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Task 1:

Demand Forecasting for ECOVACS DEEBOT X2 OMNI Robot Vacuum
& Mop and procurement planning for Harvey Norman

Description:
Demand for ECOVACS DEEBOT X2 OMNI Robot Vacuum & Mop at Harvey Norman across Australia for the last 18 months are as follows:

Task Questions to be done in Excel:

a) Estimate the demand for July, August, and September of 2024 using a 3-month moving average method.

b) Estimate the demand for July, August, and September of 2024 using the static method.

c) Evaluate the MAD, MAPE and TS (i.e., the KPIs) in each case and compare them in the format as shown below.

d) Based on the findings from (b), which of the two methods do you prefer? Why? (1 mark) (Note: You can give your answer in the table of Question (c).)

Task Question to be done in Word:

e) Harvey Norman sells DEEBOT X2 OMNI Robot Vacuum & Mop ordered from ECOVACS at all its stores in Australia. The average demand is 700 units each month. Harvey Norman incurs a fixed order placement, transportation, and receiving cost of $5,000 each time an order is placed with ECOVACS. It also incurs a holding cost of 5 per cent of the unit cost of the product. The normal wholesale price is $1,400 per unit. Recently, ECOVACS offers all-unit quantity discount to its retailers to promote sales. The price schedule is as follows:

Order Quantity Per Lot Price Per Unit
1-1,000
1,001-2,000
Over 2,000
$1,400
$1,350
$1,300

1) What is the economic order quantity (EOQ) of the product per lot for Harvey Norman if there is no volume discount?

2) What is the total annual cost for Harvey Norman assuming there is no volume discount from ECOVACS and the price per unit is $1,400? (1 mark)

3) What is the optimal order quantity if Harvey Norman decides to take the volume discount? You need to show the calculations of EOQS and total costs at all the three prices.

4) What is the new total annual cost for Harvey Norman upon taking the volume discount?

5) What is the annual saving for Harvey Norman upon taking the quantity discount in comparison with the normal situation when there is no volume discount?

f) Conduct your own research and find out what the robotic vacuum and mop industry usually does in forecasting demand. You may wish to analyse and discuss based on product value, product volume, and product flow as different product characteristics may require different methods to forecast the demand accurately. Give examples and use up-to-date references to support your arguments.

Task 2: Sourcing Decision for Harvey Norman

Description:

Harvey Norman is a leading retailer of household appliances and consumer electrical products in Australia. As of 2022, there are 304 company-owned and franchised stores in Australia, New Zealand, Europe, and South-East Asia. In the past 12 months, the sales of robotic vacuum cleaner and autonomous mop machines at Harvey Norman stores have been growing. However, like may new consumer electrical products, the preferences of consumers keep changing and therefore the demand can be uncertain. The company has been sourcing the product from China, given the lower costs there. For a popular model, it costs 5,760 Chinese yuan or renminbi (RMB) per unit to source (inclusive of production and delivery costs). At the current exchange rate of 4.8 RMB per AUD (i.e., 1 AUD = 4.8 RMB), this gives a variable cost of about 1200 AUD per unit. The Chinese supplier, however, has a long lead time, forcing Harvey Norman to pick an order size well before the product is advertised. This does not leave the company any flexibility if actual demand differs from the order size. Sourcing from a local supplier for an equally popular model can be an alternative but the cost will be higher at 1400 AUD per unit. The advantage is the local supplier can supply quickly enough that Harvey Norman will basically be able to match demand exactly with supply. Harvey Norman is conscious about the higher variable cost but finds the flexibility of the onshore supplier attractive especially for a new product with uncertain demand. The challenge is to evaluate the value of responsiveness provided by the local supplier.

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