1. Northcutt Bikes Case Answers

2. Q1: Demand Data Plot

3. Q1: Plot Shows
There is seasonality
There is a trend
Forecast should take into account both

4. Construction of base indices
Year:
2008
2009
2010
2011
Mean Base
January
0.53
0.72
0.59
0.61
February
0.74
0.95
1.09
0.88
March
0.84
0.79
0.98
0.87
April
1.00
1.18
0.92
1.05
May
1.10
1.16
1.15
1.27
1.17
June
1.60
1.57
1.39
1.51
1.52
July
1.29
0.94
1.35
1.56
1.28
August
1.19
1.30
1.43
0.71
September
1.13
0.91
1.08
1.03
October
0.96
0.77
0.89
November
0.73
0.99
0.78
December
0.51
0.67
0.70
Mean Demand:
818.42
990.50

5. Multiple Regression Results: X is Period and Base
Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations 48
ANOVA df SS MS F
Regression 2
Residual 45
Total 47
Coefficients
t Stat
P-value
Intercept
E-07
Period
E-18
Base
E-33

6. Q2: Forecasting Methods
Multiple regression or MR (Y is forecast, X’s are period and base) MAD ≈
Simple regression or SR (deseasonalize demand, seasonalize forecast, X is period) MAD ≈
Exponential Smoothing or ES (adjusted for trend and seasonality) MAD ≈

7. Q2: Forecast for January – April 2012
Month
Mean Base
Period MR SR ES
January
0.61 49
825.27
745.12
720.56
February
0.88 50
March
0.87 51
April
1.05 52

8. Q3: Best Forecast: Exponential smoothing forecast has lowest MAD
Disadvantages: the exponential smoothing forecast should be updated frequently (say once a month).

9. Q4: Additional Information
Jan’s knowledge of market could be used to:
- Add additional independent variable to multiple regression
- Be used to adjust other forecasts (caution should be used, however)
Monthly increments best as forecast can react to latest information, provided this is not costly

10. Q5: Ways to Improve Operations
Quicker response: reduce manufacturing lead times; possibly implement online ordering
Suppliers: reduce lead times; set contracts
Improve information systems
Work force: increase flexibility; temps

11. Q6: Recommendations
Operation is likely not too large - Jan can control operation effectively if she:
delegates
improves information system
reduces lead times
implements lean (to be discussed)
uses different modes of operation for different style bikes
Information needed on costs of above

12. Questions ?
???