CHAPTER 4
Problems
Note :
YEAR
MILEAGE
3,000 .
4,000
34
3,400
3,800
3,700
Forecast the mileage for next year (6th year) using a 2-year
moving average.
I Find the MAD based on the 2-year moving average . (Hint :
You will have only 3 years of matched data .)
Use a weighted 2-year moving average with weights of .4
and .6 to forecast next year's mileage. (The weight of .6 is
for the most recent year .) What MAD results from using this
approach to forecasting? (Hint . You will have only 3 years of
matched data.)
Compute the forecast for year 6 using exponential smoothing,
an initial forecast for year 1 of 3,000 miles, and a = .5 .
The monthly sales for Yazici Batteries, Inc ., were as
MONTH
SALES
January
February
20
March
April
May
June
July
August
September
October
November
December
21
15
14
i_
13
; _.
17
16
18
20
20
21
23
Plot the monthly sales data .
Forecast January sales using each of the following:
i) Naive method .
ii) A 3-month moving average.
iii) A 6-month weighted average using .1, .1, .1, .2, .2, and .3,
with the heaviest weights applied to the most recent
months .
iv) Exponential smoothing using an a = .3 and a September
forecast of 18 .
v) A trend projection .
With the data given, which method would allow you to forecast next March's sales?
4.3
177
means the problem may be solved with POM for Windows and/or Excel OM .
4.1
The Carbondale Hospital is considering the purchase
a new ambulance. The decision will rest partly on the antici~ted mileage to be driven next year . The miles driven during the
st 5 years are as follows:
4.2
llows:
FORECASTING DEMAND
a) Plot the data on a graph. Do you observe any trend, cycles, or
random variations?
b) Starting in year 4 and going to year 12, forecast demand using
a 3-year moving average. Plot your forecast on the same graph
as the original data .
c) Starting in year 4 and going to year 12, forecast demand using
a 3-year moving average with weights of .1, .3, and .6, using .6
for the most recent year . Plot this forecast on the same graph.
d) As you compare forecasts with the original data, which seems
to give the better results?
" " 4.4
The actual demand for the patients at Omaha Emergency Medical Clinic for the first 6 weeks of this year follows:
WEEK
ACTUAL N0. OF
PATIENTS
21
65
70
48
63
52
62
Clinic administrator Marc Schniederjans wants you to forecast
patient demand at the clinic for week 7 by using this data. You
decide to use a weighted moving average method to find this forecast . Your method uses four actual demand levels, with weights
of 0.333 on the present period, 0.25 one period ago, 0.25 two periods ago, and 0.167 three periods ago .
a) What is the value of your forecast?
b) If instead the weights were 20, 15, 15, and 10, respectively, how
would the forecast change? Explain why.
c) What if the weights were 0.40, 0.30, 0.20, and 0.10, respectively? Now what is the forecast for week 7?
" 4 .5
The following gives the number of pints of type B
blood used at Woodlawn Hospital in the past 6 weeks:
WEEK OF
August 31
September 7
September 14
September 21
September 28
October 5
PINTS USED
360
389
410
381
368
374
a) Forecast the demand for the week of October 12 using a
3-week moving average .
b) Use a 3-week weighted moving average, with weights of . 1, .3,
and .6, using .6 for the most recent week . Forecast demand for
the week of October 12 .
c) Compute the forecast for the week of October 12 using exponential
smoothing with a forecast for August 31 of 360 and a = .2 .
4 .6
Refer to Problem 4.3 . Develop a forecast for years 2
through 12 using exponential smoothing with a = .4 and a forecast for year 1 of 6. Plot your new forecast on a graph with the
actual data and the naive forecast. Based on a visual inspection,
which forecast is better? I
178
PART 1
INTRODUCTION TO OPERATIONS MANAGEMENT
4 .7
A check-processing center uses exponential smoothing to forecast the number of incoming checks each month. The
number of checks received in June was 40 million, while the forecast was 42 million. A smoothing constant of .2 is used .
a) What is the forecast for July?
b) If the center received 45 million checks in July, what would be
the forecast for August?
c) Why might this be an inappropriate forecasting method for
this situation'? P-~t"
"
Daily high temperatures in St . Louis for the last week
were as follows: 93, 94, 93, 95, 96, 88, 90 (yesterday) .
