Logistics and Supply Chain Report - Forecasting and Recommendations

This report, a solution for a Logistics and Supply Chain Management assignment, focuses on forecasting and capacity utilization. It analyzes demand using methods like moving averages and exponential smoothing, calculating MAD and MAPE to assess accuracy. The report evaluates capacity utilization for 2019, 2020, and 2021, determining machine and labor requirements. It provides recommendations based on the findings, emphasizing the importance of just-in-time inventory management, systematic supply chain policies, and risk minimization. The report highlights potential resource shortages and suggests proactive measures to meet future demand effectively.

Logistics and Supply Chain Management
Supply Report Part 2
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Table of Contents
1. Forecasting...................................................................................................................................3
1.a to 1.d......................................................................................................................................3
1.e MAD and MAPE...................................................................................................................3
2. Capacity Utilization.....................................................................................................................3
2.a Capacity utilization for 2019 and 2020..................................................................................3
2.b Machine and labour requirements for 2019 and 2020...........................................................4
2.c Machine and labour requirements for 2021...........................................................................4
3 Recommendations.........................................................................................................................5
List of Tables
Table 1: MAD and MAPE for the all four forecasting models.......................................................3
Table 2: Capacity utilization for 2019 and 2020.............................................................................3
Table 3: Machine and labour requirement.......................................................................................4
Table 4: Machine and labour requirement of 2021.........................................................................4

1. Forecasting
1.a to 1.d
Refer attached worksheet
1.e MAD and MAPE
The below mention table summarized the findings of the Mean Absolute Deviation (MAD) and
Mean Absolute Percent Error (MAPE) for all the four forecasting methods.
Table 1: MAD and MAPE for the all four forecasting models
Forecasting methods MAD MAPE
Four-period simple moving average (SMA) 1002 16%
Three-period weighted moving average (WMA) 758 13%
Exponential smoothing (ES) 958 17%
Exponential smoothing plus trend (ES + Trend) 449 8%
It can be noticed here that, the exponential smoothing plus trend method yields the lowest values
for forecasting error as well as the lowest percentage error. Therefore, it is recommended to use
exponential smoothing plus trend method for forecasting future demand.
2. Capacity Utilization
2.a Capacity utilization for 2019 and 2020
The capacity utilization of machine and labour for 2019 and 2020 is computed as below:
Table 2: Capacity utilization for 2019 and 2020
Year
New
Product
Deman
d
Maximum
Production
capacity with
3 machines
Machine
Capacity
Utilizatio
n
Total
Labours
Availabl
e
Actual labour
utilized for
operating 3
machines
Labour
capacity
Utilization
2019 6000 6000 100% 7 6 86%
2020 5000 6000 83% 7 6 86%

2.b Machine and labour requirements for 2019 and 2020
The requirements of machine and labour to meet demand for 2019 and 2020 are calculated as
below:
Table 3: Machine and labour requirement
Year
New
Product
Demand
Production
capacity of
one
machine
Requireme
nt of
machine
Labour
requiremen
t for one
machine
Total labour
requirement
2019 6000 2000 3.0 2 6
2020 5000 2000
2.5
(not
feasible)
2 5
(Actual requirement = 6)
Here, it should be noted that since computed machine requirements as 2.5 machines is not
feasible, the actual machines requirement should be 3 machines for 2020. Hence, total labour
requirement for operating 3 machines will be 6 instead of computed 5.
2.c Machine and labour requirements for 2021
After selling one machine and transferring two labours to another department, machine and
labour requirements for the year 2021 against new product demand are calculated as follows:
Table 4: Machine and labour requirement of 2021
Year 2021
New Product Demand 4500
Production capacity of one machine 2000
Requirement of machine 3*
Labour requirement for one machine 2
Total labour requirement 6*
Available machines after selling one machine 2
Shortage of machine 1
Available labour after moving two operators 5
Shortage of labour 1
*It should be noticed that requirement of machine though comes to 2.3 subject to the demand in
the year 2021 it is not feasible to have 2.3 machines. Therefore, requirement of machines are
considered as 3. Hence, the requirement of labours will be 6 instead of theoretical value of 5.

The calculation considering above assumption shows that the company will not be having
enough resources to handle demand for 2021 after selling one machine and transferring two
operators. There will be shortage of 1 machine and 1 labour to meet the demand.
3 Recommendations
The company follows just-in-time inventory management which is effective in decreasing
inventory costs and increasing inventory turn around. Also producing at the optimal inventory
levels reduces warehouse costs and other overheads which increases profitability. It is
recommended to establish appropriate levels of control to minimize risks. Supply chain
management policies should be formulated in such a way that it follows a systematic structure.
Frequent review of these policies is essential to keeping them realistic while ensuring
compliance.