Production and Operations Management

CASE STUDY
CASE STUDY : BETA ATM MACHINES (FORECASTING)
Bank ing indu stry is the key for the econom y of any nation. The w hole banki ng ind ustry is now
transformed into fu lly IT supported service provider. Au tomatic Teller Machines (ATM ) have become
a vi tal organ of the banking indu stry, w hich facilitates its cu stomers to withdraw money at any
point of time at any part of the world. Beta ATM m achines m anu facturing compan y has its
custom ers all over the world and right now, it has 15 plan ts located arou nd the globe. The central
office receives orders and allocates them to different plants by taking thei r existing load and the
proximity of the plan ts to the cu stom ers.
Since the orders received from its cu stomers are smaller in size, the compan y wants to use a
recu rsi ve forecasting method to estim ate its dem and, so that it will be usefu l to plan its m en,
m achines and materials.
The planning departm ent of the company proposed a skeleton of the recu rsive forecasti ng
m ethod whose steps are listed below.
1. Set the current period I = 1.
2. Collect the m onthly demand of the past 12 m onths (/ - 1 1, I - 10, I - 9,. .. ., I - 1, /).
3. Set a linear reg ression equ ation, Y = a + bX , where X is the ti me period in mon th and Y is
the dem and in u nits.
4. Forecast the demand for the nex t 12 m onths from now (/ + 1, I + 2, I + 3,. . . ., I + 1
1,
I + 12), u sing the regression equ ation designed in Step 3.
5. Plan the activi ties and other matters for the nex t 12 m onths based on the projected dem and
val u es as obtained in Step 4.
6. Move on to next month (/ = I + 1).
7. Go to Step 2.
One m ay notice that there will be m inor modifications in the plan for every set of nex t 12 mon ths
As a newl y joined m anagement trainee of the company you are expected to do these calcu lations at the end
To test you r u nderstanding of the proced u re, a sam ple data for months in 2010 is given below.

Month Jan. Feb. March April May J u ne Ju ly A ug. Sep. Oct. Nov. Dec.
Actual demand i n u 300 320 350 370 360 400 410 420 450 460 490 4 75
nits

onthly demand based on the above data and estim ate the dem and val u es for the mon ths from Jan uary to D
Questions:
500 u ni ts, design the reg ression equation to estim ate the m onthly demand and estimate the dem and values f
n ths from February 201 1 to Decem ber 201 1
ues.