a) Forecast the high temperature today, using a 3-day moving
average.
b) Forecast the high temperature today, using a 2-day moving
average.
c) Calculate the mean absolute deviation based on a 2-day moving average.
d) Compute the mean squared error for the 2-day moving average .
e1 Calculate the mean absolute percent error for the 2-day moving average. Ply"
"
4 .8
" " 4 .9
Data collected on the yearly registrations for a Six
Sigma seminar at the Quality College are shown in the following
table:
YEAR
REGISTRATIONS (000)
10
11
10
12
14
15'
a) Develop a ' -)ear moving average to forecast registrations
from year 4 to year 12 .
b) Estimate demand again for years 4 to 12 with a 3-year weighted
moving average in which registrations in the most recent year
are given a weight of 2, and registrations in the other 2 years
are each given a H eight of 1 .
c) Graph the original data and the two forecasts. Which of the
two forecasting methods seems better?
January
February
March
April
$1 .80
1 .67
1 .70
1 .85
July
August
September
October
1 .80
1 .83
1 .70
1 .65
May
1 .90
November
1 .70
June
1 .87
December
1 .75
a) Use a 2-month moving average on all the data and plot the
averages and the prices .
b) Use a 3-month moving average and add the 3-month plot to
the graph created in part (a).
c) Which is better (using the mean absolute deviation) : the
2-month average or the 3-month average?
d) Compute the forecasts for each month using exponential
smoothing, with an initial forecast for January of $1 .80. Use
a = .1, then a = .3, and finally a = .5 . Using MAD, which a
is the best? PJ
As you can see in the following table, demand for
heart transplant surgery at Washington General Hospital has
increased steadily in the past few years:
. . . 4.13
The director of medical services predicted 6 years ago that
demand in year I would be 41 surgeries.
Use exponential smoothing with a smoothing constant of 0.3 to forecast the registrations at the seminar given in
Problem 4.9 . To begin the procedure, assume that the forecast for
year I was 5,000 people signing up .
a) What is the MAD? 535C
b) What is the MSE?
" 4.10
Consider the following actual and forecast demand
levels for Big Mac hamburgers at a local McDonald's restaurant :
" " 4 .11
DAY
ACTUAL DEMAND
FORECAST DEMAND
Monday
88
88
Tuesday
72
88
Wednesday
68
84
Thursday
48
80
Friday
The forecast for Monday was derived by observing Monday's
demand level and setting Monday's forecast level equal to this
demand level. Subsequent forecasts were derived by using exponential smoothing with a smoothing constant of 0.25 . Using this
exponential smoothing method, what is the forecast for Big Mac
demand for Friday? P
Lenovo uses the ZX-81 chip in some of its laptop
computers . The prices for the chip during the past 12 months
were as follows:
-4
" 4 .12
.112
a) Use exponential smoothing, first with a smoothing constant
of .6 and then with one of .9, to develop forecasts for years 2
through 6.
b) Use a 3-year moving average to forecast demand in years 4, 5,
and 6 .
c) Use the trend-projection method to forecast demand in years I
through 6.
d) With MAD as the criterion, which of the four forecasting
methods is best? R"
4 .14
Following are two weekly forecasts made by two different methods for the number of gallons of gasoline, in thousands, demanded at a local gasoline station. Also shown are
actual demand levels, in thousands of gallons.
CHAPTER 4
FORECASTS
WEEK
METHOD 1 I METHOD 2
ACTUAL DEMAND
0 .90
0 .80
0 .70
1 .05
1 .20
1 .00
0 .95
0 .90
1 .00
1 .20
1 .11
1 .00
What are the MAD and MSE for each method?
Refer to Solved Problem 4.1 on page 174.
a) Use a 3-year moving average to forecast the sales of
Volkswagen Beetles in Nevada through year 6.
b) What is the MAD?
c) What is the MSE?
4.15
4.16
Refer to Solved Problem 4.1 .
a) Using the trend projection (regression) method, develop a forecast ,' or the sales of Volkswagen Beetles in Nevada through year 6.
b) What is the MAD? P,,1,,
c) What is the MSE?
