Q4

Q1 Critique of Qualitative Forecasting in FMCG:

1. Limitations of Qualitative Methods in FMCG:
 Subjectivity: Qualitative methods like the Delphi technique or
market research rely heavily on expert opinions or consumer
surveys, which can be biased or inconsistent. In FMCG, where
trends shift rapidly, subjective judgments may not accurately
reflect real-time market dynamics.
 Slow to Adapt: These methods often involve lengthy processes
(e.g., multiple Delphi rounds or time-consuming market
research). FMCG operates with short product life cycles and
fast-changing consumer preferences, making qualitative
forecasts potentially outdated by the time they’re finalized.
 Lack of Scalability: Qualitative approaches struggle to handle
the high volume and frequency of decisions required in FMCG
(e.g., daily demand fluctuations for perishable goods).
2. FMCG Industry Challenges:
 Rapid Changes: Consumer tastes, competitor actions, and
promotional impacts can shift demand abruptly.
 Short Cycles: Products like snacks, beverages, or toiletries
require frequent replenishment and inventory adjustments.
 High Volatility: External factors (e.g., seasonality, supply chain
disruptions) further complicate forecasting.
Recommended Alternative: Quantitative Forecasting
 Time-Series Models (e.g., ARIMA, Exponential Smoothing):
o Analyze historical sales data to identify patterns (trends,
seasonality) and project future demand.
 o Advantages for FMCG: Fast, data-driven, and adaptable
to frequent updates. For example, exponential smoothing
can weight recent sales more heavily, capturing sudden
changes.
 Causal Models (e.g., Regression Analysis):
o Incorporate external variables (e.g., pricing, promotions,
economic indicators) to predict demand.
o Advantages for FMCG: Accounts for factors like marketing
campaigns or competitor pricing, which are critical in
FMCG.
Why Quantitative Methods Fit Better:
 Speed: Automated models generate forecasts quickly, essential
for real-time decision-making.
 Objectivity: Data-driven approaches reduce human bias.
 Scalability: Can handle large datasets (e.g., point-of-sale data)
and frequent recalculations.
Hybrid Approach Suggestion:
 Combine quantitative models (for baseline demand)
with qualitative insights (e.g., expert input on new product
launches) to balance agility and nuance. For instance, use time-
series forecasting for routine products but supplement with
market research for innovation-driven items.
Key Takeaway:
In FMCG, quantitative methods (time-series or causal models) are
more effective due to their speed, accuracy, and adaptability.
Qualitative methods can play a supporting role for strategic, long-
term decisions but are insufficient alone for operational forecasting.
Q2 Effectiveness of Capacity Planning Strategies
 1. Types of Capacity Planning:
o Long-term (e.g., infrastructure expansion, hiring
permanent staff):
 Effectiveness: Ensures baseline readiness but lacks
agility for sudden surges.
 Limitation: High costs and slow implementation
make it inflexible for unpredictable flu seasons.
o Short-term (e.g., staff overtime, temporary beds):
 Effectiveness: Quickly addresses demand spikes but
may strain resources (e.g., staff burnout).
2. Healthcare-Specific Challenges:
o Uncertain Demand: Flu severity varies annually, making
precise forecasting difficult.
o Emergencies: Unplanned patient influx (e.g., flu
complications) disrupts schedules.
o Result: Rigid plans fail; adaptive strategies are critical.
3. Flexibility as a Key Success Factor:
o Dynamic Staffing (e.g., cross-training, float pools): Allows
rapid redeployment.
o Scalable Resources (e.g., modular wards, shared
equipment): Expands capacity without permanent
investment.
o Impact: Reduces wait times, avoids overcrowding, and
maintains care quality.
Justification for Flexibility
 Risk Mitigation: Flexible plans absorb shocks (e.g., sudden
patient surges).
  Cost Efficiency: Avoids overinvestment in fixed capacity (e.g.,
idle beds).
 Patient Outcomes: Adaptive strategies prevent delays in critical
care.
Recommendation
Combine short-term flexibility (e.g., temporary staff, surge wards)
with predictive analytics (e.g., flu trend modeling) to optimize
capacity. For example:
 Use time-series forecasting to anticipate patient volume.
 Implement staff rotation protocols to balance workload.
Key Takeaway: In hospitals, flexible capacity planning outperforms
static strategies during flu season by aligning resources with real-
time demand.
Q3 1. Optimized Inventory Management
 Prevents Overstocking & Stockouts:
o Accurate forecasts ensure the right inventory levels,
avoiding excess storage costs or lost sales.
o Example: Amazon uses AI-powered demand forecasting
to stock products in regional fulfillment centers, reducing
delivery times while minimizing holding costs.
2. Reduction in the Bullwhip Effect
 Stabilizes Supply Chain Fluctuations:
o Small demand changes at the retail level can cause
exaggerated order swings upstream (e.g., manufacturers
overproducing).
o Forecasting aligns stakeholders (retailers, distributors,
suppliers) with real data.
 o Example: Walmart shares point-of-sale data with
suppliers, enabling just-in-time replenishment and
smoother production planning.
3. Improved Logistics & Fulfillment Efficiency
 Strategic Inventory Placement:
o Predicts demand by region to position goods closer to
customers.
o Example: Alibaba pre-positions inventory in local hubs
before major sales events (e.g., Singles’ Day), cutting
delivery times.
 Dynamic Resource Allocation:
o Adjusts warehouse staffing and transportation based on
forecasted order volumes.
4. Cost Reduction & Waste Minimization
 Lowers Holding & Obsolescence Costs:
o Prevents perishable or trend-sensitive goods from
expiring unsold.
o Example: Zara uses short-cycle demand forecasting to
align fast-fashion production with real-time trends,
reducing markdowns.
 Minimizes Emergency Shipments:
o Fewer last-minute, high-cost logistics fixes.
5. Enhanced Customer Satisfaction
 Ensures Product Availability:
o Fewer stockouts mean customers get what they want,
when they want it.
 Faster Deliveries:
 o Proactive inventory placement speeds up order
fulfillment.
o Example: Amazon Prime’s 1-day delivery relies on hyper-
local demand predictions.
6. Supports Agile & Resilient Supply Chains
 Risk Mitigation:
o Identifies potential disruptions (e.g., seasonal spikes,
supplier delays) and plans alternatives.
 Data-Driven Decision Making:
o Integrates market trends, promotions, and external
factors (e.g., weather) into planning.
Key Takeaways
Demand forecasting transforms supply chains by:
✅ Reducing costs (inventory, logistics, waste).
✅ Increasing efficiency (labor, transportation, storage).
✅ Boosting customer loyalty (availability, speed, reliability).

