International Political Economy

Part Perspectives on International Political Economy The first chapter of the text deals with the fundamental nature of International political economy (PIP) and some analytical Issues related to Its multidimensional character. Chapters 2 through 4 are the core chapters of the text that explore the history and policies associated with the three dominant PIP perspectives, namely economic liberalism, mercantilism, and structuralism. These theoretical tools are useful In understanding many political, economic, and social Issues In the global economy of the past as well as the present.Chapter 5 develops two alternative PIP respective?constructivism and feminism?that derive, In part, from the three mall outlooks under study. Chapter What Is International Political Economy? We Are the 99%: A Haitian hillside. Georgian Allen When a philosopher has once laid hold of a favorite principle, which perhaps accounts for many natural effects, he extends the same principle over the whole creation, a nd reduces to it every phenomenon, though by the most violent and absurd reasoning. Our own mind being narrow and contracted, we cannot extend our conception to the variety and extent of nature †¦David Hump, â€Å"The Septic† 2 The Darkness on the Edge of Town he Darkness on the edge of town What are the chances you will find a good paying Job?or any Job for that matter? when you graduate from college In the next few years? Have your parent's or people you know lost their Jobs, the family home, or a big chunk of their retirement savings? How are you adjusting to the financial crisis? Maybe things haven't been that bad for you, yet! Reading the headlines of any major newspaper, you might sometimes worry that the world is on the brink of a global economic catastrophe, if not a second Great Depression.The effects of the global economic crisis have made many people feel ensue, tearful, and depressed. The collapse to the US housing market in 2 morphed into a credit crisis tha t threatened some of the biggest banks and financial institutions in the United States and Europe. Government leaders responded with a variety of bank rescue measures and so-called stimulus packages to restart their economies. These interventions angered many ordinary folks who felt that the bailouts rewarded bankers and Coos who had caused the crisis in the first place.Meanwhile, many people around the world were forced out of their homes and became unemployed. They suffered cuts in social services, health care benefits, and education spending when governments were forced to trim budgets. As we write in late 2012, the hoped-for recovery has proved elusive. Unemployment in the United States is stuck at 7. 9 percent; in the European Union (ELI), it has risen to 1 1. 6 percent (23. 4 percent for young people). Home foreclosures and stagnant incomes continue to place enormous strain on many families' finances.The EX. has fallen into another recession, with countries like Greece, Italy, Spain, and Portugal so deep in debt that they might slide into national bankruptcy, causing the Else's monetary system to collapse. People seem to have lost confidence in national and international political institutions that underpin capitalism and democracy. Is this what the Great Transformation from industrial to post-industrial society was supposed to look like? Are globalization and the so-called â€Å"creative destruction† of new technologies shrinking the middle classes in Western countries and permanently shifting economic dynamism to Asia and Latin America?Adding to the sense of gloom are events around the world in the last few years. High oil prices have benefited giant oil companies while hurting consumers. The giant British Petroleum (BP) oil spill reciprocated an environmental catastrophe in the Gulf of Mexico. Japan's Fuchsia earthquake and tsunami damaged several nuclear power plants, causing release of dangerous radioactive material across a large swath of te rritory. High agriculture commodity prices have raised the cost of food and increased levels of world hunger.Because there has been little progress in reducing reliance on fossil fuels, capping carbon emissions, or investing in alternative energy resources, the threat of catastrophic climate change looms larger. And wars in Syria, Afghanistan, Somalia, and the Congo are destroying the livelihoods of millions of people. Hope on the Horizon? Is there only gloom and doom around the globe? Surely, no! As we discuss in Chapter 13, emerging powers such as China, India, Brazil, and Russia have dramatically reduced poverty in the last fifteen years and made it possible for hundreds 4 Chapter 1 of millions of people to Join the middle class.Fortunately, they continued to grow at a fairly robust pace after 2007; more Jobs, investment, and consumption in these countries helped keep the rest to the world trot tailing into a deeper recession. Of most of the last decade, sub-Sahara Africa has als o grown surprisingly fast, thanks n part to high prices for oil and commodities exports. And the European Union won the 2012 Nobel Peace Prize, a reminder that?despite its serious economic and social problems today?the community has advanced the causes of â€Å"peace and reconciliation, democracy, and human rights† for more than sixty years.Along with these rays of hope are three interrelated global developments that merit discussion at the beginning of this textbook because they are