Sales of quilt covers at Bud Banis's department store
in Carbondale o,-r the past year are shown below. Management
prepared a forecast using a combination of exponential smoothing and its collective judgment for the 4 months (March, April,
May, and June):
--4.17
MONTH
UNIT SALES
July
August
100
93
MANAGEMENT'S FORECAST
FORECASTING DEMAND 17 9
The first forecast, Fr , was derived by observing A i and setting Fr
equal to Al . Subsequent forecast averages were derived by exponential smoothing. Using the exponential smoothing method,
find the forecast for time period 5. (Hint. You need to first find
the smoothing constant, a.)
. . . 4.20 Income at the architectural firm Spraggins and Yunes
for the period February to July was as follows :
MONTH
FEBRUARY
Income
(in $ thousand)
70.0
MARCH I APRIL I MAY I JUNE
68.5
64 .8
72 .8
Resolve Problem 4.20 with a = .1 and (3 = .8 . Using
MSE, determine which smoothing constants provide a better
forecast . P
" " .4 .21
. 4.22
Refer to the trend-adjusted exponential smoothing
illustration in Example 7 on pages 153-155 . Using a = .2 and
R = .4, we forecast sales for 9 months, showing the detailed calculations for months 2 and 3. In Solved Problem 4.2, we continued
the process for month 4.
In this problem, show your calculations for months 5 and 6 for
and FIT, .
Ft , Tr,
The number of internal disk drives (in millions) made
at a plant in Taiwan during the past 5 years follows:
. 4.23
96
October
November
110
124
YEAR
December
January
119
140
160
92
83
March
April
101
96
120
114
May
June
89
108
110
108
a) Compute MAD and MAPE for management's technique.
b) Do management's results outperform (i .e ., have smaller MAD
and MAPE than) a naive forecast?
c) Which forecast do you recommend, based on lower forecast
error?
Refer to Solved Problem 4.1 . Using smoothing constants of .6 and .9, develop forecasts for the sales of VW Beetles.
What effect did the smoothing constant have on the forecast?
Use MAD to determine which of the three smoothing constants
(.3, .6, or .9) gives the most accurate forecast .
" 4.18
. . . . 4.19 Consider the following actual (A,) and forecast (Fr )
demand levels for a commercial multiline telephone at Office Max:
TIME
PERIOD, t
ACTUAL
DEMAND, A,
FORECAST
DEMAND, Ft
50
50
42
50
56
48
46
50
71 .3
Use trend-adjusted exponential smoothing to forecast the firm's
August income . Assume that the initial forecast average for
February is $65,000 and the initial trend adjustment is 0. The
smoothing constants selected are a = .1 and R = .2 . P`':
September
February
71 .7
JULY
DISK DRIVES
190
200
210
a) Forecast the number of disk drives to be made next year, using
linear regression .
b) Compute the mean squared error (MSE) when using linear
regression .
c) Compute the mean absolute percent error (MAPE) . P"
Refer to Problem 4.22. Complete the trend-adjusted
exponential-smoothing forecast computations for periods 7, 8,
and 9 . Confirm that your numbers for F,, Tt , and FIT, match
those in Table 4.1 (p . 154) . P
" 4.24
Mark Gershon, owner of a musical instrument distributorship, thinks that demand for guitars may be related to the
number of television appearances by the popular group Maroon 5
during the previous month. Mark has collected the data shown in
the following table:
--4.25
10
a) Graph these data to see whether a linear equation might
describe the relationship between the group's television shows
and guitar sales.
b) Use the least-squares regression method to derive a forecasting
equation .
180 PART 1
INTRODUCTION TO OPERATIONS MANAGEMENT
c) What is your estimate for guitar sales if Maroon 5 performed
on TV nine times last month?
d) What are the correlation coefficient (r) and the coefficient of
determination (r2) for this model, and what do they mean? P?(
" 4.26
The following gives the number of accidents that
occurred on Florida State Highway 101 during the past 4 months :
MONTH
NUMBER OF ACCIDENTS
January
February
March
April
30
where
60
90
Forecast the number of accidents that will occur in May, using
least-squares regression to derive a trend equation .PX
George Kyparisis owns a company that manufactures
sailboats. Actual demand for George's sailboats during each of
the past four seasons was as follows:
" " 4.27
YEAR
2
Winter
Spring
1,400
1,200
1,000
900
1,500
1,400
1,600
1,500
1,000
2,100
2,000
1,900
600
750
650
500
Summer
Fall
George has forecasted that annual demand for his sailboats
in year 5 will equal 5,600 sailboats. Based on this data and the
multiplicative seasonal model, what will the demand level be for
George's sailboats in the spring of year 5?
