OPERATION MANAGEMENT

PRESENTATION
PREPARED BY
Mohamed Aboubakr Aly Abdelaal
Mohamed Khaled Abdelhameid Gaafar
Omar Maher Mohamed Mohamed
Mohamed Refaat Taha ELaasar

SUBMITTED TO
DR/ Mohamed EL-mokadem
 XYZ Company for Tea Production

• XYZ Co is a prominent company in the FMCG industry. It provides 400

different brands spanning 14 categories of home, personal care and
foods products. XYZ is now one of the world's biggest companies.
Their first business in the Middle East started in Saudi Arabia in the
1930's and by 1978, the first factory was set up in Jeddah to supply
the Middle East region with home and personal care products. In
Egypt, XYZ established in 1991 a joint venture with an Egyptian
company creating one of the largest FMCG businesses in Egypt.
• In 2000, XYZ established its tea factory in Borg El Arab to produce
high quality tea. The total sales for XYZ (the tea factory) were around
60 Million Egyptian pounds during year 2020. The company is
operating under a strategy that aims to provide the best tea tasting
experience to its customers (differentiation strategy).
 Case Study Forecasting

• During the last board of directors meeting, there was

a hot discussion about the future of the tea business.
The General Manager of the tea business shared the
latest sales numbers. He highlighted the constant
growth in sales in years 2017, 2018 and 2019.
• However, the current conditions in Egypt and the
world calls for reassessment of their future sales.
Thus, the General Manager highlighted the need to
reassess the forecasting techniques that they
currently use.
Month 2019 2020 2021
Jan 185000 245000 269000
Feb 219000 235000 255000
Mar 218000 229000 245000
Apr 208000 228000 232000
May 212000 227000 305000
Jun 195000 262000 250000
Jul 258000 219000 237000
Aug 192000 212000 214000
Sep 183000 217000 225000
Oct 205000 200000 225000
Nov 211000 235000 256000
Dec 225000 235000 269000
Series 1 represent 2019
Series2 represent 2020
Series 3 represent 2021
 Naïve Method 2020 forecast
  Demand(y) Forecast Error |Error| Error^2 |Pct Error|
Past Period 1 245000          
Past Period 2 235000 245000 -10000 10000 1E+08 4.26%
Past Period 3 229000 235000 -6000 6000 36000000 2.62%
Past Period 4 228000 229000 -1000 1000 1000000 0.44%
Past Period 5 227000 228000 -1000 1000 1000000 0.44%
Past Period 6 262000 227000 35000 35000 1.23E+09 13.36%
Past Period 7 219000 262000 -43000 43000 1.85E+09 19.64%
Past Period 8 212000 219000 -7000 7000 49000000 3.30%
Past Period 9 217000 212000 5000 5000 25000000 2.30%
Past Period 10 200000 217000 -17000 17000 2.89E+08 8.50%
Past Period 11 235000 200000 35000 35000 1.23E+09 14.89%
Past Period 12 235000 235000 0 0 0 0%
TOTALS 2744000   -10000 160000 4.8E+09 69.75%
AVERAGE 228666.7   -909.091 14545.45 4.36E+08 6.34%

Next period forecast   235000 (Bias) (MAD) (MSE) (MAPE)

        Std err 23094.01  

Measure Value
Error Measures  
.
Bias (Mean Error) -909.091
MAD (Mean Absolute Deviation) 14545.45
MSE (Mean Squared Error) 4.36E+08
Standard Error (denom=n-2=9) 23094.01
MAPE (Mean Absolute Percent Error) 6.34%
Forecast  
next period 235000
Naïve method graph
 Exponential Smoothing 2020
  Demand(y) Forecast Error |Error| Error^2 |Pct Error|