Q4 Suitability of Hybrid Aggregate Planning for Seasonal

Businesses: Air Conditioning Equipment Case
1. Aggregate Planning Strategies Overview
 Level Strategy: Maintains constant production/workforce
(stable costs but risks over/underproduction).
 Chase Strategy: Matches production to demand (responsive
but costly due to hiring/layoffs).
 Hybrid Strategy: Blends level and chase to balance stability and
flexibility.
2. Why Hybrid Fits Seasonal AC Businesses?
A. Matches Demand Patterns:
 Seasonal Peaks (Summer): Temporary labor (chase) scales up
production.
 Off-Season (Winter): Core workforce (level) handles
maintenance/R&D.
 Example: Trane Technologies uses permanent staff for R&D
year-round but hires temp workers for summer production
surges.
B. Cost-Effectiveness:
 Avoids overtime costs (pure level) and hiring/firing costs (pure
chase).
 Example: Daikin combines subcontracting (chase) with
optimized inventory (level) to smooth costs.
C. Resource Utilization:
 Equipment/Facilities: Stable core workforce keeps machinery
active; temp workers prevent idle capacity.
 Data Point: HVAC manufacturers report ~30% lower off-season
costs with hybrid vs. pure chase.
3. Justification Over Pure Strategies

Suitability for
Strategy Pros Cons
AC Business

Poor (demand
Stable labor, low High off-season
Level varies 300%+
turnover inventory costs
seasonally)

Chase Perfect demand High Risky (loses

match training/layoff skilled labor
 Suitability for
Strategy Pros Cons
AC Business

costs long-term)

Best
Balances Complex fit (adapts to
Hybrid
cost/responsiveness coordination spikes, retains
expertise)

4. Implementation Examples
 Labor: Core team handles quality control; temps assemble units
during peak.
 Inventory: Build buffer stock in spring using overtime (level),
then switch to just-in-time (chase) in summer.
 Suppliers: Pre-negotiate flexible raw material contracts (e.g.,
copper tubing) to align with hybrid cycles.
5. Potential Challenges & Mitigations
 Coordination Complexity: Use ERP systems (e.g., SAP) to align
temp hiring with production schedules.
 Skill Gaps: Cross-train core staff to supervise seasonal workers.
Conclusion
For air conditioning businesses, a hybrid aggregate planning
strategy is optimal because:
1. Cost Control: Balances fixed and variable expenses.
2. Responsiveness: Handles demand volatility without sacrificing
workforce stability.
 3. Industry Alignment: Matches the high-seasonality pattern seen
in HVAC (e.g., 70% of sales in Q2-Q3).
Q5 Long-Term and Short-Term Implications of Poor Facility Location
Decisions in Multinational Manufacturing
A poorly chosen facility location can have cascading effects on a
multinational firm’s operations, finances, and competitiveness.
Below is a structured assessment of its implications:

