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Transcript of AGSB Quanti Final Paper 2013
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7/25/2019 AGSB Quanti Final Paper 2013
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ATENEO DE MANILA UNIVERSITY
GRADUATE SCHOOL OF BUSINESS
#20 Rockwell Drive, Rockwell Center, Makati City, 1200 Philippines
TUV CORPORATION, INC.:THE USE OF QUANTITATIVE TOOLS TO FORECAST AND
MEET DEMANDS, MAXIMIZE PROFIT AND FORECAST
SALES REVENUE
Submitted to:
Professor Ralph AnteQuantitative Methods for Managers (R14)
Submitted by:
Encarnacion, Kyla
Fermin, Verando
Hatanaka, Hans
Navidad, Freedom Ianfe
Palmos, Russell Joyce
Sy, Neilwin
September 28, 2013
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
ABSTRACT
This paper shall initially discuss the existing inventory/stocking policies and
historical sales data of some of the products of TUV Corporation, Inc. (the Company).
The authors of this paper will seek to forecast demands, with respect to products
that are subject of this study, to enable it to determine whether it could meet product
demands as they come and eventually stay true to its mission of providing quality
service to its clients; the best combination of products to maximize profit; and the sales
revenue for the ensuing year.
The authors of this paper shall attempt to demonstrate the application of
quantitative tools in meeting the objectives of this study.
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
LIMITATIONS OF THE STUDY
While the Company maintains an inventory of around four hundred (400)
products, due to time and data gathering constraints, this paper discusses and studies
only twenty-five (25) of such products, chosen for the seventy-five percent (75%) of the
total revenue of the Company. Moreover, the computations and solutions herein are
based on the Companys one-year historical data, starting from September of 2012 to
August of 2013, considering that the Companys fiscal year ends on the month of
August.
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
INTRODUCTION: THE COMPANY
The Company was established in 2001, and since then it has been a
supplier/provider of air-conditioning parts and materials for residential, commercial and
industrial applications
MISSION, VISION & PASSION
TUV is proud of its strong c l ient-focus edand sol id bu siness partner relat ionships .
Our aim is to serve our clients, embracing their technical needs and challenges to
provid e products that exceed qual i ty standards. Attention to detail and quality of
work, paired with years of industry experience, make us the perfect choice to partner
with to provide superior products.
KEY PRODUCTS
COPPER TUBES, ELBOWS & COUPLINGS RUBBER
INSULATION TUBES
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
CAPACITORS FAN MOTORS
ORDERING AND STOCKING POLICIES
The Company imports its products using Full Container Loads (FCLs) of twenty (20) to
forty (40) feet. The delivery lead time is pegged at two (2) months.
The Company maintains one (1)-month each of safety, emergency and special projects
stocks.
The effects of the Companys ordering and stocking policies are best illustrated in the
figure below:
3140
3072
2673
2057
1113
8051
420
1455
1200
930
500
365
524
512
446
343
186
135
0
500
1000
1500
2000
2500
3000
3500
CP-3034 CP-2524 CP-3004 FM-0501 FM-0138 FM-0354
Stock
Existing ROP
ROP
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
HISTORICAL SALES DATA
Based on the last fiscal year, the Company was able to generate the following
sales, which sales represent the historical sales data on demands:
COPPER TUBES, ELBOWS AND COUPLINGS
RUBBER INSULATION TUBES
Stock Code CE-12SR CE-34SR CE-38LR CE-38SR CE-58LR CE-58SR
01-Sep-12 1155 656 526 400 438 457
01-Oct-12 798 835 526 652 438 1673
01-Nov-12 1112 888 526 639 438 1260
01-Dec-12 835 938 526 361 438 115101-Jan-13 694 1481 526 923 438 1450
01-Feb-13 1007 834 96 723 73 902
01-Mar-13 901 368 52 1402 86 1061
01-Apr-13 1185 1380 211 1431 389 1853
01-May-13 1165 1072 294 1241 386 1111
01-Jun-13 630 945 189 453 156 1228
01-Jul-13 585 981 236 1813 161 2875
01-Aug-13 545 861 259 378 342 1018
Stock Code RI-1212 RI-1238 RI-1412 RI-1438 RI-3412 RI-3434 RI-3812 RI-3834 RI-3838 RI-5812 RI-5834 RI-5838
01-Sep-12 909 248 1104 833 568 246 1138 448 292 980 886 354
01-Oct-12 1442 372 1593 1061 915 386 1540 590 368 1067 722 461
