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Actual demand data was taken from Else Cable Limited, India. This organization produces
copper cables since 1984. After collecting the actual demand data for the last 9 month of the
previous year (Table 1), first you will make the forecasting demand for this years last 9
period using an appropriate exponential smoothing forecasting technique. Here, the value of
the first forecast can be taken as the actual demand of the first period as 39773 and smoothing
constant is 0.20 (alpha). You will naturally derive a trend or/and seasonal constant(s) if it is
needed.
Thus, the demand forecast for nine periods of this year in the cable company is collected.
After collecting the forecasts you will balance your transportation problem by using Table 2.
As an explanation, the monthly capacity of the first production department is 41600 km in the
Regular time period (S1) and 20800 km in the Overtime period (S2). The cost of production
of per unit of copper cable is $5 in Regular time period and $7.25 in overtime period. You can
generalize this information to all Sis. On the other hand, the inventory cost per month per unit
is $0.25 and backordering is allowed with a greater cost of $3 per unit per month for all
producers. All these data are put in the transportation table. As the transportation algorithms
state, the demand and capacity have to be equal in the transportation table, the dummy
demand or supply equal the total demand and capacity. You will balance Table 2 by using an
appropriate transportation model such as Stepping Stone or VAM (or the least cost method for
a lose upper bound) with Excel (Please attach your Excel sheet to your final work).
Table 1.
Period

Actual Demand

Forecasts

39773.00

39773.00

36289.00

55588.00

45891.00

55056.00

32974.00

57803.00

33792.00

63321.00

Table 2.

After doing all these forecasts and transportation balancing, you will propose an aggregate
planning model by considering the following parameters and decision variables without the
need for solving for Else Cable Limited. You will derive new parameters or decision variables
if you need.
Mi = Regular time production (Maximum) during period i
Yi = Overtime production (Maximum) during period i
Di = Demand during period i
Ii = Inventory at the end of period i
r = Regular time cost of production, per unit
v = Over time cost of production, per unit
h = Cost of carrying the inventory per unit per period.

Ans.

Table 1 Exponentiallly Smoothed Forecasts.

Period Actual
Forecasts
Demand
39773
1
39773
36985.8
2
36289
3
55588 51867.56
4
45891 47086.31
5
55056 53462.06
6
32974 37071.61
7
57803 53656.72
8
33792 37764.94
.
9
63321
Graph Actual-Vs Fitted Plot

Actual Vs. Predicted vs. Moving averages

70000
60000
50000
40000
30000
20000
10000
0
0

Actual Demand

Forecasts

2 per. Mov. Avg. (Actual Demand )

2 per. Mov. Avg. (Forecasts)

We note that although the data has been smoothed, the MA trend closely fits that of
the unadjusted data, although it is smoother, due to a reduced spread in the new series.

The Solution:
Since Total DD < Total Supply Constraints , slack is added on Y.
Total cost is computed as sum of inventory and backorderting costs to that of Production
Costs
We find a feasible solution:

Period

1
D1

S1
S2
S3
S4
S5
S6
S7
S8
S9
S10
S11
S12
S13
S14
S15
S16
DD

R1
O1
R2
O2
R3
O3
R4
O4
R5
O5
R6
O6
R7
O7
R8
O8

2
D2

3
D3

4
D4

5
D5

6
D6

7
D7

39773 1827
0
0
0
0
0
0
0
0
0
0
0
0
0 35159 6441
0
0
0
0
0
0
0
0
0
0
0
0
0 41600
0
0
0
0
0
0 3826
0
0
0
0
0
0
0 41600
0
0
0
0
0
0 5486
0
0
0
0
0
0
0 41600
0
0
0
0
0
0 11862
0
0
0
0
0
0
0 37072 4528
0
0
0
0
0
0
0
0
0
0
0
0
0 41600
0
0
0
0
0
0 7528
0
0
0
0
0
0
0
0
0
0
0
0
0
0
39773 36986 51868 47086 53462 37072 53657
39773 36986 51868 47086 53462 37072 53657

Deriving new parameters or decision variables if you need.

Mi = Regular time production (Maximum) during period i
Yi = Overtime production (Maximum) during period i
Di = Demand during period i
Ii = Inventory at the end of period i, Pi =Pre-order
r = Regular time cost of production, per unit
v = Over time cost of production, per unit

8 Slack
Supply
D8
Dummy
y
0
0 41600
0
20800
0
0
0 41600
0
20800
0
0
0 41600
0
16974
3826
0
0 41600
0
15314
5486
0
0 41600
0
8938 11862
0
0 41600
0
20800
0
0
0 41600
0
13272
7528
16965
24635 16965
20800
0 20800
37765
37765

h = Cost of carrying the inventory per unit per period.

Min TC =

s.t
The Excel sheet with solver notes is attached.