1. Short-Term Implications
(a) Increased Logistics Costs & Delays
 Higher Transportation Expenses: Poor proximity to suppliers or
customers leads to elevated freight costs.
o Example: A factory far from ports may incur 20-30%
higher shipping fees for exports.
 Supply Chain Disruptions: Longer lead times cause production
delays and stockouts.
(b) Operational Inefficiencies
 Underutilized Workforce: Difficulty in attracting skilled labor in
remote areas reduces productivity.
 Regulatory Hurdles: Unanticipated taxes, tariffs, or
bureaucratic red tape increase compliance costs.
(c) Customer Dissatisfaction
 Longer Delivery Times: Slower order fulfillment harms
relationships with key clients.
o Example: A poorly located automotive parts plant may
delay just-in-time deliveries to car manufacturers.
2. Long-Term Implications
(a) Reduced Market Competitiveness
 Lost Market Share: Inability to serve key regions efficiently
allows competitors to dominate.
o Case Study: Nokia’s India Factory – Poor location planning
contributed to higher costs, reducing its price
competitiveness against rivals like Samsung.
 Missed Growth Opportunities: Difficulty expanding into
adjacent markets due to geographic constraints.
(b) Talent Attrition & Low Morale
 Employee Turnover: Undesirable locations make retention
difficult, increasing recruitment/training costs.
 Declining Productivity: Low morale in isolated or high-cost
areas affects long-term performance.
(c) Financial Strain & Exit Costs
 High Relocation Expenses: Shutting down and moving a facility
is costly (e.g., severance, asset write-offs).
 Sunk Investments: Capital spent on unsuitable infrastructure
cannot be recovered.

3. Key Factors Leading to Poor Location Decisions

Factor Impact if Poorly Evaluated

Labor Costs & Skills High turnover or training costs

Proximity to Market Increased logistics expenses

Factor Impact if Poorly Evaluated

Tax & Regulatory Climate Unexpected compliance burdens

Infrastructure Quality Production bottlenecks

Political Stability Supply chain disruptions

4. Mitigation Strategies
 Conduct Scenario Analysis: Model total landed costs (TLC)
before selecting a site.
 Leverage Real Options: Choose flexible locations (e.g., near
multiple transport hubs).
 Case Example: Tesla’s Berlin Gigafactory – Selected for skilled
labor, EU market access, and government incentives, avoiding
pitfalls of prior locations.

Conclusion
A poor facility location decision has:
 Short-Term Pain: Higher costs, delays, and operational
headaches.
 Long-Term Damage: Eroded competitiveness, talent loss, and
financial strain.
Recommendation:
Multinational firms must prioritize data-driven location analysis,
balancing:
✔ Cost (labor, logistics)
✔ Market Access
✔ Risk (political, regulatory)

Q6 Key Limitations of Manual MRP Systems

Challenge Impact Example

Misplaced orders, stockouts, A typo in Excel leads to ordering 10,000

Human Errors
excess inventory units instead of 1,000.

Slow Response Delayed adjustments to Manual recalculation takes days;

Times demand/supply changes production halts due to part shortages.

Lack of Real- Decisions based on outdated Unaware of a supplier delay, the plant
Time Data information runs out of critical components.

Poor Silos between procurement, Warehouse doesn’t know about a last-

Integration production, and sales minute sales surge, causing backorders.

Scalability Cumbersome for multi-site, Spreadsheets crash when handling

Issues global operations 50,000+ SKUs across 10 factories.

