Re-Write Supply Chain Management

4. Although financial data are sketchy, an estimate from a construction company indicates that adding bed capacity would cost about $100,000 per bed. In addition, the rate charged for the hernia surgery varies between about $900 and $2,000 (U.S. dollars), with an average rate of $1,300 per operation. The surgeons are paid a flat $600 per operation. Due to all the uncertainties in government health care legislation, Shouldice would like to justify any expansion within a five-year time period. How would you do that?

The following tabulations are actual sales of units for six months and a starting forecast in January.

a. Calculate forecasts for the remaining five months using simple exponential smoothing with a = 0.2.

b. Calculate MAD for the forecasts.

	Actual	Forecast
January	100	80
February	94
March	106
April	80
May	68
June	94

 

 

 

 

Solution: Answer- a: Exponential smoothing forecast (a=0.2) Forecast of X month = f(x) ; Actual sales of X month = Y(x) Forecast of February = f(feb) = f(jan)*0.2 + Y(jan)*(1-0.2) =0.2*80 + 0.8*100 = 96 Forecast of March= f(mar) = f(feb)*0.2 +Y(feb)*(1-0.2)=0.2*96 + 0.8*94= 94 Forecast of April= f(apr) = f(mar)*0.2 +Y(mar)*(1-0.2)=0.2*94 + 0.8*106 = 104 Forecast of May= f(may) = f(apr)*0.2 +Y(apr)*(1-0.2)=0.2*104+ 0.8*80= 85 Forecast of June= f(jun) = f(may)*0.2…

 

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