01-Nov-12 1050 355 1490 941 324 353 1410 342 370 1146 422 421
01-Dec-12 1177 908 1634 1345 796 166 1056 354 795 1074 437 311
01-Jan-13 1227 636 2039 1151 839 515 1746 673 781 1434 741 430
01-Feb-13 729 276 1091 793 425 322 1067 387 490 896 670 290
01-Mar-13 977 644 1292 1142 861 239 1106 1340 770 1160 1239 436
01-Apr-13 2090 1187 2374 3003 1217 465 2363 518 1493 2120 767 644
01-May-13 2214 721 2832 1928 710 472 2138 482 853 2008 842 554
01-Jun-13 3466 712 3418 2108 1027 799 2401 154 1133 2585 724 622
01-Jul-13 1838 769 2626 2084 993 737 2434 322 1003 1698 714 77901-Aug-13 1929 423 1701 1761 1251 741 2092 566 927 2021 951 370
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
FAN MOTORS
CAPACITORS
Stock Code FM-0138 FM-0354 FM-0501
01-Sep-12 66 47 14201-Oct-12 116 73 91
01-Nov-12 72 62 194
01-Dec-12 26 45 98
01-Jan-13 121 70 128
01-Feb-13 48 60 138
01-Mar-13 69 31 115
01-Apr-13 152 86 370
01-May-13 165 66 294
01-Jun-13 71 85 18101-Jul-13 124 78 181
01-Aug-13 83 102 125
Stock Code CP-1524 CP-2524 CP-3004 CP-3034
01-Sep-12 282 215 407 306
01-Oct-12 125 151 143 147
01-Nov-12 167 157 85 152
01-Dec-12 92 174 104 213
01-Jan-13 218 100 123 195
01-Feb-13 166 169 72 164
01-Mar-13 144 219 258 152
01-Apr-13 516 706 260 420
01-May-13 916 384 542 591
01-Jun-13 206 46 183 364
01-Jul-13 225 612 211 299
01-Aug-13 257 139 285 137
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
THE CHALLENGES
Given the historical sales data above, the authors would like to:
1. Forecast demands for the next ensuing year;
2. Determine the stocking policy that could best meet the forecasted
demands;
3. Determine the best combination of products to achieve maximum profit;
and
4. Forecast sales revenue for the next ensuing fiscal year.
To meet these challenges, appropriate quantitative tools such as Monte Carlo
Simulation, Inventory Management, Case Modelling and Linear Programming shall be
used.
Meeting these challenges is not only essential for the economic survival of the
Company, but also for the Company to stay true to its Mission, Vision and Passion of
providing quality services to its clients and embracing their technical needs.
FORECASTING AND MEETING SALES DEMANDS
Based on the historical sales data provided above and using the Montecarlo
Simulation tool, sales demand on the next ensuing year is forecasted as follows:
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
COPPER TUBES, ELBOWS AND COUPLINGS
RUBBER INSULATORS
CAPACITORS
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
FAN MOTORS
Given the forecasted demands and the delivery lead time of two (2) months,
theres a need to simulate stocking and ordering policies that could meet the forecasted
demands.
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
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Page 13
TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
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Page 15
TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
Based on the simulated results and monthly costs computed above, we need to
determine the costs of lost sales in the event that theres a demand, but the Company
wouldnt be able to serve the same as the product -in-demand is not in its inventory.
By adding the stocks and the end of the monthand the new deliverieswe get the
total number of stocks after each delivery. These stocks after deliveryare equal to the
stocks after sales. A negative stocks after sales means loss in sales. Costs of lost sales
is computed by multiplying the loss in saleswith the contribution margin.
Now, comparing the existing Total Annual Cost (TAC) versus the TAC for the
forecasted demands, and considering the Costs of Lost Sales, would give us the
following results:
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
CONCLUSION:
While savings in the amount of Three Hundred Fifty-Nine Thousand Seven
Hundred Seventy-Five Pesos and Seventy-Seven Centavos (Php359,775.77) will be
incurred from the Simulated Inventory (following the results of Montecarlo Simulation),
the Company is advised to maintain its current inventory practices because of the costs
of lost sales that it will have to incur if it modifies said practices pursuant to the
forecasted demands. Moreover, lost sales is reflective of a Company deviating from its
actual Mission, Vision and Passion which is to provide quality service to its customers
and address their technological needs.
