DEMAND

FORECASTI

NG

Actual %
Period Naive
Sales Difference
Forecast
2015 200653482 0
0.00604655
2016 201866745 200653482
8
0.18679961 Figure
2017 239575376 201866745
9 1
-
221799796
2018 239575376 0.07419618
.8
6
0.03877859
2019 230400881 221799796.8
4
2020 236502500 230400881 0.02648262

Actual %
Period 3 MA
Sales Difference
2015 200653482 0
Figure
2016 201866745 0
2
2017 239575376 0
221799796
2018 214031867.7 0.03629333
.8
0.04215765
2019 230400881 221080639.3
7
0.02563177
2020 236502500 230592017.9
2
 Actual Sales
250000000

240000000

230000000

220000000

210000000

200000000

190000000

180000000
2014 2015 2016 2017 2018 2019 2020 2021

Figure 3

Period Actual Sales

2015 200653482
2016 201866745
2017 239575376
2018 221799796.8
2019 230400881
2020 236502500

Figure- Values used in the chart above

Figure 1 shows the Naive Forecasting where the last period's actuals are used as this

period's forecast, without adjusting them or attempting to establish causal factors. It is

used only for comparison with the forecasts generated by the better (sophisticated)

techniques.
Figure 2 shows 3-period Moving average which is a simple and common type of

smoothing used in time series analysis and time series forecasting.

Figure 3 shows the trend progression of Samsung where it is assumed that past sales

and demand would remain same in the future. The chart also portrays the linear

regression line.

Inventory Management

Inventory Management is one of the most important function of the whole supply

chain. Its task is to make sure that there is a balance between inventory investment

and customer service. It is often one of the most expensive asset for a company. The

functions of it are making sure anticipated demand for goods are met accurately,

avoid demand fluctuations and exploit quantity discount. There are 4 types of

inventory: Raw materials, work-in-process, maintenance-repairing-operating and

finished goods.

ABC analysis of Samsung

ABC analysis is one of the inventory classifying methods. Through ABC analysis the

following has been identified for Samsung.

Class A- Samsung mobile phones. Mobile phones are a very high value item for
Samsung and is the principal revenue drivers for the business. It should be managed

very closely and reorder levels should be fixed as to avoid running out of important

items.

Class B- Samsung appliances, television and monitor. These items should be checked

very carefully as it has the potential to fall in the Class A items in the future.

Class C- Memory chips. These items have little or no demand but has to be kept at

production just for occasional desires by consumers.

Samsung also performs cycle counting in-order to eliminate shutdowns, annual

inventory adjustment, errors and keep right records of inventory.

Cost of inventory

 Purchase Cost- Cost of purchasing raw materials.

 Setup Cost- Incurs while establishing new manufacturing procedures.

 Holding Cost- Expenses incurring from keeping and maintaining goods in

warehouse.

 Shortage cost- Occurs when an item is out of stock.

 Lead time- Time spent between starting of a process until its conclusion.

Economic order quantity and a real life example problem of Samsung

Economic order quantity(EOQ) is the right amount of products a company should

purchase in-order to reduce inventory costs such as holding, shortage and order cost.

EOQ= Root over 2kd/h where D= Demand quantity, K= Setup/Ordering Cost, H=

Holding/Carrying cost per unit, L= Lead time

Problem Note- (The following problem has been taken from a case study of Samsung

which is a Report on Inventory Model done by students of Daffodil University)

A Samsung mobile phone retailer store “Samsung Premium Partner” has various

models of Samsung mobile phone in their stock. Demand for various models of

Samsung mobile phone is 40 sets per day. It costs the retailer tk. 20* to order every

time. A mobile phone staying in stock for a day will cost tk. 15** per set/ day which

includes space rent for the inventory. The amount of time between the placing of an

order and the receipt of the goods ordered is 6 hours.

Determine the Optimal Inventory Policy of “Samsung Premium Partner” for ordering.

SOLUTION

Here

D = Demand quantity of the product = 40 sets/day

K = Setup Cost or Ordering Cost =tk. 20 per order

H = Holding cost per unit also known as carrying cost = tk. 15 sets/day

L = Lead time= 6 hours =0.25 days

Assumption

1. Demand is deterministic
 2. Demand is constant over time

3. A constant setup cost

4. No shortage cost

(1) We know the formula for Optimal Order Quantity is

2 KD
EOQ, Y= √
H

So,

2 ×20 × 40
EOQ, Y=√ =10.33 sets
15

Y
(2) Associated cycle length is, t0 =
D

10.33
t0 =
40

t0 = 0.26 day

3) Whenever Inventory drops to

= L× D

= .25 ×40

= 10units.

(4) No of order = 1/ t0

=> 1/ 0.26 = 3.85 per day

(5)Total Cost of Units

KD HY
TCU = +
Y 2
 20× 40 15× 10.33
= +
10.33 2

= 77.45 + 77.45

= TK. 155

Additional Information

Ordering Cost:

Telephone Cost= tk. 20 per order as their supplier have policy that they deliver their

supply by themselves.

Holding Cost:

Space Rent= tk. 18000 per month= tk. 18000/30 = 600 per day= 600/40= tk. 15

unit/day

References
Analytics, I. (n.d.). Samsung Electronics Co., Ltd. Retrieved January 14, 2021, from

https://www.infrontanalytics.com/fe-EN/30005FK/Samsung-Electronics-Co-

Ltd-/gprv-growth

Bhasin, H., & Onyema, D. (2020, August 03). ABC Analysis in Inventory

Classification Explained with examples. Retrieved January 14, 2021, from

https://www.marketing91.com/abc-analysis/

Hasan, M., Yesmin, N., Alam, M. R., & Fuhad, M. A. (2016). Report on Inventory

Model (A case study of SAMSUNG) (pp. 1-26, Rep.). Dhaka: Rayan Mirja.

Kenton, W. (2020, August 28). Understanding Economic Order Quantity – EOQ.

Retrieved January 14, 2021, from

https://www.investopedia.com/terms/e/economicorderquantity.asp

Samsung profits fall more than 50% on lower demand for memory chips. (2019, July

08). Retrieved January 14, 2021, from

https://siliconangle.com/2019/07/04/samsung-profits-fall-50-lower-demand-

memory-chips/

Samsung's Operations Management Sample Critical Analysis. (2019, August 27).

Retrieved January 14, 2021, from https://onlineessaypapers.com/samsungs-

operations-management-sample-critical-analysis/