profoundly shaping the international political economy: the Arab Spring, the European sovereign debt crisis, and the Occupy Wall Street (SOWS) movement. Taking place on three different continents since 2011, they have shaken political institutions and spurred waves of political protests in response to a variety of social and economic ills. None of us knows how these momentous developments will play out, but we can be sure that they will affect our daily lives and pocketbooks for many years.Each i s a double- edged sword: a potential harbinger of positive change and a potential foreshadowing of worse yet to come. In other words, each development can either help lead to a more stable, prosperous world in which human security is better guaranteed or ender divisions within and between societies wider than before so that cooperative relations and a fairer distribution of resources remain ever more elusive goals. The Arab Spring took the world by surprise?a reminder that social scientists still do not have good tools to predict when and why large-scale changes will occur in complex socio-political systems.On December 17, 2010, a Tunisian street vendor named Mohamed Bouzouki set himself on fire in reaction to harassment by police officers. His death sparked street demonstrations that brought down the Tunisian government one month later. Protests spread like wildfires to other countries in the Middle East and North Africa. After eighteen days of mass demonstrations, Egypt authoritar ian president Hosting Embark resigned on February 11, 2011, replaced by a military council. On February 15, residents of Bengali, Libya, rose up against the regime of Miramar Qaeda.Following months of NATO bombing and rebel fighting, Qaeda was killed on October 20, 2011, and a National Transitional Council took power. The dramatic political protests?which captivated television viewers and Twitter-feed followers around the world?created an opportunity for a number of Arab countries o Join the community of democratic nations. Yet the crackdown in Syria showed the world how determined some authoritarian leaders in the Middle East are to remain in power?even at the expense of killing tens of thousands of their own citizens.With the genie of Arab political opposition out of the bottle, countries in the Middle East and North Africa are rapidly changing. Fortunately, high oil prices and a return to relative stability in many places could improve conditions in 2013. Along with the Arab Spri ng came President Barack Beam's withdrawal of all U. S. Troops from Iraq at the end of 2011. An ignominious end to an imperial endeavor, the withdrawal seemed to signal that the U. S. Public was no longer willing to pay for wars that drain the public treasury.President Obama refocused U. S. Policy on fighting against the Taliban in Afghanistan and ratcheting up pressure on Iran to abandon its effort to develop nuclear weapons. Many analysts believe that Beam's decisions reveal a significant weakening of U. S. Influence in the Middle East. Perhaps to counteract this decline, Obama decided to bolster the American military presence in the Pacific by cultivating ties with countries afraid of China's rise and attaching 2,500 troops permanently in northern Australia beginning in November 2011.A second development?the European sovereign debt crisis?relentlessly gathered steam after 2010 in the face of a prolonged recession that made it hard for some countries to pay back huge loans to dome stic and foreign banks. European Union leaders had hoped to contain the debt problems in Greece and Ireland, but governments in Spain and Portugal also began to have trouble raising new money by issuing new government bonds. All four countries in 2012 had to get financial bailouts in exchange for adopting painful government spending cuts that contributed o high unemployment.Even with help from the European Central Bank, these countries have dire conditions that threaten the stability of the European financial system. Rupee's responses to its debt crisis have stimulated widespread social unrest. Severe austerity measures have spawned street protests throughout the continent and brought changes of government in Greece, Italy, and Spain. Some EX. leaders and analysts believe that the crisis will spur European countries to form closer ties, while others foresee the death of the Euro and the prospect of national bankruptcies as some countries refuse to pay back onerous loans.If problems worsen in France and Italy, the EX. could unravel economically, causing another deep global recession. The crisis is forcing Germany to decide if it is willing to share the costs of making the EX. stronger, or if it will pursue its purely national interests. The outcomes will likely cause changes in Rupee's traditionally generous social programs and in Rupee's influence in the world. A third development started as an anti-wall Street protest in New York City's Cutting Park on September 17, 2011. Two weeks later, the Occupy Wall Street movement had quickly spread to many major U. S. Ties, tit encampments and â€Å"general assemblies† in public spaces. Similar â€Å"occupations† occurred in Europe, Israel, Chile, and Australia. Although the majority of participants in the SOWS social movement have been students, union workers, progressive activists, and the unemployed, their ideas seemed to resonate with a significant number of the middle class. Calling themselves the â €Å"99%† (in contrast