Question: as a manufacturer selling directly to final endusers your sales...

As a manufacturer selling directly to final end-users, your sales and inventory transaction
systems normally have up-to-date information on sales and inventory from which you create
production plans. In selling through intermediaries, a variety of complications arise.
Channel members maintain inventory buffer stocks to service their customers. Suppliers
may or may not be aware of channel members’ inventory policies and levels. In addition,
channel members may or may not share their generate-demand program plans and/or their
customer sales data with upstream suppliers.

For upstream suppliers, collaboration and information sharing with downstream channel
members has value. Various possibilities for supply chain collaboration exist. Plan
sharing, plan coordination, and EDI (electronic data interchange) are three examples of
supply chain collaboration. However, downstream channel members aren’t always willing
or able to collaborate in a timely fashion and at the level of information disaggregation of
interest and value to upstream suppliers.

Regarding these data and this product and channel:
• The Alpha channel is one particular distributor of one of your products.
• “Orders” are the orders (in units) from the channel (i.e., your sales) for delivery in the
specified week, “Sales” are the sales (in units) to final customers made by the Alpha
channel, and “Promotion?” describes whether the Alpha channel conducted any special
promotion/merchandising program during a particular week.
• This product was reconfigured prior to week 1 so the week-1 orders reflect expected
sales plus any inventory build-up by the Alpha channel to have a suitable amount of
reconfigured product inventory on-hand to service final customers’ requirements.
• There is no known sales seasonality for this particular product.
RG Chapman PhD, ”Forecaster Simulation Problem #5” Page 2 of 2

You always know your own sales data (“Orders”) since the Alpha channel places their
orders with you on Friday of each week for delivery in the following week. However, you
only know Alpha’s sales and end-of-week inventory levels two weeks after the fact due to
the current information sharing collaboration arrangements with the Alpha channel. Thus,
you aren’t privy to current Alpha-channel sales or inventory data or to forward-looking
promotional program activities prior to their conduct. Your field sales force does observe
Alpha-channel promotional activities and that’s why you do have more current information
on promotion activity than on Alpha-channel sales. The regular weekly sales force “Field
Activities Report” is only available to you on Friday of each week, so your knowledge-base
on Alpha-channel promotional activities is lagged one week.

Question: It’s now Thursday of week 8 and you must create your production plan for week 9 for the
Alpha channel. Assuming that you have no on-hand inventory to service the Alpha channel
and that inventory shortfalls are as costly as unfilled orders, forecast Alpha-channel orders
for week 9.