Attendance at Orlando's newest Disneylike attraction, Lego World, has been as follows:
--4.28
QUARTER
GUESTS (IN
THOUSANDS)
Winter Year 1
Spring Year 1
73
104
Summer Year 1
168
Fall Year 1
74
Winter Year 2
65
Spring Year 2
82
QUARTER
Summer Year 2
Fall Year 2
Winter Year 3
Spring Year 3
Summer Year 3
Fall Year 3
GUESTS
(IN THOUSANDS)
124
52
D=77+0 .43Q
Spring
Summer
Fall
FACTOR (INDEX)
.8
1 .1
1 .4
7
Forecast energy use for the four quarters of year 25, beginning
with winter .
PRICE
NUMBER SOLD
$2 .70
760
$3 .50
510
$2 .00
980
$4 .20
$3 .10
250
320
$4 .05
480
Using these data, how many mocha latte coffees would be forecast to be sold according to simple linear regression if the price
per cup were $2 .80? P%
The following data relate the sales figures of the bar
in Mark Kaltenbach's small bed-and-breakfast inn in Portand, to
the number of guests registered that week :
" 4.33
WEEK
98
where Q refers to the sequential quarter number and Q = 1 for
winter of Year 1 . In addition, the multiplicative seasonal factors
are as follows:
Winter
Caf6 Michigan's manager, Gary Stark, suspects
that demand for mocha latte coffees depends on the price being
charged. Based on historical observations, Gary has gathered the
following data, which show the numbers of these coffees sold over
six different price values :
205
North Dakota Electric Company estimates its demand
trend line (in millions of kilowatt hours) to be :
y=36+4 .3x
y = demand for Kool Air conditioners and
x = the outside temperature (F) Pte
--4 .32
146
" 4.29
Lori Cook has developed the following forecasting
a) Forecast demand for the Kool Air when the temperature is
70F .
b) What is demand when the temperature is 80F?
c) What is demand when the temperature is 90F? PX
89
Compute seasonal indices using all of the data .
QUARTER
" 4 .31
model:
40
SEASON
In the past, Peter Kelle's tire dealership in Baton
Rouge sold an average of 1,000 radials each year . In the past 2
years, 200 and 250, respectively, were sold in fall, 350 and 300 in
winter, 150 and 165 in spring, and 300 and 285 in summer. With a
major expansion planned, Kelle projects sales next year to increase
to 1,200 radials. What will be the demand during each season?
" 4.30
GUESTS
BAR SALES
16
$330
12
270
18
380
14
300
a) Perform a linear regression that relates bar sales to guests (not
to time).
b) If the forecast is for 20 guests next week, what are the sales
expected to be? PX
The number of auto accidents in Athens, Ohio, is
related to the regional number of registered automobiles in thousands (XI), alcoholic beverage sales in $10,000s (X2), and rainfall
in inches (X3). Furthermore, the regression formula has been calculated as :
" 4 .34
Y=a+b,X,+b2X2 +b3X3
where
Y = number of automobile accidents
a=7.5
b r = 3.5
bz = 4.5
b3 = 2.5
CHAPTER 4
Calculate the expected number of automobile accidents under
conditions a, b, and c:
2
3
y = $90.00 + $48 .50x i + $ .40x2
The coefficient of correlation computed was .68 .
a) If Donna Battista returns from a 300-mile trip that took her
out of town for 5 days, what is the expected amount she should
claim as expenses?
b) Battista submitted a reimbursement request for $685 . What
should the accountant do?
c) Should any other variables be included? Which ones? Why?
" " 4.36
Rhonda Clark, a Slippery Rock, Pennsylvania, real
estate developer, has devised a regression model to help determine
residential hou,ing prices in northwestern Pennsylvania . The
model was developed using recent sales in a particular neighborhood . The price ( Y) of the house is based on the size (square footage = X) of the house. The model is :
Y = 13,473 + 37 .65X
The coefficient of correlation for the model is 0.63.
a) Use the model to predict the selling price of a house that is
1,860 square feet .
b) An 1,860-square-foot house recently sold for $95,000. Explain
why this is not what the model predicted.
c) If you were going to use multiple regression to develop such a
model, what other quantitative variables might you include?
d) What is the value of the coefficient of determination in this
problem?