to the wealthiest 1 percent of Americans), SOWS protestors criticized financial institutions, condemned Wall Street greed, and called for a reduction of corporate control over the democratic process.Although SOWS encampments disappeared, the movement kook up new campaigns in 2012, including efforts to stop home foreclosures and reduce student debt. What do these three developments have in common? While each has its own causes, the protestors collectively represent a reaction to corrupt government and growing inequality. In three large regions?the Middle East, Europe, and North America?movements sought protection from financial and cultural globalization that left people feeling at the mercy of market forces.In many cases, protestors felt that they were unfairly forced to bail out the wealthy but denied a chance to snare many o governments 6 s to previous growth. Austerity policies that many had adopted since 2008?and even earlier in the Arab countries?cu t into a host of public social programs such as education and relief for the poor. Many disgruntled citizens disagreed with their leaders, who argued that such reductions were necessary to reduce the size of government, balance national budgets, and stimulate economic recovery.While Arabs claimed a political voice that had been squashed by decades of dictatorial rule, Americans and Europeans seemed to demand a new kind of politics freed from the grip of special interests and big money. In all three cases, elites who were supposed to be the experts on political and financial affairs suddenly were at a loss to explain why things had gotten so bad under their watch. With a loss of faith in Arab regimes, EX. leaders, and U. S. Bankers came a certain â€Å"denationalization† of ruling ideologies such as economic liberalism.A new emphasis was placed on democratic participation and economic fairness. Despite a new zeitgeist in the air in three continents, old political and economic institutions were still resilient. Many regimes held firm in the Middle East. American banks grew even egger after government bailouts, and more money than ever poured into the campaign war chests of Democratic and Republican political candidates. EX. political elites continued to make deals that seemed designed to save big investors and banks rather than ordinary citizens.The alternatives to the old did not always promise a better future, either. In the aftermath of the Arab Spring, Psalmists like Egypt new president Mohamed Moors' made their own undemocratic power grabs, seeking to impose religiously conservative policies and weaken women's rights. Reactions against austerity in Europe strengthened extreme right-wing parties in Greece and France while fueling anti-E or secessionist sentiments in the United Kingdom and Catalonia.And by refusing to organize and engage in â€Å"normal† politics, the SOWS forces dissipated?leaving normal two-party gridlock in Washington after t he November 2012 elections. The Road Ahead By discussing above the three big developments, as well as the problems and promises in the global economy, we have hopefully given you a sense of some of the important phenomena we seek to understand in international political economy. Not unsurprisingly, there are fierce debates about the causes of current crises and the best solutions to them.One of the arguments we make in this text is that to adequately describe and explain the current global financial crisis?or any of the other issues covered in the different chapters?we must use an analytical approach that synthesizes methods and insights derived from economics, political science, and sociology as conditioned by an understanding to history and philosophy. As you delve deeper into the material, you will learn a variety of theories and analytical tools that help us interpret the interrelationships of the state, market, and society in different nations.The PIP method bridges different a cademic disciplines to better explain employ, real-world problems that span physical and intellectual boundaries. While this statement might sound a bit formal and confusing at this point, keep in mind that we do not think you need to be an economics major, a specialist in finance, The What, Why, and How of International Political Economy or a Middle East expert to understand the basic parameters of the global financial crisis or the Arab Spring.This book is written for students who have limited background in political science, economics, or sociology, as well as for those who want to review an assortment of topics in preparation for graduate school. In the next section, we look at how to study PIP?its three distinct analytical perspectives and a number of methodological issues with which PIP students should become acquainted. All the chapters in the book cover important theoretical and Policy issues that have connections to the three developments we have mentioned?and to many more. In this way, we hope students might better understand different dimensions of the problems and then make some reasoned Judgments about how to solve them. Later in this chapter, we discuss the popular phenomenon of globalization as a way o introduce students to many of the political-economic conditions that led up to the global financial crisis. Many PIP experts have asserted that the economic liberal ideas behind globalization may have contributed to the crisis. Opinions differ, however, on whether or not the crisis signals the end of