University of Bahrain

College of Information Technology
Information Systems Department / /

BIS 314 Business Applications

Take-Home Exam 1

Mark = 15 (Individual Evaluation = 5)

Due Date: 10 April 2008

Question 1:

In this highly competitive environment, award-winning Qatar Airways has undergone a phenomenal expansion period, with their commitment being to provide travelers with the highest quality of service in the air and on the ground. Their quest is to become known globally as the best airline in the world.

Before Qatar Airways can proceed with assigning the needed resources and suitable capacious aircrafts for the coming year 2008, they would like to estimate the amount of passengers that will be booking with them in each season.

The data given below are the number of passengers embarked for each season in the last two years. The data is seasonal by quarters. The allocation and scheduling managers feel that they have enough data to develop a forecast of passengers for the seasons in advance in order to schedule resources for tasks such as baggage handling, meal catering, cabin crew, security, and so on.

Table 1.1

Year / Month / Passengers (in thousands) / Year / Month / Passengers (in thousands)
2006 / Jan / 928 / 2007 / Jan / 972
Feb / 810 / Feb / 820
Mar / 715 / Mar / 765
Apr / 623 / Apr / 693
May / 4256 / May / 595
Jun / 892 / Jun / 720
Jul / 959 / Jul / 980
Aug / 980 / Aug / 997
Sep / 872 / Sep / 894
Oct / 684 / Oct / 5260
Nov / 510 / Nov / 530
Dec / 730 / Dec / 812

The pattern of previous years’ passenger data has been depicted graphically:

Outliers have been noticed in some of the seasons of the previous years’ data. After careful speculation, the managers found out that this was simply a mistake due to a clerical data entry error, in which case the incorrect data needs to be replaced with the correct data, meaning that since there is no doubt about the accuracy or veracity of the observation, then the outlier should be removed, and the model should be refitted.

Privilege Club is one of the best loyalty programs offered by Qatar Airways. As a member, a passenger will earn Qmiles every time he/she flies with them. In addition, Qmiles can be earned whenever passengers use the services of any hotels, car rentals, financial and travel partners. These Qmiles can be redeemed for flights on Qatar Airways and airline partners. The table (1.2) below shows the membership level and its equivalent points.


Table 1.2

Membership level / Qpoints required to qualify or retain status
Burgundy / 50 Qpoints
Silver / 150 Qpoints
Gold / 300 Qpoints

The following table shows the percentage of number of privilege-club cards offered to passengers for the previous 2 years (2006/2007):

Table 1.3

Year / Month / Membership Level / Number of passengers that applied for each membership / Year / Month / Membership Level / Number of passengers that applied for each membership
2006 / Jan / Burgundy / 680 / 2007 / Jan / Burgundy / 700
Feb / Silver / 450 / Feb / Burgundy / 501
Mar / Gold / 521 / Mar / Silver / 420
Apr / Silver / 786 / Apr / Gold / 436
May / Burgundy / 975 / May / Silver / 725
Jun / Silver / 759 / Jun / Burgundy / 759
Jul / Silver / 812 / Jul / Burgundy / 912
Aug / Burgundy / 860 / Aug / Silver / 843
Sep / Silver / 657 / Sep / Silver / 689
Oct / Gold / 559 / Oct / Silver / 625
Nov / Burgundy / 648 / Nov / Burgundy / 720
Dec / Gold / 752 / Dec / Silver / 986

·  Produce a forecast for next period using the appropriate regression technique to find the first period forecast (F1).

·  Prepare the seasonal forecast for the number of passengers for the year 2008 based on the data from table 1.1 and the above forecast. Assume a first period trend (T1) = 650.


Question 2:

Mohammed Nasser is the executive manager of the International Company which is dealing with one product. Daily demand of the company is uncertain and running out of stock has been a problem for the company. However, based on the financial analysis, the cash is short, and thus any excess stock is to be eliminated as possible.

Whenever the company makes an order, it takes them 4 days to be delivered. Moreover, the supplier has set number of policies regarding the reorder process. First each reorder made will cost the company $200 and the cost of the units will be increased by 5%. Thus if the cost per unit in the first order is $0.32, then the cost per unit in the next order will be equal to (1+0.05)*0.32, and so on.

The cost of the 600 units available in the inventory is $0.27 per unit. The selling price is set to be $0.9 per unit. The demand of the company follows a uniform distribution between a low value of 550 units and a higher level of 800 units. Currently, the reorder level and the reorder quantity are set to be 500 units and 700 units, respectively.

The manager wishes to devise a reordering policy of the following form: “when the opening stock is less than XXX units, place an order for XXX units” that will maximize the company profit.

Develop a simulation model for the daily profit for April (30 days). The developed model should help the manager to decide what value to choose for the reorder level and the reorder quantity. Thus you should create the following summary model:

·  Number of days when stock-out occurred

·  Mean of the closing stock

·  The total of the increased in the cost of each reorder

·  The total cost of the reorders made

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