PK Village is a neighborhood 24-hour convenience store chain. The outlets, located in gas stations throughout South Florida offer over 10 thousand SKU (store keeping units). The first store opened in 2002 and it is managed by Sammy Patel, one of its owners. The company now operates a network of 12 stores spread throughout Miami-Dade, Broward, and Palm Beach counties.
The partners are considering opening other branches in other parts of the state and eventually expand nationwide through franchises after 2020. One of the products sold by PK Village is a general use lubricant sourced from a factory in Malaysia and packed under the PK Village private label. Ms. Patel has noticed that, over the past year, the company has experienced frequent shortages of this SKU, resulting in lost sales as well as periods of excess inventory.
Ami places orders for this product every month and is considering implementing a routine methodology to estimate future demand for this product. The demand for this SKU during the past five years is shown in the table below:
The company is retaining your services to recommend a forecasting methodology to estimate the demand for generic lubricant.
Your document should contain
- A forecasting error comparison of these methodologies: Two-period moving average; Three-period moving average; Single Exponential Smoothing with constants of 0.4 and 0.3
- A summary of your recommended next steps.