FACULTY OF BUSINESS AND MANAGEMENT

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 INDIVIDUAL ASSIGNMENT 1
OPM545 – OCTOBER 2020
Answer ALL questions

1. Forecasting figures can be influenced by many factors. Describe any four (4) of the factors in the context
of a business organization.

- Past Economic Performance

The historical business data across all levels and sectors of the organization matters. Data of this nature is used to show
what happened to the business under different conditions in the past. It can be used to determine the way your
business will perform if some of the events happen again within the year. The company can use the data to adapt its
operations and ride the economic wave. This, in turn, may help create a more positive forecast.

- Current Global Conditions

The world is a global village. What happens in one corner of the world will likely affect a business at the other end of
the world. Issues that have a global impact like wars and political elections therefore matter a lot to your business
forecasts. If the current global or regional conditions look like they could get out of hand, your forecasts should be
adjusted for the ongoing events. You must adjust the values of your production levels, marketing efforts, and product
pricing. All these things will affect your business forecasts greatly.

- Current Industry Conditions

Even if your business is immune to what is going on in the world, it is unlikely to remain unaffected by the current
industry conditions. These may include government policies that affect your business, the rate of growth in your
industry, and even your market share within that sector. For that reason, the market conditions that your business
grapples with will affect your forecast tremendously.

- Rate of Inflation
Inflation is usually inevitable. It will affect the value of the currencies that you use for your business operations. You
may also have to deal with artificial adjustments in inflation depending on the part of the world in which you will be
doing business. Since you have minimal control over inflation, your business needs to adjust your predictions based on
what you can expect to happen. It is always better for you to err on the side of caution regarding this matter.

(10 marks)

2. Identify five (5) values of practicing manufacturability and engineering activities in product development
process.
• Reduced complexity of the product
o For manufacturing, company need to think a way how to simplify things they created to easy the
consumers.
• Reduction of environmental impact
o It lessens the environmental impact as they planning to for friendly environment for the
manufacturing. It is important to nature and surrounding.
• Trying to lower for environmental. Additional standardization of components
• Improvement of functional aspects of the product
• Improved job design and job safety
(10 marks)

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 3. The following sales figures have been recorded by Setia Electric and Services on the demand for its
washing machines for the last nine months of last year.

Month Sales (units)

April 320
May 150
June 220
July 410
August 425
September 190
October 200
November 170
December 316

The company intends to develop a forecasting method for the demand of its products for the coming
years. You are required to develop sales forecasts for the company for the last six months of the year by
using the following methods:

a. Three-month weighted moving average. Use a weightage scale of 0.7, 0.2 and 0.1 to reflect the level
of influence the previous month’s figures may have on the forecasted months' figures.

Month Sales (units) 3-month moving average 3-month weighted moving average
April 320 - -
May 150 - -
June 220 - -
July 410 (320+150+220)/3=230.0 (220*07)+(150*0.2)+(320*0.1)/1=216
August 425 (150+220+410)/3=260.0 (410*07)+( 220*0.2)+( 150*0.1)/1=346
September 190 (220+410+425)/3=351.7 (425*07)+(410*0.2)+(220*0.1)/1=401.5
October 200 (410+425+190)/3=341.7 (190*07)+( 425*0.2)+(410*0.1)/1=259
November 170 (425+190+200)/3=271.7 (200*07)+(190*0.2)+(425*0.1)/1=220.5
December 316 (190+200+316)/3=186.7 (316*07)+( 200*0.2)+(200*0.1)/1=178

(5 marks)
b. Exponential smoothing with a smoothing constant, a = 0.5, where forecasted sales for June this year
was 210 units.
Month Sales (units) 3-month moving average 3-month weighted moving average
April 320 - -
May 150 - -
June 210 - -
July 410 (320+150+210)=226.7 209
August 425 (150+210+410)=256.7 344
September 190 (210+410+425)=348.3 400.5
October 200 (410+425+425)=341.7 259
November 170 (425+190+200)=271.7 220.5
December 316 (190+200+170)=186.7 178

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 c. Based on the forecasted demand in question (a) and (b) above, develop sales forecast using Mean
Absolute Deviation Error (MAD). Which method would you recommend the company to use? Justify
your answer.

Month Sales (units) MAD 3M MA MAD 3M wMA

April 320
May 150
June 210
July 410 183.33 201.00
August 425 168.33 81.00
September 190 158.33 210.50
October 200 141.67 59.00
November 170 101.67 50.50
December 316 129.33 138.00
TOTAL 147.11 123.33

(5 marks)

4.
a. Define and describe the operating capacity of a college of business administration. How should
its capacity be measured?

Operating capacity is defined as the throughput, or the number of units a facility can hold,
receive, store, or produce in a period. It determines foxed costs, will demand be satisfied or
three-time horizons. Capacity is usually measured in production units (e.g. 1,000 cars per
month). Productive capacity can change e.g. when a machine is having maintenance, capacity
is reduced. Capacity is linked to workforce planning: e.g. by working more production shifts,
capacity can be increased. Capacity needs to take account of seasonal or unexpected changes
in demand. E.g. Chocolate factories need capacity to make Easter Eggs in November and
December before shipping them to shops after Christmas.

(10 marks)

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 b. Discuss the fundamental differences between long term and short-term capacity decisions.

o Capacity decisions impact all 10 decisions of operations management as well as other functional areas of the
organization. Capacity decisions must be integrated into the organization’s mission and strategy

LONG TERM CAPACITY SHORT TERM CAPACITY

Increase capacity: Have people work Cross-train your staff: The more people
overtime or bring in skilled contract with broader skill sets, the easier it will be
labour. to fill gaps as they arise.

Increase time: Call the client and push
back the deadline.
Time-phase the work: By doing a single
type of work in phases, you can create
the most efficiencies in that period.
However, you may still need to push back
some deadlines with this strategy.

Decrease quality: Cut corners (not Hire up: Swapping one of your staff with
recommended). someone more efficient will create
capacity.

(10 marks)

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