--4.37
Sales of tablet computers at Ted Glickman's electronics store in Washington, D.C ., over the past 10 weeks are shown
in the table below:
20
58 .3 61 .1 73 .4 75 .7 81 .1 89 .0 101 .1 94 .8 103 .3 116 .2
" 4.35
Accountants at the Tucson firm, Larry Youdelman,
CPAs, believed that several traveling executives were submitting
unusually high travel vouchers when they returned from business
trips. First, they took a sample of 200 vouchers submitted from
the past year . Then they developed the following multiple-regression equation relating expected travel cost to number of days on
the road (x,) and distance traveled (x 2) in miles:
WEEK 1 DEMAND
18 1
their homes) . The following table indicates how many patients
Dr . Fok has seen each year for the past 10 years. It also indicates
what the robbery rate was in New Orleans during the same year :
(a)
(b)
FORECASTING DEMAND
WEEK I DEMAND
6
29
21
36
28
22
37
25
25
10
28
a) Forecast demand for each week, including week 10, using
exponential smoothing with a = .5 (initial forecast = 20) .
b) Compute the MAD.
c) Compute the tracking signal .
Dr . Lillian Fok, a New Orleans psychologist, special--4.38
izes in treating patients who are agoraphobic (i .e ., afraid to leave
Using trend (linear regression) analysis, predict the number of
patients Dr . Fok will see in years 11 and 12 as a function of time .
How well does the model fit the data?
" " 4.39
City government has collected the following data on
annual sales tax collections and new car registrations:
ANNUAL SALES TAX COLLECTIONS
(IN MILLIONS)
1 .0
1 .4
1 .9
2 .0
1 .8
2 .1
2 .3
NEW CAR REGISTRATIONS
(IN THOUSANDS)
10
12
15
16
14
17
20
Determine the following:
a) The least-squares regression equation .
b) Using the results of part (a), find the estimated sales tax collections if new car registrations total 22,000 .
c) The coefficients of correlation and determination .
--4.40
Using the data in Problem 4.38, apply linear regression to study the relationship between the robbery rate and
Dr . Fok's patient load . If the robbery rate increases to 131 .2 in
year 11, how many phobic patients will Dr . Fok treat? If the robbery rate drops to 90 .6, what is the patient projection? ~`
. . . 4.41
Bus and subway ridership for the summer months in
London, England, is believed to be tied heavily to the number of
tourists visiting the city . During the past 12 years, the data on the
next page have been obtained :
182
PART
INTRODUCTION TO OPERATIONS
YEAR
(SUMMER MONTHS)
NUMBER OF TOURISTS
(IN MILLIONS)
RIDERSHIP
(IN MILLIONS)
7
2
1 .5
2
3
b) If a student scores a 350, what do you think his or her GPA
will be?
c) What about a student who scores 800?
1 .3
m ._ .
4
14
1 .5
2 .5
15 "
2 .7
16
2 .4
12
2 .0
14
20
2 .7
11
15
3 .4
12
1 .7
CEO John Goodale, at Southern Illinois Power and
Light, has been collecting data on demand for electric power in its
western subregion for only the past 2 years . Those data are shown
in the table below.
To plan for expansion and to arrange to borrow power from
neighboring utilities during peak periods, Goodale needs to be
able to forecast demand for each month next year . However, the
standard forecasting models discussed in this chapter will not fit
the data observed for the 2 years.
a) What are the weaknesses of the standard forecasting techniques as applied to this set of data?
b) Because known models are not appropriate here, propose
your own approach to forecasting . Although there is no perfect solution to tackling data such as these (in other words,
there are no 100% right or wrong answers),justify your model.
c) Forecast demand for each month next year using the model
you propose .
" " " 4 .44
1 .0
w.-
10
MANAGEMENT
4 .4
a) Plot these data and decide if a linear model is reasonable .
b) Develop a regression relationship .
c) What is expected ridership if 10 million tourists visit London
in a year?
d) Explain the predicted ridership if there are no tourists at all.
e) What is the standard error of the estimate?
f) What is the model's correlation coefficient and coefficient of
determination?
