Solved: The Midwest Computer Company serves a large

number of businesses

The Midwest Computer Company serves a large number of businesses in the Great Lakes
region. The company sells supplies and replacements and performs service on all computers
sold through seven sales offices. Many hems are stocked, so close inventory control is
necessary to assure customers of efficient service. Recently, business has been increasing, and
management is concerned about stock outs. A forecasting method is needed to estimate
requirements several months in advance so that adequate replenishment quantities can be
purchased. An example of the sales growth experienced during the last 50 months is the growth
in demand for item EP-37, a laser printer cartridge, shown in Table.

a. Develop a trend-adjusted exponential smoothing solution using POM for Windows for
forecasting demand. Find the best parameters and justify your choices. Forecast demand for
month 51.
b. A consultant to Midwest’s management suggested that new office building leases would be a
good leading indicator for company sales. The consultant quoted a recent university study
finding that new office building leases precede office equipment and supply sales by three
months. According to the study findings, leases in month i would affect sales in month 4, leases
in month 2 would affect sales in month 5, and so on. Use POM for Windows’ linear regression
module to develop a forecasting model for sales, with leases as the independent variable.
Forecast sales for month 51.
c. Which of the two models provides better forecasts?Explain.

ANSWER
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