Analysis:
Questions and Answers:
Q1. The first step in analysis of this case is to evaluate the demand forecast. Calculating
the actual increase in total demand over the past year can do this. The increase from FY09
to FY10 was
84,600 / 69,500 = 1.217
The projected increase from FY08 to FY09 is
110,000 / 84,600 = 1.30
Thus a larger increase is being projected than was experienced last year.
We also observe that forecasts in the past have been very accurate (e.g. FY09 actual
compared to forecast and FY10 actual compared to forecast). But, the forecasts by model
type have not been nearly as accurate as total demand forecasts. Furthermore, the case
states that demand is highly influenced by the economy and the weather. In view of this,
past forecasts have been remarkably accurate.
For purposes of analysis we will accept the new forecast of 110,000 units. Although the
projected demand increase is larger than last year’s actual increase, the forecast still
appears reasonable. It may be, however, that marketing is attempting to drive production
through a higher forecast to avoid stockouts. Therefore, we may wish to evaluate a
somewhat lower forecast, as well as the one given in the case.
It is best to evaluate the various production strategies in terms of aggregate demand.
Evaluating these strategies by model type results in a tremendous amount of detailed
calculation.
To construct an aggregate plan we need to forecast aggregate demand by month. Assuming
the same monthly pattern as last year can do this. From exhibit 4 in the case, the
