Operations Management

Question 1:

SB Coffee has a large, nationwide supply chain that must efficiently supply over 200 stores. Although

the stores might appear to be very similar, they are actually very different. Depending on the location

of the store, its size, and the profile of the customers served, SB Coffee management configures the

store offerings to take maximum advantage of the space available and customer preferences. SB

Coffee’s actual distribution system is much more complex, but the information below is directed at

only a single item that is currently distributed through five distribution centres in Australia. The item

is a logo branded coffee maker that is sold at some of the larger retail stores. The coffeemaker has

been a steady seller over the years due to its reliability and rugged construction. SB Coffee does not

consider this as a seasonal product, but there is some variability in demand. Demand for the product

over the past 13 weeks is shown in the following table. The demand at the distribution centres (DCs)

varies from a maximum of 68 at Sydney in Week Number 13 and a minimum of 10 in Week Number

12 at Darwin.

Management would like you to experiment with some forecasting models to determine what should

be used in a new system to be implemented. Their initial request is provide recommendations over

two forecasting models: simple moving average and exponential smoothing.

c. Compare all the techniques in Part a and Part b (The table have been done above) and explain

which of these would be preferable. Explain the reasons for your choice.

(Note: Limit your answer to 250 words. This should exclude any tables, diagrams or figures)

d. What other factors (other than past demand) would you consider to draw up more accurate

forecasted figures? Describe also what mathematical technique (or techniques) you would use to

derive the new forecast which will take all these factors into account.

(Note: Limit your answer to 350 words)

e. SB Coffee is considering simplifying the supply chain for their coffeemaker. Instead of stocking the

coffeemaker in all five distribution centres, they are considering only supplying it from a single

location. What are the advantages and disadvantages of aggregating demand from a forecasting


Are there other factors or issues that should be considered when going from multiple DCs to a single


(Note:Limit your answer to 350 words)

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