4. (e points) In a supply chain the demand of the end-consumer is 100. The retai

Question

4. (e points) In a supply chain the demand of the end-consumer is 100. The retailer assumes that his forecast for the end-consumer demand will have an error of 10%, thus he places an order which will cover for the potential error of 10P%. The wholesaler ard the manufacturer assume to make their forecast of the retailer's order with an error of 20% and so%, respectively, thus they will procure an amount of product which will cover for the potential errors. Please refer to Figure 1 for more details. What is the total demand error (defined by the sum of demand errors by retailer, wholesaler and manufacturer), expressed as a percentage of the end-consumer demand? 132 143 100110 Retailer Wholesaler Manufacturer End-Consumer +10% +20% +30% Figure 1: Errors of demand forecast in the Supply Chain

Explanation / Answer

Thus from the figure it is clear that for an actual demand of 100 for end customers manufactured ( the first leg of the production) has kept a demand at 143.

Thus total demand error = (End customer actual demand - Manufacturer estimated demand)/ End customer actual demand = (143-100)/100 = 43/ 100 = 0.43

Thus % of total demand error = 0.43*100= 43%

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