Questions
Prepare a forecast for the Indy–Motors demand and revenue, as outlined in questions A through
C below. You forecast needs to address all three questions (A through C). Please refer to the
attached Exhibits 1 and 2 for more data and information.
A. Select very suitable forecasting models for forecasting demand and revenue for the Indy–
Motors product family. Specifically and thoroughly articulate the forecasting models you have
selected AND articulate in detail the justification for selection/suitability of the model, i.e. what
makes the models you have selected very suitable for use in this case.
B. Using the model you have selected in Part–A, provide clearly shown demand and revenue
forecasts for Indy–Motors product family each of the four calendar quarters of year–6, as well
as for the whole year.
C. Based on the anticipated demand and revenue for years 6, 7, and 8, do you expect the Indy–Motors product family to exceed an annual revenue of $500M within the next three years? If yes, in which year? If not, why not?
SPM needs to choose a specific inventory model for the Med–Motors product family. Below are
some specific data and information for Med–Motors. Please address all three questions (D
through F) as a recommended inventory management plan for Med–Motors inventories for year 6.
• Monthly demand forecast for Med–Motors is provided in the attached Ehibit–3
• Med–Motors average selling price is $1700 per unit
• Assume backordering is not an option for Med–Motors
• SPM’s cost of build for Med–Motors is $700 per unit
• Delivery lead time for Med–Motors orders is 1 month (just assume 1 month, do not worry
about whether a month is 28, 30, or 31 days)
• SPM incurs ordering costs of $150 each time an order is placed for Med–Motors
• Monthly inventory carrying costs for med–Motors are $15 per unit
• SPM wants to maintain a 96% service level with its Med–Motors customers
D. Choose an appropriate inventory model to recommend for managing Med–Motor inventories
for year
6. Specifically, articulate what inventory model you have chosen AND why it is an appropriate model to use in this case. Show details of your work, i.e. describe the model/approach and show the equations, if any, that you use.
E. Determine the reorder point (ROP).
F. Determine the Total Annual Inventory costs for Med–Motors. Show details of your work, i.e.
describe the approach and show the equations, if any, that you use.