laissez-fairer economic policies, or even the end of capitalism itself. He what, why, and how of International Political economy Our discussion of the financial crisis and its consequences makes clear that today's complex issues can no longer be easily analyzed and understood by using any single et of disciplinary methods and concepts. Those who study PIP are, in essence, breaking down the analytical and conceptual boundaries between politics, economic s, and sociology to produce a unique explanatory framework. Following are several examples of questions that traditional academic disciplines might ask as they seek to explain the global financial crisis.Each discipline focuses on different actors and interests: International Relations: How much has the financial crisis detracted from the ability of states to pay for military defense? How has the crisis affected the conditions of war or terrorism in poor states? As Europe, Japan, and the United States struggle, will emerging countries like China, India, and Brazil gain more political influence in international institutions? International Economics: How has the crisis impacted foreign investment, international trade, and the values of different currencies?Comparative Politics: What is the capability of political institutions within different nations to respond to the needs of the unemployed? What new political forces are emerging and with what effects on political coalitions? Sociolo gy: How has the crisis affected consumption trends for different groups such as the upper, middle, and rower classes? How do the effects of inequality vary on the basis of ethnicity and gender? Anthropology: How have different societies in history dealt with crises related to how they allocate scarce resources?And how have these crises impacted their cultures, values, and societal norms? 8 Focusing on a narrow range of methods and issues enhances intellectual specialization and analytical efficiency. But any single discipline offers an incomplete explanation of global events. Specialization promotes a sort of scholarly blindness or distorted view that comes from using only one set of analytical methods and incepts to explain what most decidedly is a complex problem that could benefit from a multidisciplinary perspective.When defining PIP, we make a distinction between the term â€Å"international political economy' and the acronym PIP. The former refers to what we study?commonly re ferred to as a subject area or field of inquiry that involves tensions among states, markets, and societal actors. In this text, we tend to focus on a variety of actors and issues that are either â€Å"international† (between nation-states) or â€Å"transnational† (across the national borders of two or more states).Increasingly today, any analysts use the term â€Å"global political economy' instead of â€Å"international political economy' to explain problems such as climate change, hunger, and illicit markets that have spread over the entire world, and not Just a few nations. In this book, we often use these two terms interchangeably. The acronym PIP also connotes a method of inquiry that is multidisciplinary. PIP fashions the tools of analysis of its antecedent disciplines so as to more accurately describe and explain the ever- changing relationships between governments, businesses, and social forces across history and in different geographical areas.What are some of the central elements of the antecedent melds to study that contribute to IP 7 First, PIP includes a political dimension that accounts for the use of power by a variety of actors, including individuals, domestic groups, states (acting as single units), international organizations, nongovernmental organizations (Nags), and transnational corporations (Tens). All these actors make decisions about the distribution of tangible things such as money and products or intangible things such as security and innovation.In almost all cases, politics involves the making of rules pertaining to owe states and societies achieve their goals. Another aspect of politics is the kind of public and private institutions that have the authority to pursue different goals. Second, PIP involves an economic dimension that deals with how scarce resources are distributed among individuals, groups, and nation-states. A variety of public and private institutions allocate resources on a day-to-day basis in local markets where we shop. Today, a market is not Just a place where people go to buy or exchange something face to face with the product's maker.The market can also be thought of as a driving force that shapes human behavior. When consumers buy things, when investors purchase stocks, and when banks lend money, their dependability transactions constitute a vast, sophisticated web of relationships that coordinate economic activities all over the world. Political scientist Charles Limbo makes an interesting case that the economy is actually nothing more than a system for coordinating social behavior! What people eat, their occupation, and even what they do when not working are all organized around different agricultural, labor, and relaxation markets.In effect, markets often perform a social function of â€Å"coordination without a coordinator. L Third, the works of such notables as Charles Limbo and economists Robert Hellbender and Lester Throw help us realize that PIP does not reflect enough the societal dimension of different international problems. 