April through September a three month möving average a. Forecast using b. Use si

Question

April through September a three month möving average a. Forecast using b. Use simple exponential smoothing with an alpha of 0.3 to estimate April through September Use MAD to decide which method produces the better forecast over six month period c. (Marks: 10) 2. a) FMCG firm having a sales turnover of Rs 120 crores per tear is carrying 18 days finished goods inventory at any point of time. The firm is spending 3.5 per cent of its turnover on logistics operations. The breakup of logistics cost is: transportation 60 per cent, warehousing 20 per cent and administration 20 per cent. In order to reduce the inventory cost and enhance customer service, the logistics manager proposed to operate on 6 days inventory level by adopting latest DRP (Distribution Requirement Planning) software module from a leading e-business Solution company. He also suggested the changes in the organization structure to suit the module. On the distribution side for extending superior customer service, he proposed to service their customer through frequent deliveries with smaller lots. This will help in reducing inventory burden on their clients and extend superior service to them. As a result, the transportation Assumption? lado 22 %

Explanation / Answer

Particulars UOM Amount Turnover Cr 120 Transportation Cost against turnover % 3.50% Total Transportation cost Cr 4.2 Breakup Transportation Cost % 60% Warehousing % 20% Admin % 20% Transportation Cost Cr 2.52 Warehousing Cr 0.84 Admin Cr 0.84 Increase in Transporation % 30% Decrease in Warehousing cost % 25% Increase In Admin % 10% Revised Transportation Cr 3.276 Revised Warehousing cost Cr 0.63 Revised Admin Cr 0.924 Total revised Cost Cr 4.83 Increase in total Cost Cr 0.63 Reduction In inventory( from 18 Days to 6 Days) Days 12 Reduction In inventory( from 18 Days to 6 Days) Cr 4.8 (120 Cr/300 days*12 Days) Total Working Days Days 300 Inventory Carrying cost % 22% Reduction Inventory carrying cost( 4.8 Cr * 12%) Cr 1.06 Net Gain from reduction in inventory Cr 0.426

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