Task 1: Demand Forecasting Method

a. State and justify your choice of demand forecasting method if

you had to forecast the demand for the next six months (a short-
term forecast). Also, explain at least one assumption made.
Remember that the data of demand provided is sensitive to
changes.
(Word Limit: 200 words)
Answer:- I suggest adopting a time series forecasting method, more
especially the Exponential Smoothing method, like the Holt-Winters
method, to predict demand for Tech Hub Electronics for the upcoming six
months (a short-term projection). This approach is useful for making short-
term forecasts and is especially suitable for data that shows a trend and
seasonality, which is frequently the case in the electronics sector due to
seasonal sales, holidays, and product release cycles.
JUSTIFICATION FOR THE CHOICE OF METHOD:
Exponential Smoothing method
Seasonality: According to the demand information presented, sales of
smartphones, laptops ,and smartwatches tend to be seasonal, rising
during particular months (like the holiday shopping season). The
Exponential Smoothing approach is a good option since it can identify and
include seasonality in the projections.
Trend: The data also reveals an overall upward trend in sales for all three
product categories over the previous year. In a market that is rapidly
changing, the trend component of the exponential smoothing method is
crucial because it can adjust to shifting sales trends.
Data Sensitivity: Because it gives different weights to more recent and
older observations, the exponential smoothing method is well adapted to
capture and react to current changes in demand patterns. As was
previously indicated, the given data is sensitive to recent changes.
Assumption: When applying the Exponential Smoothing approach, it is
important to make the assumption that past trends will hold true in the
future. This signifies that we anticipate the seasonality and pattern seen
over the previous 12 months to continue for the ensuing six months.
Although this presumption might not always be true in a highly dynamic
market like electronics, it offers a reasonable place to start when
forecasting the near future.
• In actuality, I would advise routinely (e.g., monthly) re-evaluating the
forecast and modifying it when new information becomes available.
Furthermore, it's crucial to take into account outside variables like new
product launches, marketing campaigns, or economic shifts that could
affect demand and modify the forecast appropriately.
In order to effectively estimate the seasonality and trend components for
the
Exponential Smoothing approach, we would require historical data for at
least three complete seasons (for example, three years). Even though
there is only one year of data available in this scenario, the prediction
can nevertheless offer useful information for inventory management and
short-term planning.

Task 2: Demand Forecast Calculation

a. Using the monthly demand data provided for the previous year,
forecast the demand for each product for the next six months using a
suitable forecasting method (e.g., moving average, weighted moving
average, simple exponential smoothing).
Note: For any forecasting calculation purposes, you can consider α=0.3
Answer:- To forecast the demand for each product category
(Smartphones, Laptops, and Smartwatches) for the next six months (Jan
to Jun of the following year), we'll use Simple Exponential Smoothing
(SES) as requested, with a smoothing constant α = 0.3.

✅ Smartphones Forecast

Month Actual (A) Forecast (F)

Jan 1500 1500 (initial)
Feb 1600 1500
Mar 1800 1530 (=0.3×1600 + 0.7×1500)
Apr 1900 1591 (=0.3×1800 + 0.7×1530)
May 1700 1663.7
Jun 2000 1684.6
Jul 2100 1749.2
Aug 2200 1824.4
Sep 1900 1897.1
Oct 1800 1898
Nov 2000 1868.6
Dec 2300 1908
Jan (forecast) – 1995.6 (=0.3×2300 + 0.7×1908)
Feb – 2087.9
Mar – 2151.5
Apr – 2186.1
May – 2210.3
Jun – 2231.2
Laptops Forecast
Month Actual (A) Forecast (F)
Jan 800 800 (initial)
Feb 820 800
Mar 900 806
Apr 920 827.2
May 850 845.0
 Month Actual (A) Forecast (F)
Jun 1000 848.5
Jul 1050 893.0
Aug 1100 929.1
Sep 950 964.4
Oct 900 958.1
Nov 1000 940.7
Dec 1150 952.5
Jan (forecast) – 1016.8
Feb – 1071.8
Mar – 1110.2
Apr – 1137.2
May – 1155.1
Jun – 1168.6
Smartwatches Forecast
Month Actual (A) Forecast (F)
Jan 300 300 (initial)
Feb 310 300
Mar 320 303
Apr 330 308.1
May 310 313.7
Jun 350 313.6
Jul 360 324.5
Aug 370 335.2
Sep 340 344.6
Oct 320 344.2
Nov 350 337.9
Dec 380 342.5
Jan (forecast) – 360.8
Feb – 372.6
Mar – 379.8
Apr – 383.9
May – 386.7
Jun – 388.7
Final Forecast Summary (Jan - Jun Next Year)
Month Smartphones Laptops Smartwatches
Jan 1995.6 1016.8 360.8
Feb 2087.9 1071.8 372.6
Mar 2151.5 1110.2 379.8
Apr 2186.1 1137.2 383.9
May 2210.3 1155.1 386.7
Jun 2231.2 1168.6 388.7
Task 3: Calculating Forecast Errors
a. Consider the following table as the actual demand data for the company’s
products after six months.
Months Smartphones Laptop Smartwatches

January 1600 755 259

February 1649 865 292

March 1569 877 250

April 1750 923 214

May 1920 1000 200

June 2040 1100 196

Based on the demand forecasts you prepared in Task 1 and the actual data provided
in the table above, calculate the forecast errors for the six months.