2 A growing number of PIP scholars argue that states and markets do not exist in a social vacuum. There are usually many different social groups within a state that share identities, norms, and associations based on tribal ties, ethnicity, religion, or gender.Likewise, a variety of transnational groups (referred to as global civil society) have interests that cut across national boundaries. A host of Nags have attempted to pressure national and international organizations on issues such as climate change, refugees, migrant workers, and gender-based exploitation. All of these groups are purveyors of ideas that potentially generate tensions between them and other groups but play a major role in shaping global behavior. How to Study PIP: Contrasting Perspectives and Methodologies The three dominant perspectives of PIP are economic liberalism, mercantilism, and structuralism.Each focuses on the relationships between a va riety of actors and institutions. A strict extinction between these perspectives is quite arbitrary and has been imposed by disciplinary tradition, at times making it difficult to appreciate their connections to one another. Each perspective emphasizes different values, actors, and solutions to Policy problems but also overlooks some important elements highlighted by the other two perspectives. Economic liberalism (particularly unilateralism?see Chapter 2) is most closely associated with the study of markets.Later we will explain why there is an increasing gap between orthodox economic liberals (Eels), who champion free arrests and free trade, and heterodox interventionist liberals (Hills), who support more state regulation and trade protection to sustain markets. Increasingly, Hills have stressed that markets work best when they are embedded in (connected to) society and when the state intervenes to resolve problems that markets alone cannot handle. In fact, many Hills acknowledge that markets are the source of many of these problems.Many liberal values and ideas are the ideological foundation of the globalization campaign. They are derived from notable thinkers such as Adam Smith, David Richard, John Maynard Keynes, Frederica Hayes, and Milton Friedman. The laissez-fairer principle, that the state should leave the economy alone, is attributed to Adam Smith. 3 More recently, economic liberal ideas have been associated with former president Ronald Reagan and his acolytes, who contended that economic growth is best achieved when the government severely limits its involvement (interference) in the economy.Under pure market conditions (I. E. , the absence of state intervention or social influences), people are assumed to behave â€Å"rationally' (see Chapter 2). 10 That is, they will naturally seek to maximize their gains and limit their losses when reducing and selling things. They have strong desires to exchange and to generate wealth by competing with others for sales in local and international markets. According to Eels, people should strongly value economic efficiency? the ability to use and distribute resources effectively and with little waste.Why is efficiency so important? When an economy is inefficient, scarce resources go unused or could be used in other ways that would be more beneficial to society. This idea has been applied to the new global economy and is one of the basic principles behind globalization. Mercantilism (also called economic nationalism) is most closely associated with the political philosophy of realism, which focuses on state efforts to accumulate wealth and power to protect society from physical harm or the influence of other states (see Chapters 3 and 9).In theory, the state is a legal entity and an autonomous system of institutions that governs a specific geographic territory and a â€Å"nation. † Since the mid-seventeenth century, the state has been the dominant actor in the international community based on the principle that it has the authority to exercise sovereignty (final authority) over its own affairs. States use two types of power to protect themselves. Hard power refers to tangible military and economic assets employed to compel, coerce, intelligence, tend tot, or death enemies and competitors.Soft power comprises selective tools that reflect and project a country cultural values, beliefs, and ideals. Through the use of movies, cultural exports and exchanges, information, and diplomacy, a state can convince others that the ideas it sponsors are legitimate and should be adopted. Soft power can in many ways be more effective than hard power because it rests on persuasion and mutual exchange. For example, Nobel Peace Prize recipient Barack Obama partly regained some of the world's support for the United States through a discourse emphasizing multilateral cooperation.Structuralism is rooted in Marxist analysis but not limited to it (see Chapter 4). It looks at PIP issues mainly in terms of how different social classes are shaped by the dominant economic structure. It is most closely associated with the methods of analysis many sociologists employ. Structuralisms emphasize that markets have never existed in a social vacuum. Some combination of social, economic, and political forces establishes, regulates, and preserves them.As we will see in the case of the financial crisis, even the standards used to Judge the effectiveness of market systems reflect the dominant values and beliefs of those forces. The Benefits of PIP Each perspective in PIP sheds light