Impact Of Forecast Modeling On Cost Performance

Tan, Kah Ee (2011) Impact Of Forecast Modeling On Cost Performance. Project Report. UTeM, Melaka, Malaysia. (Submitted)

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Abstract

As it seems, in real-life industrial situations, management tends to find and implement simple approaches for operational problems that they face in their day-to-day running of business, the author in this regard refer to simple approaches to the approaches that are well understood by managers. It is a known fact in management science that managers will not use approaches that they cannot understand, obviously, due to the risk of making the wrong decision when using an approach they truly not well understood. Exponential Smoothing and Moving Average are two most common and the simplest method to use for demand forecasting, as reported in the literatures. In this project, the author considers an inventory model in which the manager does not know the exact demand behavior. This project present an extension of the central depot inventory model, reported by Lorenzo and Stefano (2009) that allows the author to quantify the historical demand data and the impact of forecast modeling on the expected cost at the manager. This project approach is demonstrated through examples in which the manager employs the commonly used forecast technique and the impact is investigated through the designed scenarios, in addition analyze in term of simulation output measures. At the end of this project, in contrast to the expected finding, result analysis performed that, the weaker the interaction among the forecast accuracy and inventory control system provides the better solution to total cost performance.

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