Answer:- We'll calculate the Forecast Error for each month as:

📱 Smartphones Forecast Errors

Month Actual Forecast Error (Actual - Forecast)
Jan 1600 1995.6 -395.6
Feb 1649 2087.9 -438.9
Mar 1569 2151.5 -582.5
Apr 1750 2186.1 -436.1
May 1920 2210.3 -290.3
Jun 2040 2231.2 -191.2

💻 Laptops Forecast Errors

Month Actual Forecast Error (Actual - Forecast)
Jan 755 1016.8 -261.8
Feb 865 1071.8 -206.8
Mar 877 1110.2 -233.2
Apr 923 1137.2 -214.2
May 1000 1155.1 -155.1
Jun 1100 1168.6 -68.6
⌚ Smartwatches Forecast Errors
Month Actual Forecast Error (Actual - Forecast)
Jan 259 360.8 -101.8
Feb 292 372.6 -80.6
Mar 250 379.8 -129.8
Apr 214 383.9 -169.9
May 200 386.7 -186.7
Jun 196 388.7 -192.7

📊 Summary Table of Forecast Errors

Month Smartphones Laptops Smartwatches

Jan -395.6 -261.8 -101.8
Feb -438.9 -206.8 -80.6
Mar -582.5 -233.2 -129.8
Apr -436.1 -214.2 -169.9
May -290.3 -155.1 -186.7
Jun -191.2 -68.6 -192.7

Task 4: Metrics and Analysis

a. Based on the forecast and forecast errors you calculated in the previous tasks,
calculate the following key performance metrics:
1. Mean absolute percentage error (MAPE)

2. Bias
Answer:- SMARTPHONES
Actuals: 1600, 1649, 1569, 1750, 1920, 2040
Forecasts: 1995.6, 2087.9, 2151.5, 2186.1, 2210.3, 2231.2
Errors (A - F): -395.6, -438.9, -582.5, -436.1, -290.3, -191.2

LAPTOPS
Actuals: 755, 865, 877, 923, 1000, 1100
Forecasts: 1016.8, 1071.8, 1110.2, 1137.2, 1155.1, 1168.6
Errors (A - F): -261.8, -206.8, -233.2, -214.2, -155.1, -68.6

SMARTWATCHES
Actuals: 259, 292, 250, 214, 200, 196
Forecasts: 360.8, 372.6, 379.8, 383.9, 386.7, 388.7
Errors (A - F): -101.8, -80.6, -129.8, -169.9, -186.7, -192.7

Metric Smartphones Laptops Smartwatches

MAPE 22.99% 21.69% 65.00%
Bias -389.1 -189.9 -143.6

Task 5: Recommendations
Analyze the forecast errors and metrics calculated so far and propose
corrective actions in your approach and strategy. Provide
recommendations for improving the supply chain planning process to
handle demand fluctuations better, reduce lead times, and enhance
overall supply chain performance. Provide at least three recommendations
(at least three; one for each product category).
(Word Limit: 500 words)
Answer:- 1. Smartphones:
Recommendation: Diversify Suppliers and Implement
Risk Mitigation
Rationale: It's critical to diversify smartphone component suppliers and forge
solid bonds with a
number of vendors given the high demand volatility and potential supply chain
interruptions in
the electronics sector. By employing this technique, the danger of single-source
dependence will
be reduced, which can result in production delays and shortages in the event of
unforeseen
circumstances like natural disasters or geopolitical upheaval.
Actions to Take:
• Identify the crucial parts used in the manufacture of smartphones and
evaluate the
concentration of suppliers for each.
• To lessen the impact of regional disruptions, procure essential components
from a
number of suppliers, preferably located in several geographic locations.
• Create backup plans and risk-reduction methods, such as buffer stocks and
alternate
sourcing choices, to quickly manage supply chain interruptions.
2. Laptops:
Recommendation: Implement Advanced
Inventory Management Techniques
Rationale: To handle demand fluctuations better and reduce lead times for
laptops, it's essential
to implement advanced inventory management techniques. Laptops often have
longer lead
times due to their complex manufacturing processes, making it challenging to
respond quickly to
sudden demand spikes.

Actions to Take:
• Implement Just-In-Time (JIT) inventory management practices to minimize
carrying costs
while ensuring product availability.
• Employ demand sensing and demand shaping tools to better predict and shape
customer demand, allowing for more proactive inventory management.
• Optimize safety stock levels by considering factors like seasonality, supplier
reliability,
and transportation lead times.

3. Smartwatches:
Recommendation: Enhance Demand
Collaboration with
Retailers
Rationale: Smartwatches exhibit relatively stable demand throughout the year
compared to
smartphones and laptops. To enhance supply chain performance for
smartwatches, it's crucial
to establish better collaboration and communication channels with retailers to
align
production with actual demand.

Actions to Take:
• Implement a Vendor-Managed Inventory (VMI) system or Collaborative
Planning,
Forecasting, and Replenishment (CPFR) with key retailers to share demand
forecasts and
inventory data.
• Regularly review sales data and collaborate with retailers to adjust production
plans
based on real-time demand insights.
• Consider offering incentives to retailers for timely and accurate demand
information
sharing to improve forecast accuracy and reduce overstocking or understocking
issues.