Alternative Fuel - Automobile Company discussion

timer Asked: Mar 6th, 2019
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Question Description

Our reading this week emphasizes the role of demand management in creating a coordinated flow of demand across the supply chain. Experience shows that selecting the best method of estimating demand will vary with the maturity of the business and the data available. Address the following:

  1. A start-up alternative fuel automobile company has a first year market forecast of 1000 units. Identify the forecasting model that is in use here and explain why it is the obvious choice.
  2. During its first three full years of operation the automobile company had actual sales of:
    1. Year One: 800 units
    2. Year Two: 1200 units
    3. Year Three: 2000 units
    4. Using a simple three year moving average, calculate the predicted demand for Year Four. Explain your reasoning.
  3. The sales department expects the growth in Year Four to more closely resemble the average growth experienced in the last two years. Predict the number of units expected in Year Four. Discuss whether you would recommend this quantity as the manufacturing plan or the quantity found using the simple three year moving average in step two and why.
  4. In Year Three, one fourth of the production was sold in China. The marketing department has just learned of a new tax that will be imposed on all luxury imports into China beginning in Year Four. It is expected that this will decrease sales to China by 50%. Apply this market intelligence to the simple three year moving average method discussed in step two and recalculate the predicted demand for Year Four. Explain how you arrived at your answer.

(1200 Words)

Tutor Answer

School: UIUC

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Alternative Fuel
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Making forecasts for a company that has just started is often a challenging task. This
is because, in order for there to be a prediction, historical data needs to available. Without
historical data that relates to sales, start-up needs to adopt other forecasting approaches since
without the data, the firm is doomed to fail. Forecasting helps companies to determine the
quantity of production materials that should be procured, the quantity that needs to be
produced and sold. For such a company, the use of customer feedbacks, questionnaires and
survey may be one of the approaches with which the company can adopt to gather data which
is instrumental in predicting the future sales.
A start-up alternative fuel automobile company has a first-year market forecast of 1000
units. Identify the forecasting model that is in use here and explain why it is the obvious
Given that the company’s first year market is 1000 units, it is clear that both the
product and the company are just new entrants into the fuel automobile business. Therefore,
the forecasting method that is best suited for the company is the qualitative forecasting
method. To begin with, forecasting refers to the process of making predictions of the days to
come basing the predictions on the past as well as the present data and often, through the
analysis of p...

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