Past Period 1 245000          

Past Period 2 235000 245000 -10000 10000 1E+08 4.26%

Past Period 3 229000 240000 -11000 11000 1.21E+08 4.80%

Past Period 4 228000 234500 -6500 6500 42250000 2.85%

Past Period 5 227000 231250 -4250 4250 18062500 1.87%

Past Period 6 262000 229125 32875 32875 1.08E+09 12.55%

Past Period 7 219000 245562.5 -26562.5 26562.5 7.06E+08 12.13%

Past Period 8 212000 232281.3 -20281.25 20281.25 4.11E+08 9.57%

Past Period 9 217000 222140.6 -5140.625 5140.625 26426030 2.37%

Past Period 10 200000 219570.3 -19570.31 19570.31 3.83E+08 9.79%

Past Period 11 235000 209785.2 25214.84 25214.84 6.36E+08 10.73%

Past Period 12 235000 222392.6 12607.42 12607.42 1.59E+08 5.37%

TOTALS 2744000   -32607.42 174002 3.68E+09 76.27%
AVERAGE 228666.7   -2964.311 15818.36 3.35E+08 6.93%

Next period forecast   228696.3 (Bias) (MAD) (MSE) (MAPE)

        Std err 20229.6  

Measure Value
Error Measures  
Bias (Mean Error) -2964.31
MAD (Mean Absolute Deviation) 15818.36
MSE (Mean Squared Error) 3.35E+08
Standard Error (denom=n-2=9) 20229.6
MAPE (Mean Absolute Percent
Error) 6.93%
Forecast  
next period 228696.3
Exponential Smoothing graph
 Two-moving average 2020
|Pct
  Demand(y) Forecast Error |Error| Error^2 Error|
Past Period 1 245000          
Past Period 2 235000          
Past Period 3 229000 240000 -11000 11000 1.21E+08 4.80%
Past Period 4 228000 232000 -4000 4000 16000000 1.75%
Past Period 5 227000 228500 -1500 1500 2250000 0.66%
Past Period 6 262000 227500 34500 34500 1.19E+09 13.17%
Past Period 7 219000 244500 -25500 25500 6.5E+08 11.64%
Past Period 8 212000 240500 -28500 28500 8.12E+08 13.44%
Past Period 9 217000 215500 1500 1500 2250000 0.69%
Past Period 10 200000 214500 -14500 14500 2.1E+08 7.25%
Past Period 11 235000 208500 26500 26500 7.02E+08 11.28%
Past Period 12 235000 217500 17500 17500 3.06E+08 7.45%
TOTALS 2744000   -5000 165000 4.01E+09 72.14%
AVERAGE 228666.7   -500 16500 4.01E+08 7.21%

Next period forecast   235000 (Bias) (MAD) (MSE) (MAPE)

        Std err 22396.99  

Measure Value
Error Measures  
Bias (Mean Error) -500
MAD (Mean Absolute Deviation) 16500
MSE (Mean Squared Error) 4.01E+08
Standard Error (denom=n-2=8) 22396.99
MAPE (Mean Absolute Percent Error) 7.21%
Forecast  
next period 235000
Two-moving average 2020
When reviewing the tree methods we found
the following:

Naïve method Exponential smoothing Two-moving average

The observation of the previous tables are :

Naïve method has lower error tendency.

We would use this method in 2022 forecast for better results.
Forecast naïve method for 2022
Demand(y Cum abs Track
  ) Forecast Error Cum error error Cum Abs MAD Signal
Past Period 1 269000              
Past Period 2 255000 269000 -14000 -14000 14000 14000 14000 -1
Past Period 3 245000 255000 -10000 -24000 10000 24000 12000 -2
Past Period 4 232000 245000 -13000 -37000 13000 37000 12333.33 -3
Past Period 5 305000 232000 73000 36000 73000 110000 27500 1.309
Past Period 6 250000 305000 -55000 -19000 55000 165000 33000 -0.576
Past Period 7 237000 250000 -13000 -32000 13000 178000 29666.67 -1.079
Past Period 8 214000 237000 -23000 -55000 23000 201000 28714.29 -1.915
Past Period 9 225000 214000 11000 -44000 11000 212000 26500 -1.66
Past Period 10 225000 225000 0 -44000 0 212000 23555.55 -1.868
Past Period 11 256000 225000 31000 -13000 31000 243000 24300 -0.535
Past Period 12 269000 256000 13000 0 13000 256000 23272.73 0

Values of tracking signal are within ± 4 which indicate a range of acceptable

values of tracking signal of the forecast.