Managerial Economics

1. Done By:
Dina Faris
Nujoud Al- Salem
Houssam Chahine
Dahlia Hage

2. OUTLINE
• Introduction
• SWOT analysis
• Current Forecasting Method
• Suggested demand forecasting method.
• Recommendations
• Conclusion

3. INTRODUCTION
Wilkins Regulator company produces high quality
products.
Main products
Pressure vacuum breakers (PVBs)
Fire valves
Product demand is affected by some external factors
Weather and Macro-economic factors

4. SWOT ANALYSIS

5. CURRENT FORECASTING METHOD
Two major steps:
Step 1: The Forecast Master
Average weekly sales history (1999 to 2004)
2005 Wilkins’ forecast estimated by expected
demand

6. CURRENT FORECASTING PROCESS
WILKINS
Step 2: The Planning Bill
• Sales history.
• Average number of units sold.
• Average daily sales for that family.
• Per cent sales of the product family.
• Annual sales forecast.

7. PLANNING BILL

8. IMPRECISION OF THIS METHOD
1. Forecast does not take into consideration seasonal
factors.
2. Weekly and daily unit sales used for annual
forecasts.
3. Quarterly forecasts based on assumptions.
4. Overestimated and misleading forecasts

9. SUGGESTED DEMAND FORECASTING METHOD
• Dummy variables method (to find PVB)
• The three year moving average method (for
the unemployment rate and the bank loan)

10. 3-QUARTER MOVING AVERAGE

11. PVB & FIRE VALVE

12. SINGLE & MULTI

13. RECOMMENDATIONS
• Use the 3-year moving average method for unemployment and bank
loans and the dummy variable forecasting method for the PVB and the
Fire valves.
• Estimate for different scenarios (Worst, Normal and Best)
• Follow up with company forecasts and compare them to the actual
demand results
• Consider the indicators when forecasting (unemployment and bank loans)
• Take into consideration the uncontrollable factors such as weather and
competitors.
• Use market research, industry specific data and rival products previous
demand to forecast for new products.

14. CONCLUSION
P1: Current forecasting method doesn’t give relatively accurate estimations of the demand. It
uses weekly and daily unit sales to perform annual projections.
P2: Current forecasting demand does not take into consideration seasonal factors.
P3: Leading to overestimation of demand and hence overproduction.
P4: Overproduction increases inventory holding costs and decreases the
company’s liquidity.
P5: The overall efficiency of the company is affected negatively.
Conclusion: Wilkins should use a more reliable demand
forecasting method (Dummy variables along with the 3-year moving
average) to get better demand projections. Hence, avoiding
additional costs from occurring due to stock outs or over stocking.