# Konys, Inc. Case Harvard Case Solution & Analysis

## Konys, Inc. Case Study Solution

Part C

The forecast for the four sales quarter of the MC20

In order to better estimate the four sales quarter of the MC20 for the near future, various statistical or quantitative methods and models are employed such as;

Simple Moving Average (SMA):

It is one of the simplest form of forecasting method which is calculated by adding the versions of product for the previous 2 versions; divided then by 2 in order to forecast the data. In doing so, every single discrepancy is removed from the data.

Exponential smoothing forecasting technique:

It uses historical data to estimate the demand of the inventory in the near future. This method takes most obvious observation into consideration & weighs them accordingly. The formula used to forecast the required versions of products in first quarter is as follows;

Ft+1= αAt + (1-α)Ft

Whereas Ft is the actual demand of transformers and At is the forecasted demand of product’s version. Concisely, the method uses the difference between actual projections & what actually occurred.

Quantity should Konys contract for using the optioncontract

The quantity that should Konys contract for using the option contract is 3500000, at this quantity that profit would be maximized for the fiscal year 2014. The quantity is calculated after determining the expected profit for Q3, Q4, Q2& Q1.

Factors drive the expected 4-quarter profit

The factors that derived the expected 4-quarter profit includes the expected profit for 3-quarter which is \$9908373. Furthermore, another factor which drives the change in the profit is the spot price per unit, the actual spot price per unit is \$19.76 while the calculated spot price per unit is \$19.39.

On the basis of the above analysis, it could be determined that the best suitable option for the company is the option contract as it is beneficial to meet the uncertain demand in the market as well as increase the profitability of the company. Additionally, the long term contract was beneficial on the basis of the going concern assumption to smooth variations in the product demand by achieving lower cost and using excessmaterial from the prior quarter. Hence, it is significantly important for the company to tradeoff between flexibility of purchase quantity and lower cost per unit. Also, the best course of action for the company would be the combination of both contracts. In addition to this, the vice president of the supply chain management needs to critically assess and analyze the unique situation in order to find the optimal mixture with core consideration of maximizing the profitability.

Conclusion

As a manufacturer of mobile manufacturing device – Konys Inc. is operating in the industry having short life cycle of product and face uncertain demand which in turn challenges the ability of the company to manage pricing or procurement to assure the profitability. In addition to this, Konys experienced the uncertain demand with prior 19 versions of the MC phones due to which it needs a better pricing strategy. With the choice of either entering into the option contract or long term contract, the analysis shows that the company should find the optimal mixture with core consideration of maximizing the profitability. It is due to the fact that the option contract is beneficial to meet the uncertain demand in the market as well as increase the profitability of the company and the long term contract is beneficial on the basis of the going concern assumption to smooth variations in the product demand by achieving lower cost and using excess material from the prior quarter.................................

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