Problem Statement Research Objective Scope of Study

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1.2 Problem Statement

In general, the SMI under study produces products to customers as requested. Meaning production of demands will only be started once order is received. This scenario demonstrates in substance of demand forecasting in the company. Without forecasting, expected future demands are unknown. This scenario causes the company to buy raw material without proper planning. Sometimes, the stock can last up to 6 months or a year. Higher stock of raw material may tight- up cash flow necessary. This cash flow can be invested to other activity, which can bring benefits to the company. Moreover, the company is also facing problem with limited space for storing and operation of new products. Despite recent expansion, space is still limited. It is observed that reduction in storage of raw materials may offer benefit to the company.

1.3 Research Objective

The aim of this research is to develop a forecasting system for a Malaysian SMI that prediction of future demands can be made based on data from previous demands. • Identify a method suitable for forecasting demands. • Identify the performance measure to be used for evaluating the performance of forecasting activity • Analyze demands from the customer order for each product. So that, forecasting can be conducted accurately • Develop forecasting software to predict the future demands.

1.4 Scope of Study

This research covers forecasting of demands for a small medium industry SMI. The SMI has an external customers and internal customers for the demands of the product. 4 In this case, the researches cover both of the external and internal customer‘s demands. The method of forecasting used to predict the demands from customer in this research is exponential smoothing. For evaluating the performance of forecasting system, the mean absolute percentage error was used to evaluate. The error shows how accurate the result compares to actual previous demands. Specifically, the input data in this research covers for at least previously 5 year. The data are than forecast using the exponential smoothing. The forecasting software is developed using enter Microsoft Office Excel or Visual Basics.

1.5 Research Methodology