on some aspects of a problem particularly well, but casts a shadow on other important aspects. By using a combination of the three dominant PIP methods and concepts (outlined in Table 1-1), we can move to the big picture?the most comprehensive and compelling explanation of global processes.Not surprisingly, mixing together the disciplines of economics, political science, and sociology gives rise to a n analytical problem: It is difficult to establish a single explanation to any PIP issue because each discipline has its own set of analytical concepts, core beliefs, and methodologies. Does this weaken the utility of PIP? Not at all. We must recognize that PIP is not a â€Å"hard science†; it may never table 1-1 Conflicting Political economic Perspectives about state-market relations in Capitalist societies Monetarism (Orthodox Economic Liberals) Main Ideas aboutCapitalism â€Å"Laissez-fairer†; minimal state intervention and regulation of the economy Keynesian (Heterodox Interventionist Economic Liberals) The state primes (injects money? liquidity) into the economy to restore confidence in it and to stabilize it Efficiency mixed with a variety of state political and social objectives Developmental State Model (Mercantilism) Socialism (Structuralism) Social Democracy (Structuralism) The state plays a proactive role in the economy to guide and protect its major industr ies The state controls the economy. Prices set by state officials. Emphasis on state

The Directive for the American Dream

Robert Frost is one of the most popular poets in America. He was known as the favorite poet of the country’s citizens (Hollander). In â€Å"Directive†, one of his popular works, Frost became controversial as the interpretation of the poem actually suggested that in order to find one’s self; one has to get lost first. This may be true as there is no necessity to find something which is not lost. However, by claiming this in his poem, it has been said that Frost has presented to his audience the modern version of the American dream. The American DreamThe concept, American Dream, began from the writer James Truslow Adams. He used it in his book, â€Å"Epic of America†, which was published in 1931. The concept referred to that dream or vision of a land in which life is better, richer, and fuller for all people. The opportunities in this land are according to each person’s ability and accomplishments. It is not merely a dream of people to have high-end p roperties and earn high salaries; instead it is a vision of a social order in which all men and women may be able to achieve the fullest stature that their innate capability may bring them.This is regardless of concepts that are relative to fate or destiny, like circumstances of birth or position (â€Å"What is the American Dream†). During the 30’s, the century in which this work was published, the American dream actually started to become vague. Although there were people who believed strongly in the American dream, there were also those who slowly lost faith. America was then under the great depression and its economy was at a very low status; thus, the vision of the American dream seemed rather obscure (Sutton). However, as the time passed, the cloudiness of the vision started to clear up.America slowly got to its feet again and the dreamers, who woke up during the great depression, began to dream again. Today the dream is still on-going and the dreamers have now gr own to multitudes. From Americans who believed their founding fathers, the dream has already spread to other countries (Sutton). Foreigners who continued to enter America were said to have been armed with their American dream. They come into the country, with the desire to earn for themselves and their families and to achieve greater. This is then current generation’s view of the American dream (Bohan).This may be what Frost was referring to in his poem. It may be remembered that the poem, â€Å"Directive† was about a speaker telling someone that he can accompany him around, direct him somewhere. But there is a huge probability that he may only take the person to the wrong destination as indicated by this line, â€Å"if you'll let a guide direct you/ Who only has at heart your getting lost† (Frost). This may point that Frost was trying to tell his audience that in order for a person to find his true destination, he must first get lost.In the earlier part of the poem the speaker described the places that the person he will be accompanying may go through. It is an old town, where everything is dilapidated and destroyed. The roads were once walked on yet no longer visited and patronized. It is a place that people has deserted (Frost). This may be comparable to the fact that when foreign migrants start to envision something great for themselves and decides to transfer to America, he leaves behind the home he once knew. The deserted place may refer to the life the migrants once had. It was tattered, of not the best quality, and very poor.Now the journey that the poem is referring to may be the travel in order to achieve the American dream. This may refer to the part of the migrant’s life where he enacts the dream and tries to fulfill it. In the poem, this is the line that says, ‘Make yourself up a/cheering song of how /Someone's road home from work this once was, /Who may be just ahead of you on foot† (Frost). It indicates th at many have done the same things and many have dreamed the same dream and have embarked