Paul Jordan has just been hired as a management analyst at Digital Cell Phone Inc. Digital Cell manufactures a broad line of phones for the consumer market. Paul's boss, John Smithers, chief operations officer, has asked Paul to stop by his office this morning. After a brief exchange of pleasantries over a cup of coffee, he says he has a special assignment for Paul: "We've always just made an education guess about how many phones we need to make each month. Usually w e just look at how many we sold last month and plan to produce about the same number. This sometimes works fine. But most months we either have too many phones in inventory or we are out of stock. Neither situation is good."
Handing Paul the table shown here, Smithers continues, "Here are our actual orders entered for the past 36 months. There are 144 phones per case. I was hoping that since you graduated recently from the University of Alaska, you might have studied some techniques that would help us plan better. It's been a while since I was in college- I think I forgot most of the details I learned then. I'd like you to analyze these data and give me an idea of what our business will look like over the next 6 to 12 months. Do you think you can handle this?"
"Of course," Paul replies, sounding more confident than he really is. "How much time do I have?"
"I need your report on the Monday before Thanksgiving-that would be November 20th. I plan to take it home with me and read it during the holiday. Since I'm sure you will not be around during the holiday, be sure that you explain things carefully so that I can understand your recommendation without having to ask you any more questions. Since you are new to the company, you should know that I like to see all the details and complete justification for recommendations from my staff."
With that Paul was dismissed. Arriving back at his office, he began his analysis.
Discussion Questions:
1.) Prepare Paul Jordan's report to John Smithers using regression analysis. Provide a summary of the cell phone industry outlook as part of Paul's response.
2.) Adding seasonality into your model, how does the analysis change?