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
MAXIMIZING PROFIT
Given the data below, what combination of products should TUV sell in order to
achieve maximum profit. Minimum demand data is calculated from breakeven point
while maximum demand is the maximum stock on hand. It is also assumed that TUVs
maximum capital is limited to 12 Million pesos per year.
Product Selling Price Unit Cost Profit Min Demand/ Month
MaxDemand /
Month
RI-1412 39.29 27.5 11.79 773 2642
RI-3812 46.43 32.5 13.93 592 2391
RI-1212 52.68 36.875 15.80 471 2156
RI-5812 58.04 40.625 17.41 380 1920
RI-1438 22.32 15.625 6.70 1058 2054RI-3412 65.18 45.625 19.55 178 1006
RI-3838 28.57 20 8.57 366 908
RI-5834 102.68 71.875 30.80 115 1025RI-1238 32.14 22.5 9.64 308 861
RI-3834 89.29 62.5 26.79 92 716RI-5838 36.61 25.625 10.98 199 635
RI-3434 111.61 78.125 33.48 66 641
CE-58SR 26.79 18.75 8.04 827 1927
CE-34SR 40.18 28.125 12.05 402 1405
CE-12SR 19.64 13.75 5.89 1337 2285CE-38SR 14.29 10 4.29 1106 1374
CE-58LR 49.11 34.375 14.73 134 574CE-38LR 26.79 18.75 8.04 268 625
CP-3034 205.36 143.75 61.61 24 429
CP-2524 178.57 125 53.57 25 393
CP-1524 151.79 106.25 45.54 37 482
CP-3004 187.50 131.25 56.25 22 353FM-0501 1116.07 781.25 334.82 3 277
FM-0138 1651.79 1156.25 495.54 1 138
FM-0354 2053.57 1437.5 616.07 1 119
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
STEP 1: OBJECTIVE
Maximize Profit
STEP 2: DECISION TO BE MADE
Combination of products that yield maximum profit
STEP 3: CONSTRAINING FACTOR AFFECTING DECISION
Minimum demand per product
Maximum product availability
Capital of 12Million pesos per year
STEP 4: DECISION VARIABLES
Let:
X1= RI-1412 X6= RI-3412 X11= RI-5838 X16= CE-38SR X21= CP-1524X2= RI-3812 X7= RI-3838 X12= RI-3434 X17= CE-58LR X22= CP-3004
X3= RI-1212 X8= RI-5834 X13= CE-58SR X18= CE-38LR X23= FM-0501X4= RI-5812 X9= RI-1238 X14= CE-34SR X19= CP-3034 X24= FM-0138
X5= RI-1438 X10= RI-3834 X15= CE-12SR X20= CP-2524 X25= FM-0354
STEP 5: CONSTRAINTS USING DECISION VARIABLES
1.
773 < X1< 2642 402 < X14< 1405
592 < X2 < 2391 1337 < X15< 2285471 < X3< 2156 1106 < X16< 1374
380 < X4< 1920 134 < X17< 5741058 < X5< 2054 268 < X18< 625
178 < X6< 1006 24 < X19< 429
366 < X7< 908 25 < X20< 393
115 < X8
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TUV CORPORATION, INC.:
THE USE OF QUANTITATIVE TOOLS TO FORECAST AND MEET DEMANDS, MAXIMIZE PROFIT AND
FORECAST SALES REVENUE
Encarnacion, Kyla | Fermin, Verando | Hatanaka, Hans | Navidad, Freedom Ianfe | Palmos, Russell Joyce | Sy, Neilwin
2.
27.5X1+ 32.5X2+ 36.9X3.. 1437.5X25< 1.2M
3.
X1+ X2+ X3.. X25> 0 (Non-Negativity)
STEP 6: OBJECTIVE FUNCTION
Max Profit = 11.79X1+ 13.93X2+ 616.07X25
CONCLUSION:Using solver, TUV should sell the quantities given on the table below to maximize
profit given an investment capital of 12Million pesos.
Solver Solution on Product Mix Variables
X1= 854 X6= 299 X11= 281 X16= 1132 X21= 361
X2= 677 X7= 417 X12= 273 X17= 241 X22= 353
X3= 568 X8= 311 X13= 883 X18= 324 X23= 277
X4= 498 X9= 373 X14= 475 X19= 429 X24= 138
X5= 1098 X10= 250 X15= 1378 X20= 338 X25= 119