on the journey. They left their home, their old lives, and even their identities.The way that the migrants left their identities behind is the notion of ‘lost’ that was being referred to by Frost in his work. Paralleling this to the American dream, it should be noted that foreign people enter the country to work and the citizens have the tendency to discriminate. These immigrants are not only viewed unequally by the citizens; they are also treated unequally by those who employ them. One common instance is the case of the Mexican laborers who are paid with lower wages but given bigger and more difficult jobs than American laborers.People seem to have this notion that when the work is done by Mexicans, it can be as good and efficient but not as costly. This notion is directly related to their racial affiliations (La Botz). The fact that when they are seen this way denotes that they ha ve already lost their dignity and themselves. There seems to be no hope if this kind of situation is examined, however, as the poem indicates, â€Å"And if you're lost enough to find yourself/ By now, pull in your ladder road behind you/ And put a sign up CLOSED to all but me./Then make yourself at home† (Frost), the drawback is not without a price. After being lost, the person finally finds his destination. Relative to the immigrant workers, the destination is the fulfillment of their American dream. Given this, it may then be concluded that using various symbolic words such as destinations, lost, and home in the poem â€Å"Directive†, Robert Frost was able to present to the public his idea on modern American Dream. He was able to expose to his readers that the modern American dream involves getting lost and finding one’s self again as narrated in his poem.He was also able to pinpoint that this generation’s American dream is no longer limited to the citi zens of the country but also to foreigners who are willing to get lost in order to find themselves finally. Works Cited Bohan, RT. 2008. â€Å"Immigrants and the American Dream†. Liberty in America. 30 April 2009 . Frost, Robert. 2009. â€Å"Directive†. Poets. org. 30 April 2009 < http://www. poets. org/viewmedia. php/prmMID/20521 >. Hollander, John. 2009. â€Å"A Close Look at Robert Frost†.Poets. org. 30 April 2009 < http://www. poets. org/viewmedia. php/prmMID/15894 >. La Botz, Dan. 1992. â€Å"Labor in Mexico†. multinationalmonitor. org. 30 April 2009 < http://multinationalmonitor. org/hyper/issues/1992/11/mm1192_13. html >. Sutton, Bettye. 2008. â€Å"American Cultural History†. Lonestar College Kingwood. 30 April 2009 < http://kclibrary. lonestar. edu/decade30. html >. â€Å"What is the American Dream. † 2002 The Library of Congress. 30 April 2009 < http://lcweb2. loc. gov/learn/lessons/97/dream/thedream. html >.

Demand Forecasting and Production Planning

ScienceAsia 27 (2001) : 271-278 Demand Forecasting and Production Planning for Highly Seasonal Demand Situations: Case Study of a Pressure Container Factory Pisal Yenradeea,*, Anulark Pinnoib and Amnaj Charoenthavornyingb a Industrial Engineering Program, Sirindhorn International Institute of Technology, Thammasat University, Patumtani 12121, Thailand. b Industrial Systems Engineering Program, School of Advanced Technologies, Asian Institute of Technology, P. O. Box 4, Klong Luang, Patumtani 12120, Thailand. * Corresponding author, E-mail: [email  protected] tu. ac. th Received 24 May 2001 Accepted 27 Jul 2001 ABSTRACT This paper addresses demand forecasting and production planning for a pressure container factory in Thailand, where the demand patterns of individual product groups are highly seasonal. Three forecasting models, namely, Winter’s, decomposition, and Auto-Regressive Integrated Moving Average (ARIMA), are applied to forecast the product demands. The results are compared with those obtained by subjective and intuitive judgements (which is the current practice). It is found that the decomposition and ARIMA models provide lower forecast errors in all product groups. As a result, the safety stock calculated based on the errors of these two models is considerably less than that of the current practice. The forecasted demand and safety stock are subsequently used as inputs to determine the production plan that minimizes the total overtime and inventory holding costs based on a fixed workforce level and an available overtime. The production planning problem is formulated as a linear programming model whose decision variables include production quantities, inventory levels, and overtime requirements. The results reveal that the total costs could be reduced by 13. % when appropriate forecasting models are applied in place of the current practice. KEYWORDS: demand forecasting, highly seasonal demand, ARIMA method, production planning, linear programming, pressure container factory. INTRODUCTION Most manufacturing companies in developing countries determine product demand forecasts and production plans using subjective and intuitive judgments. This may be one factor that leads to production inefficiency. An accuracy of the demand forecast significantly affects safety stock and inventory levels, inventory holding costs, and customer service levels. When the demand is highly seasonal, it is unlikely that an accurate forecast can be obtained without the use of an appropriate forecasting model. The demand forecast is one among several critical inputs of a production planning process. When the forecast is inaccurate, the