Case: Oregon Chain Saw

Steve Alexander
09/11/2016

Executive Summary
The Oregon Chain Saw company produces several different types of chainsaws for a
diverse customer group. Over the past four years, demand for each different product has
fluctuated in different ways. While the majority of inputs and materials needed to make
each of the different products, it is important to be able to forecast the demand for each
product. This will allow management to make better decisions and reduce costs. We
looked at each product line to best determine the forecast for the upcoming year.
In order for our forecast to be as accurate as possible, we analyzed the past four-year
demand for each different chain saw market (17-inch Replacement, 17-inch New, 21-inch
Replacement, 21-inch New). We noticed that each market had a slightly different demand
pattern. Paying attention to the differences in demand patterns is critical for a successful
demand forecast. After analyzing the data, we determined that the 17-inch Replacement
market is gradually and steadily trending upwards. The 17-inch New market is also
trending upwards, but also has some seasonality effects. The 21-inch Replacement market
was the most unpredictable of all the product lines, but we were still able to match the
previous demand to a smoothing constant and forecast the demand for next year. Finally,
the 21-inch New market is trending upwards steadily and with noticeable seasonality
effects.
Taking all the data and analysis in this report, we concluded that there is a considerably
larger portion of your workforce working on the 17-inch chain saw product line.
Compared to the 21-inch product line, 75% of available time is used to build the 17-inch
chains. We also concluded that you will need 254 total employees for year 5 of
production. Taking the forecasts and analysis together, we recommend to focus more
attention on the 17-inch production because 17-inch production is much greater than the
21-inch production. Additionally, taking the forecasts provided in this report, it will be
easier to anticipate future demand and make arrangements that ensure successful
production and operation.

Case Assignments:
1. For the replacement parts market of the 17-inch chains, based on its
demands over the last four years, suggest a method to forecast its monthly
demands for the next year.
A) Display graphically the demand pattern of the past four years.
17--Replacement

17--Repl

B) Determine and rationalize your method of forecasting.

Based on the data presented above, there is a noticeable trend in the past four
years of data, and there is no seasonality. Therefore, to forecast the fifth year,
it would be best to use the linear regression forecasting method.
C) Show the forecasting result for the next year and include MAD and
tracking signal for the last four years.
5

16000
14000

dec
jan
feb
mar
apr
may
jun
jul
aug
sep
oct
nov
dec

48
12808 12291.39
49
12452.09
50
12612.8
51
12773.51
52
12934.21
53
13094.92
54
13255.63
55
13416.33
56
13577.04
57
13737.74
17Replacement
Forecast
[Trend]
58
13898.45
59
14059.16
60
14219.86

12000
10000
8000
6000
4000
2000
0
1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960
17--Repl

Ft

MAD
600
500
400
300
200
100
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

MAD
600
500
400
300
200
100
0

15

TS
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

10
5
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
-5
-10
-15
-20

20000
18000
16000

2. For the new product production of the 17-inch chains, based on its demands over
17-New its monthly demands for the next
the last four years, suggest a method to forecast
year.
A) Display graphically the demand pattern of the past four years.

14000
12000
10000
8000
6000
4000
2000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Monthly Demand
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
1

6
Y1

7
Y2

Y3

10

11

Y4

B) Determine and rationalize your method of forecasting.

Based on the past four years of data for the 17 inch new chains, there is a
noticeable trend and seasonality in the data. Therefore, using the seasonal
forecast with the trend line will be a good method to forecast this data.
C) Show the forecasting result for the next year and include MAD and
tracking signal for the last four years.
dec
jan
feb
mar
apr
may
jun
jul
aug
sep
oct
nov
dec

48
49
50
51
52
53
54
55
56
57
58
59
60

13685
12783.3967
14797.3593
18180.3063
17454.1357
16283.357
14423.3794
15918.1401
17153.3778
17437.0469
16252.2231
15090.8066
14287.6085

12

17New Forecast [Trend w/Seasonality]

20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960
17-New

Forecast w/ SF

MAD
600

500

400

300

200

100

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

TS
10
5
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
-5
-10
-15
-20

2. For the demand of 17-inch chains, add the forecast results from (1) and (2)
to obtain the monthly demands for the next year. Alternatively, but not
recommended, you could use the total demand of 17-inch chains for the last
four years to determine the pattern and method to forecast its monthly total
demands for the next year.
Year
5

Month
jan
feb
mar
apr
may
jun
jul
aug
sep
oct
nov
dec

Period
49
50
51
52
53
54
55
56
57
58
59
60

Ft[Replacement]
Ft[New]
12452.09473
12783.39669
12612.80098
14797.35928
12773.50723
18180.3063
12934.21348
17454.1357
13094.91973
16283.35701
13255.62598
14423.37944
13416.33223
15918.14014
13577.03848
17153.37782
13737.74473
17437.04688
13898.45098
16252.22309
14059.15723
15090.80662
14219.86348
Combined Forecast Year14287.60852
5

35000

CombinedForecast
25235.49142
27410.16025
30953.81353
30388.34918
29378.27673
27679.00541
29334.47236
30730.4163
31174.7916
30150.67407
29149.96384
28507.47199

17Total Year5Demand

350092.8867

30000
25000
20000
15000
10000
5000
0
1

10

11

12

4. For the replacement parts market of the 21-inch chains, based on its demands
over the last four years, suggest a method to forecast its monthly demands for the
next year.
A) Display graphically the demand pattern of the past four years.