January
17
February
14
March
10
20
April
13
23
May
18
30
FORECAST DEMAND
June
15
38
. . . 4 .42 The following are monthly actual and forecast
demand levels her May through December for units of a product
manufactured by the D. Bishop Company in Des Moines :
MONTH
ACTUAL DEMAND
May
100
100
July
23
44
June
80
104
August
26
41
July
110
99
September
21
33
August
115
101
October
15 .
23
September
105
104
November
12
26
October
110
104
December
14
17
November
125
105
December
120
109
Emergency calls to the 911 system of Durham, North
Carolina, for the past 24 weeks are shown in the following table:
" " " 4 .45
What is the value of the tracking signal as of theend of December?
Thirteen students entered the business program at
Same Fe College 2 years ago. The following table indicates what
each student scored on the high school SAT math exam and their
grade-point averages (CPAs) after students were in the Same Fe
program for 2 years:
--4.43
STUDENT
SAT SCORE
,GPA kNT
421
377
585
690
608
390
415
2 .90
2 .93
3 .00
3 .45
3 .66
2 .88
2 .15
SAT SCORE
481
729
501
613
709
366
GPA
2 .53
3 .22
1 .99
2 .75
3 .90
1 .60
a) Is there a meaningful relationship between SAT math scores
and grades?
10
11
12
50
35
25
40
45
~6
35
20
30
35
20
15
40
13
14
15
16
17
18
19
20
21
22
23
24
55
35
25
55
55
40
35
60
75
50
40
65
a) Compute the exponentially smoothed forecast of calls for each
week . Assume an initial forecast of 50 calls in the first week,
and use a = .2 . What is the forecast for week 25?
b) Reforecast each period using a = .6 .
c) Actual calls during week 25 were 85 . Which smoothing constant provides a superior forecast? Explain and justify the
measure of error you used .
" " " " 4.46 Boulanger Savings and Loan is proud of its long tra-
dition in Winter Park, Florida. Begun by Michelle Boulanger
22 years after World War 11, the S&L has bucked the trend of
financial and liquidity problems that has repeatedly plagued
CHAPTER 4
the industry . Deposits have increased slowly but surely over the
years, despite recessions in 1983, 1988, 1991, 2001, and 2010 . Ms .
Boulanger believes it is necessary to have a long-range strategic
plan for her firm, including a 1-year forecast and preferably even a
5-year forecast of deposits . She examines the past deposit data and
also peruses Florida's gross state product (GSP) over the same 44
years. (GSP is analogous to gross national product [GNP] but on
the state level.) The resulting data are in the following table.
FORECASTING DEMAND
183
with a = .1 . Co-owner Sherry Snyder wants to use a three-period
moving average .
SALES
BOB
JANUARY
400
FEBRUARY
380
400
SHERRY
BOB'S
ERROR
' SHERRY'S
ERROR
410
375
a) Is there a strong linear trend in sales over time?
b) Fill in the table with what Bob and Sherry each forecast for
May and the earlier months, as relevant .
c) Assume that May's actual sales figure turns out to be 405 .
Complete the table's columns and then calculate the mean
absolute deviation for both Bob's and Sherry's methods.
d) Based on these calculations, which method seems more
accurate?
. . . 4.48 Using the 911 call data in Problem 4.45, forecast calls
for weeks 2 through 25 with a trend-adjusted exponential smoothing model . Assume an initial forecast for 50 calls for week 1 and
. = .3 and
an initial trend of zero . Use smoothing constants of o
R = .2 . Is this model better than that of Problem 4 .45? What
adjustment might be useful for further improvement? (Again,
assume that actual calls in week 25 were 85 .) P
22
5.3
2.3
44
94 .0
5.0
'In $ millions .
bin $ billions,
a) Using exponential smoothing, with a = .6, then trend analysis, and finally linear regression, discuss which forecasting
model fits best for Boulanger's strategic plan . Justify the
selection of one model over another.
b) Carefully examine the data . Can you make a case for excluding a portion of the information? Why? Would that change
your choice of model?
