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SUPPLY CHAIN MANAGEMENT

Demand Forecasting & Aggregate Planning at GE

Submitted By: Group 5


Chetan G. Patil / (MS12V016) Piyush Raj / (MS12V017) Sharad Katwa / (MS12V027) Sitikantha Das / (MS12V028)

Submitted to : Prof R. P. Sundarraj

GE BEL

Joint Venture - Nov 1997 GE 74%; BEL 26% Site Total Area: 350 K Sq. Ft. Built Up Area: 183 K Sq Ft. 700 Employees - 500 GE, 200 Contract 100% Export Oriented Unit

Products and Applications:


C-Arm X-ray MR Radiography Mammography Vascular CT

Tubes

Generator / HV Tanks CT Detector Module

Diverse Application - Catering to wide range of Healthcare products

Problem Statement:
Demand for X Ray tube shows seasonal variations. Study aims to propose suitable : (i) Forecasting Model (ii) Aggregate Production Planning Model
DEMAND :
2008 2009 2010 2011 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 1372 1557 1639 1462 1151 1122 1344 1484 1445 1510 1494 1557 1304 1321 1275 1339
1700 1600 1500

Demand

1400 1300 1200 1100 1000 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11

Forecasting Methods:
Time Series Qualitative - Static - Adaptive
FORECASTING METHOD

Casual

Simulation

Selection : Holts & Winter Method

Time Series Forecasting Methods:

A static method assumes that the estimates of level, trend and seasonality within the systematic component do not vary as new demand is observed

In adaptive forecasting, the estimates of level, trend and seasonality are updated after each demand observation.

HOLTs Model:

Estimation of Level & Trend:

1700 1600 1500 1400 1300 1200 1100 1000 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11

Regression Analysis
8

HOLTs Model:

HOLTs Model Forecasted Values:

9 10 11 12

P9=L8+T8 P10=L8+2T8 P11=L8+3T8 P12=L8+4T8

1664.79 1725.98 1787.18 1848.37

Here MADt=-1.21. Thus the estimate of standard deviation of forecast error using holt's model with alpha=.1 and beta=.2 is -1.515968

WINTER Model :

Estimation Of Seasonal Factor:


Period Demand Deseasonalized Demand Seasonal Factor 0.980409 0.907767 1.035439 1.091176 1.016174 1.01752 0.966365 0.968284

1 2 3 4 5 6 7 8

1151.00 1122.00 1344.00 1484.00 1445.00 1510.00 1494.00 1557.00

1174 1236 1298 1360 1422 1484 1546 1608

WINTER Model:

Period Demand T D1 Level L1 Trend T1

Seasonal Factor Forecas Absolute Mean Squared S1 t F1 Error E1 Error A1 Error MSE1

MAD

% Error MAPE

TS1

1112.00
1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 1151.00 1174.05 1122.00 1237.12 1344.00 1299.89 1484.00 1362.15 1445.00 1429.46 1510.00 1511.15 1494.00 1565.32 1557.00 1609.62

62.00
62.01 62.22 62.33 62.32 63.32 66.99 64.43 60.40 0.98 0.90 1.03 1.09 0.98 0.90 1.03 1.09 1150.52 1112.45 1338.32 1484.83 1396.03 -0.48 -9.55 -5.68 0.83 -48.97 0.48 9.55 5.68 0.83 48.97 165.46 132.11 219.33 0.23 45.69 41.21 31.08 504.48 4983.32 6764.53 11932.41 0.48 5.01 5.24 4.13 13.10 38.49 51.87 72.80 0.04 0.85 0.42 0.06 3.39 10.96 8.84 14.09 0.04 0.45 0.44 0.34 0.95 2.62 3.51 4.83 -1.00 -2.00 -3.00 -3.60 -4.87 -5.96 -1.87 1.68

1344.54 -165.46 1626.11 132.11

1776.33 219.33

WINTER Model Forecasted Values:

Thus using Winter Model the forecast for next 4 periods is given by the following P9=(L8+T8)*S1 = 1636.62 P10=(L8+2T8)*S1 = 1557.38 P11=(L8+3T8)*S1 = 1844.55 P12=(L8+4T8)*S1 = 2017.84 Here MADt=72.8. Thus the estimate of standard deviation of forecast error using winter model with alpha=.1 and beta=.2 ,gama = .1,is 91

Analysis : Error Estimates for Forecast

Forecasting method Holt's method Winter method

MAD -1.213 72.8

% Error 3.325 14.09

MAPE 4.53 4.83

Deviation for winter is high Holts method is the appropriate best model for forecasting.

Aggregate Planning:
Aimed to determine ideal levels of capacity , production , subcontracting , inventory , stock outs over a specified period of time horizon.

Subcontracting

Production Rate

Objectives: Determine

Overtime

Workforce Levels

Backlog

Machine Capacity

Inputs & Constraints:


INPUTS : Demand Forecast Production Costs Labour HRS / unit

Inventory Holding Cost

Backlog Cost

CONSTRAINTS : Overtime Backlog Layoffs Capital available From Supplier

GE BEL Data:
Assumptions October starting Inventory October starting workforce Working days / month Working HRS / day 100 50 20 8 Cost Structure 50000 10000 20000 5000 5000 10 63 100 Units Associates

Material cost Inventory Holding cost Cost of stockout/backlog Hiring & Training cost Layoff cost Labour HRS required Regular Time cost Overtime cost Cost of subcontracting

per unit per unit/week per unit/week per worker per worker per unit perhour per hour per unit

1000000

Linear Programing Model:


Objective Function :
Regular time labour cost 10080 x Wt (63/HR x 8 HRS / day x 20 days/month = 10080) Over time labour cost 100 x Ot Cost of hiring & lay off - 5000 x Ht + 5000 x Lt Cost of Inventory & stock out - 10000 It + 20000 St Cost of Material & subcontracting - 50000 Pt + 1000000 Ct

Total cost incurred during planning horizon :


10080 x Wt + 100 x Ot + 5000 x Ht + 5000 x Lt+ 10000 It + 20000 St + 50000 Pt + 1000000 Ct

Constraints :
Workforce , hiring & layoff : Wt - Wt-1 Ht + Lt = 0 Capacity constraint : 16 Wt + 0.1 x Ot Inventory balance constraint : It + Pt + Ct = Dt + St-1 + It + St Overtime constraint : Ot <= 20 Wt Production per week < = 130 Lay off at a time <= 10 Subcontracting = 0 (Technology Intensive) Final stock out = 0

Snapshot:

Conclusion:

Linear Programing can be used as a flexible tool, by Operations Manager to meet Production targets , satisfying all constraints.

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