21Replacement
1920
1900
1880

Demand

1860
1840
1820
1800

21-Repl

1780
1760
1740
1720
1

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Period

Monthly Demand
1920
1900
1880
1860
1840
1820
1800
1780
1760
1740
1720
1

10

11

12

Y1
Y2of forecasting.
Y3
Y4
B) Determine and rationalize your method
This data does not show a trend or much seasonality, there seems to be no clear
pattern to the data. Therefore, an effective forecasting method to use for the fifth
year is single exponential smoothing with a smoothing constant of a = 0.3. This
method is useful for the lack of patterns in the past four-year data.

C) Show the forecasting result for the next year and include MAD and tracking
signal for the last four years.
49
50
51
52
53
54
55
56
57
58
59
60

1850.747
1848.94001
1848.40646
1848.25494
1848.21804
1848.21551
1848.2233
1848.23419
1848.246
1848.2581
1848.27027
1848.28248

21Replacement Forecast [Single Exponential Smoothing]

1920
1900
1880
1860
1840
1820
1800
1780
1760
1740
1720
1

9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
21-ReplMAD Ft(SE-0.3)

18
16
14
12
10
8
6
4
2
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

TS

10
8
6
4
2
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
-2
-4
-6
-8

5. For the new product production of the 21-inch chains, based on its demands over
the last four years, suggest a method to forecast its monthly demands for the next
year.
A) Display graphically the demand pattern of the past four years.
21-New
7000

6000

5000

4000

3000

Monthly Demand

7000
2000
6000
1000
5000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

4000
3000
2000
1000
0
1

6
Y1

Y2

7
Y3

10

11

12

Y4

B) Determine and rationalize your method of forecasting.

Based on the past four years of data, there is a noticeable upwards trend, and a
slight seasonal pattern. With that being said, using the seasonal forecast with the
trend line will be a good method to forecast this data.

C) Show the forecasting result for the next year and include MAD and tracking
signal for the last four years.

21New Forecast [Trend w/ Seasonality]

7000

6000

5000

4000

3000

2000

1000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
21-New

Forecast w/ SF

MAD
120

100

80

60

40

20

0
1

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

TS
6
4
2
0
1

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

-2
-4
-6
-8
-10
-12
-14

6. For the demand of 21-inch chains, add the forecast results from (4) and (5) to
obtain the monthly demands for the next year. Alternatively, but not recommended,
you could use the total demand of 21-inch chains for the last four years to
determine the pattern and method to forecast its monthly total demands for the next
year.
Year
5

Month
jan
feb
mar
apr
may
jun
jul
aug
sep
oct
nov
dec

Period
49
50
51
52
53
54
55
56
57
58
59
60

Ft[Replacement]
1850.747001
1848.940007
1848.406458
1848.254941
1848.218035
1848.215512
1848.223304
1848.23419
1848.246004
1848.258097
1848.270274
1848.282475

Ft[New]
6126.471325
6329.677413
6249.747768
6389.839521
6302.055269
6112.500918
6066.598268
6026.226251
6135.80383
6231.32851
6221.851281
6443.247939

CombinedForecast
7977.218326
8178.61742
8098.154225
8238.094463
8150.273304
7960.71643
7914.821571
7874.46044
7984.049834
8079.586607
8070.121555
8291.530414

7. Add the results for 17 and 21-inch chains21Total

fromY(3)
and (6), this gives the
overall
ear5Demand
96817.64459
forecast demands for all sizes for the next year.
17Total Year5Demand
21Total Year5Demand

350092.8867
96817.64459

Total ChainDemandYear5

446910.5313

8. Determine the number of workers that will be needed in each month of the next
year to produce these chains.

1). Use the result from (3) and (6) to calculate the workforce requirements for 17
and 21-inch chains. Add to obtain the total workforce requirements. Round up the
total workforce requirements if fractional. This will be the base of workforce plan.
Period
49
50
51
52
53
54
55
56
57
58
59
60

17Total
25235.49142
27410.16025
30953.81353
30388.34918
29378.27673
27679.00541
29334.47236
30730.4163
31174.7916
30150.67407
29149.96384
28507.47199

21Total
7977.218326
8178.61742
8098.154225
8238.094463
8150.273304
7960.71643
7914.821571
7874.46044
7984.049834
8079.586607
8070.121555
8291.530414

TimeRequired(min)
223859.8316
239505.6723
261935.9446
259309.9781
252085.8485
239618.9084
250035.2321
258806.1592
262516.5192
256576.281
250000.6766
247485.0461

#Workers
18.65498597
19.95880602
21.82799539
21.60916484
21.00715405
19.96824237
20.83626935
21.56717994
21.8763766
21.38135675
20.83338972
20.62375384

WorkersRounded

Total

2). What percentages of the overall workforce are used for 17 and 21-inch chains?
% of workers required for 17inch chains = 75.81%
% of workers required for 21inch chains = 24.19%

19
20
22
22
22
20
21
22
22
22
21
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254