" " " 4.47 Storrs Cycles has just started selling the new Cyclone
mountain bike, with monthly sales as shown in the table . First,
co-owner Bob Day wants to forecast by exponential smoothing
by initially setting February's forecast equal to January's sales
--4.49
Dave Fletcher, the general manager of North
Carolina Engineering Corporation (NCEC), thinks that his firm's
engineering services contracted to highway construction firms are
directly related to the volume of highway construction business
contracted with companies in his geographic area . He wonders
if this is really so, and if it is, can this information help him plan
his operations better by forecasting the quantity of his engineering services required by construction firms in each quarter of the
year? The following table presents the sales of his services and
total amounts of contracts for highway construction over the past
eight quarters :
QUARTER
Sales of NCEC Services
(in $ thousands)
Contracts Released
(in $ thousands)
10
15
12
13
12
16
153
172
197
178
185
199
205
226
a) Using this data, develop a regression equation for predicting
the level of demand of NCEC's services .
b) Determine the coefficient of correlation and the standard error
of the estimate .
Refer to MyOMLab for these additional homework problems :
4.50-4.62
184
PART 1
INTRODUCTION TO OPERATIONS MANAGEMENT
CASE STUDIES
Southwestern University: (B)*
Southwestern University (SWU), a large state college in Stephenville,
Texas, enrolls close to 20,000 students . The school is a dominant
force in the small city, with more students during fall and spring than
permanent residents.
Always a football powerhouse, SWU is usually in the top 20 in
college football rankings . Since the legendary Phil Flamm was hired
as its head coach in 2006 (in hopes of reaching the elusive number
l ranking), attendance at the five Saturday home games each year
increased . Prior to Flamm's arrival, attendance generally averaged
25,000 to 29,000 per game . Season ticket sales bumped up by 10,000
just with the announcement of the new coach's arrival . Stephenville
and SWU were ready to move to the big time!
The immediate issue facing SWU, however, was not NCAA ranking . It was capacity . The existing SWU stadium, built in 1953, has
seating for 54,000 fans . The following table indicates attendance at
each game for the past 6 years .
One of Flamm's demands upon joining SWU had been a stadium
expansion, or possibly even a new stadium . With attendance increasing, SWt
iministrators began to face the issue head-on . Flamm had
wanted dormitories solely for his athletes in the stadium as an additional feature of any expansion .
SWU's president, Dr . Joel Wisner, decided it was time for his
vice president of development to forecast when the existing stadium
would "max out ." The expansion was, in his mind, a given . But
Wisner needed to know how long he could wait. He also sought a
revenue projection, assuming an average ticket price of $50 in 2013
and a 5% increase each year in future prices .
Discussion Questions
1 . Develop a forecasting model, justifying its selection over other
techniques, and project attendance through 2014 .
2 . What revenues are to be expected in 2013 and 2014?
3 . Discuss the school's options .
*This integrated case study runs throughout the text . Other issues facing
Southwestern's football stadium include (A) managing the stadium project
(Chapter 3) ; (C) quality of facilities (Chapter 6) ; (D) break-even analysis of
food services (Supplement 7 Web site) ; (E) locating the new stadium (Chapter 8 Web site) ; (F) inventory planning of football programs (Chapter 12
Web site) ; and (G) scheduling of campus security officers/staff for game days
(Chapter 13 Web site) .
Southwestern University Football Game Attendance, 2007-2012
2007
GAME
ATTENDEES I
OPPONENT
2009
2008
ATTENDEES
OPPONENT
ATTENDEES '
OPPONE T
34,200
Rice
36,100
Miami
35,900
USC
2a
39,800
Texas
40,200
Nebraska
46,500
Texas Tech
38,200
Duke
39,100
Ohio State
43,100
Alaska
4b
26,900
Arkansas
25,300
Nevada
27,900
Arizona
35,100
TCU
36,200
Boise State
39,200
Baylor
2010
GAME
ATTENDEES
2011
OPPONENT
ATTENDEES
OPPONENT
ATTENDEES
012
OPPONENT
41,900
Arkansas
42,500
Indiana
46,900
LSU
2a
46,100
Missouri
48,200
North Texas
50,100
Texas
43,900
Florida
44,200
Texas A&M
45,900
South Florida
4b
30,100
Central Florida
33,900
Southern
36,300
Montana
40,500
LS U
47,800
Oklahoma
49,900
Arizona State
"Homecoming games .
bDuring the fourth week of each season, Stephenville hosted a hugely popular southwestern crafts festival . This event brought tens of thousands of tourists to
the town, especially on weekends, and had an obvious negative impact on game attendance .