Digital Solutions for MRP

Solution Features
Automates BOM, demand forecasting,
MRP Software
inventory control.
ERP Systems (e.g., SAP, Integrates finance, HR, supply chain with
Oracle) MRP.
AI-Based Planning Tools Real-time updates, predictive analytics.
Cloud-Based Platforms Enable remote access and collaboration.
Q7
MRP vs. MRP II: Choosing the Right System for a Growing
Electronics Manufacturer
1. Core Differences Between MRP and MRP II

MRP (Material
MRP II (Manufacturing
Feature Requirements
Resource Planning)
Planning)

Material procurement Integrated planning:

Scope & production Materials + capacity, labor,
scheduling finance

Inventory control & End-to-end manufacturing

Focus
BOM management operations

Standalone (limited to Links with finance, HR, sales,

Integration
materials) engineering

Rigid (no capacity Adaptive (considers

Flexibility
adjustments) machine/workforce limits)

Purchase orders & Financial forecasts, shop-

Output
production schedules floor control

2. Why MRP II is Better for a Growing Electronics Firm?

A. Electronics Industry Challenges:
 Complex BOMs: Hundreds of components (e.g., chips,
capacitors) with volatile lead times.
 Short Product Lifecycles: Rapid iterations (e.g., smartphones)
demand agile planning.
  Global Suppliers: Need to sync procurement with
currency/customs constraints.
B. How MRP II Addresses These Needs:
1. Capacity Planning:
o MRP II factors in machine availability and labor
skills (critical for PCB assembly lines).
o Example: Avoids overloading SMT machines during peak
demand.
2. Financial Integration:
o Tracks production costs (e.g., raw material price
fluctuations) and aligns with budgets.
o Example: Flags cost overruns if semiconductor prices
spike.
3. Multi-Department Sync:
o Coordinates engineering changes (e.g., revised designs)
with procurement and production.
o Example: Automatically updates BOMs when a resistor
supplier changes.
4. Scenario Simulation:
o Models "what-if" scenarios (e.g., supplier delays, demand
surges).
Q8 1. Understanding EBQ & Its Assumptions
The Economic Batch Quantity (EBQ) calculates the optimal
production batch size to minimize total costs (ordering + holding
costs).
Formula:
EBQ=2DSH(1−dp)EBQ=H(1−pd)2DS
  DD = Annual demand
 SS = Setup cost per batch
 HH = Holding cost per unit/year
 dd = Daily demand rate
 pp = Daily production rate
Key Assumptions:
✔ Constant demand (rarely true for bakeries).
✔ Fixed setup/holding costs (ignores perishability).

2. Challenges of EBQ in Bakeries

Bakery
EBQ Limitation Consequence
Characteristic

Perishable EBQ may

Overproduction
Inventory (e.g., recommend large
→ waste/spoilage
bread expires in 1–3 batches to reduce
costs.
days) setup costs.

Fluctuating
Static EBQ can’t
Demand (e.g., Stockouts or excess
adapt to daily
weekends vs. inventory.
demand shifts.
weekdays)

Holding costs (HH)

are nonlinear (e.g., EBQ underestimates
Short Shelf-Life
steep drop in value true costs.
after Day 1).
Example:
A bakery using EBQ might produce 500 croissants daily to minimize
setup costs, but if only 300 sell, 200 go to waste.

3. Cost Trade-Offs with EBQ

Cost Type EBQ Approach Bakery Reality

Setup Costs (e.g., Reduced via High if batches are too

oven cleaning, labor) larger batches. small.

Assumes linear Nonlinear: Unsold bread

Holding Costs
storage costs. = 100% loss after expiry.

Ignored in classic Lost sales if demand

Shortage Costs
EBQ. spikes (e.g., holidays).

Net Effect: EBQ may lower setup costs but increase waste costs.

4. Better Alternatives for Bakeries

A. Dynamic EBQ (Adjusted for Perishability)
 Modify EBQ to cap batch sizes based on shelf-life and demand
forecasts.
Example: If bread lasts 2 days, produce only 2 × (expected daily
demand).
B. Just-in-Time (JIT) Production
 Small, frequent batches aligned with real-time orders.
Example: A bakery using JIT makes fresh batches every 4 hours
based on POS data.
C. Hybrid Approach
  Use EBQ for non-perishables (e.g., flour, sugar) + JIT
for perishables (e.g., cakes, bread).

5. Case Study: Paris Baguette’s Strategy

 Problem: EBQ led to 15% waste due to overproduction.
 Solution: Switched to AI-driven demand forecasting + JIT
baking, reducing waste to 5%.

Conclusion
While EBQ works for stable, non-perishable goods, it’s ill-suited for
bakeries due to:
❌ Perishability risks (waste costs > setup savings).
❌ Demand volatility (static batches ≠ real needs).
Recommendations:
1. Adopt dynamic EBQ with shelf-life constraints.
2. Implement JIT for perishable items.
3. Leverage demand-sensing tools (e.g., predictive analytics for
holidays/weather).
For bakeries, freshness trumps batch efficiency—optimize for agility,
not just cost.