MGOC20H3 Lecture Notes - Lecture 5: Carrying Cost, Exponential Smoothing
Document Summary
Only need the mean squared error method to measure error: mse = [sum(forecast errors)^2] / n. Trend projection: regression data of demand on the y axis and time on the x axis, de-seasonalizing data; given fluctuations, how much is each season above or below an average, example 9 pg 124. Need to know linear regression and trend projections calculations. Chapter 12 inventory management: known demand; demand is given, given annual demand, after the midterm; unknown demand. Get a balance between inventory investment and customer service: expensive to hold on to inventory, but faster getting products to consumers. Dependent demand: demand for inventory that relates to demand of other inventory goods (ie internal production demand) Holding costs: cost to hold inventory over time. Ordering costs: transition costs for ordering and receiving goods. Ordering and setup together in the model; same effect. Reduced ordering cost if orders are big, but incurs bigger holding costs.
