Operational research, Corporate Finance

Assignment Help:

Fisher and Raman (1996), Fisher et al. (2001) propose to let a number of experts within a company estimate the demand for a product. The demand is calculated as the average of the experts' estimates. The method is straightforward and very applicable for the speci?c company that we consider. Indeed, both Fisher and Raman (1996), Fisher et al. (2001) also proposed the method for a retailer in the apparel industry.

Mantrala and Rao (2001) also develop two forecasting methods based on experts' estimates for an apparel retailer (of the demand for mens walking shorts for the spring season). Their methods are more detailed than those of Fisher and Raman (1996), Fisher et al. (2001), since they divide the season into a number of periods and also consider different price levels. The ?rst method starts by asking each expert separately for the minimum, maximum, and most likely (modus) demand for each combination of period and price.

Subsequently, using the Delphi group method, the experts have to reach consensus on the minimum, maximum, and modus for each combination of period and price. Finally, for each combination of period and price, the forecast (for the mean) is calculated as the average of the minimum, the maximum, and the modus. The second method asks different input from the experts: an estimate of total (over all periods) demand at a single price, as well as a 95% con?dence interval; the expected percentage of total demand that will occur in each period; and an estimate of the price elasticity.

Based on these inputs, total demand is estimated using a rather complicated model including a log-normal disturbance term. The authors do not report any results on the quality of the resulting forecasts of the two methods.

Based on a survey among 240 ?rms, Sanders and Manrodt (2003) report judgmental forecasting methods to perform less well than quantitative methods. They offer two explanations for the poor performance of judgmental forecasting. First, there are a number of inherent biases, including optimism, wishful thinking, lack of consistency, politicalmanipulation, and overreacting to randomness. Second, people have a limited ability to consider and process large amounts of information.

On the other hand, judgmental methods are often preferred by practitioners, since they can incorporate special insights, trends, and macro-economic factors, which are hard, if not impossible, to quantify in practice and since practitioners are more acquainted with them. Moreover, a lack of data often rules out the use of complex forecasting methods. This is certainly true for the mail order retailer that we consider.


Related Discussions:- Operational research

Valuing Stocks, From Finance.yahoo.com Part 1: Show the P/E ratio for each...

From Finance.yahoo.com Part 1: Show the P/E ratio for each company (as reported in finance.yahoo.com). Answer the question: Which of these two firms seems to be more of a "growth

Mini Case Chapter 17, what is a multinational corporation? Why do firms exp...

what is a multinational corporation? Why do firms expand into other countries?

Find net payment of the company, a)    Black Corp. currently has $65 millio...

a)    Black Corp. currently has $65 million worth of floating rate debts carried at an average rate of LIBOR + 2.6% that it would like to hedge against rising interest rates withou

Cash budget, You have been asked to prepare a cash budget for Whitborrow pl...

You have been asked to prepare a cash budget for Whitborrow plc for the next three months, October, November and December. The Managers are concerned that they may not have suffici

Implications of markets for international banking, i) Differentiate between...

i) Differentiate between a revolver loan and a rollover and give an explanation of the syndicated loan in the Eurocurrency market? ii) Can onshore banking and offshore co exist

Corporate finance assignment, From a Corporate Finance and Governance persp...

From a Corporate Finance and Governance perspective, the assignment is about answering three fundamental questions: 1. How much value does the organisation create/destroy today?

Evaluate accounting method, Question 1: Collect a current annual report (2...

Question 1: Collect a current annual report (2009) of an Australia listed company. Select the firm that reported the following assets. Select BOTHtypes of assets. Proper

Cash flow from an income statement, Describe how to build a cash flow from ...

Describe how to build a cash flow from an income statement.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd