Blayer Pharm sells two types of blood pressure cuffs at more than 50 locations in the Midwest. The first style is a relatively expensive model, whereas the second is a standard, less expensive model. Although weekly demand for these two products is fairly stable from week to week, there is enough variation to concern management. There have been relatively unsophisticated attempts to forecast weekly demand but they haven’t been very successful. Sometimes demand (and the corresponding sales) is lower than forecasts, so inventory costs are high. Other times, the forecasts are too low. When this happens, and on-hand inventory is not sufficient to meet customer demand, Blayer requires expedited shipments to keep customers happy—and this nearly wipes out Blayer’s profit margin on the expedited units. Profits would almost certainly increase if demand could be forecast more accurately. Data on weekly sales of both products appear in the file for this week. A time series chart of the two sales variables indicates what Blayer management expected—namely, there is no evidence of any upward or downward trends or of any seasonality. In fact, it might appear that each series is an unpredictable sequence of random ups and downs.
For this Assignment, reflect on the scenario presented. Review the resources for this week and consider how you might apply time series analyses to address the case questions.
The Assignment: (3–5 page)
Use the dataset to answer the following questions. Provide complete analysis and graphs, as appropriate.
- It is possible to forecast either series with some degree of accuracy or with an extrapolation method (where only past values of that series are used to forecast current and future values).
- Perform an analysis with at least two different methods. Show your forecast results in table form (include your SPSS output tables).
- Which method appears to be best? In narrative form, defend your choice of best method. Include a description of the level of accuracy of the chosen method.
- Is it possible, when trying to forecast sales of one of your blood pressure cuff products, to somehow incorporate current or past sales of the other blood pressure cuff product in the forecast model? Why or why not? Explain your reasoning and how you would go about doing this.
- Are these products “substitute” products or are they “complementary” products? Why? Conduct appropriate analyses to support your argument and include tabular results (i.e., your SPSS output).