North South University

Case: M&L Manufacturing Case Study

Course Name: Operations and Supply Chain Management
Course Code: MGT314
Section: 5
Semester: Fall 2020
Submitted to Ms. Yurika Uematsu Bhuiyan (YUB)
Date: 13th December 2020
Submitted by Group 3

Sazzadul Karim Chowdhury 1621595630

Sharfin Islam 1610125630

Md. Munjaber Kashem 1721968630

Syed Fahimul Haque 1813406630

Arabi Islam 1812759630

Mehdi Hasan 1512457630

 Executive Summary

This document includes the answers to a case study that we were assigned for our Operations and

Supply Chain Management course. The case assigned to us was that of M&L Manufacturing and

the effect of their decision to adopt a more formalized approach to forecasting. We observed that

the company was not able to meet changes in demand or prices as their methods were basic. As

they stocked all their products in the same quantities, they faced frequent under-stocking issues

as the demand for certain items grew and they lost potential customers. A more defined method

for forecasting allows them to make more accurate predictions and therefore, they will be able to

make informed decisions, leading to higher efficiency.

We also prepared forecasts for Product 1 and Product 2 for the following four weeks. For

Product 1, we used a linear trend method because the demand is a constant, straight-line rise

which is seen commonly in a linear trend. It also has an upward sloping trend which exhibits

short-term commodity demand.

For Product 2, we used a moving average technique for an intuitive approach of forecasting as

the manager has a disdain for technical methods. Because the data showed that the demand for

the product was more or less constant throughout the months, this method was efficient.

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Answer 1

As we see with M&L, without a proper method, they faced problems with overstocking for some

items while at the same time not being able to meet the demands for others. Their system was

basically keeping the same amount of stock for all products, without considering the demand for

their individual items. This naturally led to a chain reaction that made them unable to cope with

demand and prices changes, as they only planned for a simple short-term solution. The system

would not serve them well in the long run, already evidenced as they were not able to predict the

rise in prices of raw materials, which would cost them greatly and lead to losses.

With a formalized approach to forecasting, a company can keep a more detailed track of their

resources and the goods being produced. As mentioned in the case study, one of the major steps

the manager takes is analysing which one of their products is more highly demanded and

accounts for the larger portion of the company’s revenue. The second one is that the manager

takes into account where they see the company in the future and considers which product they

want to push out more. Thirdly, he analyses past instances when a particular product would be

out of stock frequently

From the data that the manager had gathered in 14 weeks, we can clearly see that while Product

1 has seen a slowly rising demand by the end of the period, Product 2’s demand has been more

or less constant. This shows that both the products don’t need to be stocked up the same amount;

Product 2 can be stocked in fewer quantities than Product 1, while the demand for Product 1

needs to be surveyed frequently.

Analysing the records and the environment has definitely made the company far more efficient.

It would help them bring down costs and therefore help them reach a higher revenue target. The

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method is ultimately helpful in the long run as they prepare for any rise or drop in demands and

stock accordingly.

Answer 2

Product 1: Product 1 shows that, with the exception of the unusual order of 90 units in the

seventh week, its demand has increased in a rising trend over the 2-week period, which shows

that demand can be expected to continue to rise over the next four weeks. The demand for the

7th week is therefore deemed to be an outlier.

Different ways of dealing with outliers also exist. A simple and intuitive way is to replace the

demand in the time series for the week in question with the average demand for the preceding

week and the following week. In this case, therefore, the demand for 90 in week 7 will be

replaced by 71.5 = [(67 + 76)/2

t y ty t​²

1 50 50 1

2 54 108 4

3 57 171 9

4 60 240 16

5 64 320 25

6 67 402 36

7 71.5 500.5 49

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 8 76 608 64

9 79 711 81

10 82 820 100

11 85 935 121

12 87 1044 144

13 92 1196 169

14 96 1344 196

Σ105 1020.5 8449.5 1015

n ∑ ty − ∑ t ∑ y
b= = (14(14
× 8449.5) − (105 × 1020.5)
× 1015) − (105 × 105)
= 3.5
2 2
n ∑ t − (∑ t)

∑y−b∑t
1020.5 − (3.5 × 105)
a= n
= 14
= 46.64

The trend equation is: Ft = 46.64 + 3.5t

The next four weeks forecasts are:

F15 = 46.64 + 3.5*15 = 99.14

F16 = 46.64 + 3.5*16 = 102.64

F17 = 46.64 + 3.5*17 = 106.14

F18 = 46.64 + 3.5*18 = 109.64

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Reason for using a linear trend method:

● A constant, straight-line rise is seen by a linear trend.

● It has a sloping upward trend and expects short-term commodity demand.

For the most basic operational management and supply problems, linear pattern forecasting

works well such as evaluating sales over time to predict future demand. Steady, straight-line rises

or decreases are demonstrated by linear patterns where the trend-line can go up or down and the

angle can be steep or shallow. The definition explains the aims and uses of linear trend

forecasting and the key ingredients needed for this forecasting technique to be applied.

The key benefit of this technique is that it is simple. When historical data is available, it is

possible to easily draw a trend line and estimate differences. Although the methodology is not

specific, it does provide a simple evaluation of the possible outcomes of a program.

Product 2: ​The demand for product 2 is straightforward and almost constant throughout the

weeks, with a slight increase at the ends of the months (every four weeks). In the case of Product

2, we will not be required to use very complex methods and will be going with an intuitive

forecasting approach. As the slight irregularity occurs every four weeks, we will include data

from the four most recent values to predict the demand for the next four weeks.

For example, for F15 we will simply take the average of F11, F12, F13, and F14, using the

formula of a moving average, i.e. [(A11+A12+A13+14)/4]

Therefore, the forecasts for the next four weeks will be:

F15 = (42+49+43+44)/4 = 44.50

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F16 = (49+43+44+44.5)/4 = 45.13

F17 = (43+44+44.5+45.13)/4 = 44.16

F18 = (44+44.5+45.13+44.16)/4 = 44.45

Week Forecasted Demand

15 44.50

16 45.13

17 44.16

18 44.45

Reasons for using an intuitive approach:

• Nature of the spread of the data shows a simple pattern.

• The manager prefers not to use more technical methods.

• The demand for the product is more or less constant.

Because the data for Product 2 shows that its demand barely changes from week to week, an

intuitive method is a better approach, which fits the manager's preferences well. A simple

moving average technique is able to give us an approximation of the demand for the product in

the following month. Compared to Product 1, this is far more basic but only because the data is

mostly constant.

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