obtained production plan will be unreliable, and may result in over- or understock problems. To avoid them, a suitable amount of safety stock must be provided, which requires additional investment in inventory and results in an increased inventory holding costs. In order to solve the above-mentioned problems, systematic demand forecasting and production planning methods are proposed in this paper. A case study of a pressure container factory in Thailand is presented to demonstrate how the methods can be developed and implemented. This study illustrates that an improvement of demand forecasts and a reduction of total production costs can be achieved when the systematic demand forecasting and production planning methods are applied. The demand forecasting and production planning methods are proposed in the next section. The background of the case study, including, products, production process, and the forecasting and production planning procedures being used in the factory, are briefly described in Section 3. The detailed analyses of the forecasting methods and the production planning method are explained in Section 4 and Section 5, respectively. Finally, the discussion and conclusion are presented in Section 6. 272 ScienceAsia 27 (2001) P ROPOSED D EMAND F ORECASTING PRODUCTION PLANNING METHODS AND The proposed demand forecasting and production planning methods are depicted in a step-by-step fashion in Fig. . Most factories produce a variety of products that can be categorized into product groups or families. Individual products in the same product group generally have some common characteristics. For example, they may have the same demand pattern and a relatively stable product mix. As a result, it is possible to forecast the aggregate demand of the product group first, and then disaggregate it in to the demand of individual products. Since the forecast of the aggregate demand is more accurate than that of the individual demand1, it is initially determined in Step 1. Then the demands of individual products are determined in Step 2 by multiplying the aggregate demand with the corresponding product mix that is normally known and quite constant. Since the demand forecasts are always subject to forecast errors, safety stocks are provided to avoid stock-out problems. Based on the standard deviation of the forecast errors and the required service level, the safety stocks for individual products are determined in Step 3. Production planning decisions are so complicated and important that they should not be subjectively and intuitively made. Consequently, an appropriate production planning model should be formulated to determine the optimal decisions. With this model, its parameters, eg, demand forecasts, safety stocks, holding cost, overtime cost, machine capacity, inventory capacity, and available regular time and overtime, are entered or updated (Step 4). In step 5, the optimal decisions regarding the production quantities, inventory levels, and regular production time and overtime for each product in each production stage are obtained by solving the production planning model. Step 6 indicates that only the optimal production plan of the current month will be implemented. After one month has elapsed, the demand forecasts and the production plan will be revised (by repeating Steps 1 to 5) according to a rolling horizon concept. BACKGROUND OF THE CASE STUDY The pressure container factory manufactures 15 products, ranging from 1. 25 to 50 kg of the capacity of pressurized gas. The products are divided into eight product groups, namely, Group 1 to Group 8. The first six groups have only two components, â€Å"head† and â€Å"bottom†, while the last two groups have three components, â€Å"head†, â€Å"bottom†, and â€Å"body†. The production process can be divided into five stages as shown in Fig. 2. Stage 3 is only required to produce the products having three components (ie, those in Groups 7 and 8). Stage 4, the circumference welding, is found to be a bottleneck stage due to its long processing time. Presently monthly demand forecasts are subjectively determined by the Marketing Department based on past sales and expected future market conditions. No systematic method is used in forecasting. Using these forecasts and other constraints, such as availability of raw materials, equipment, and production capacity, the monthly production plan for a three-month period is intuitively determined without considering any cost factor. This results in inaccurate demand forecasts and, subsequently, an inefficient production plan. Stage 1 Blanking 1) Forecast the monthly demands of each product group throughout the planning horizon of 12 months 2) Determine the demand for each individual product 3) Determine the safety stock for each individual product Stage 2 Forming of bottom and head Stage 3 Forming of body 4) Update the parameters in the production planning model Stage 4 Circumference welding 5) Run the planning model to obtain the optimal planning dicisions ) Roll the plan by repeating Steps 1 to 5 after one month has elapsed Stage 5 Finishing Fig 1. Proposed forecasting and planning steps. Fig 2. The production process to manufacture a pressure container. ScienceAsia 27 (2001) 273 FORECASTING METHODS Steps 1, 2, and 3 of the proposed forecasting and planning process are discussed in detail in this section. Firstly, the aggregate demand forecasts of eight product groups throughout the planning horizon of 12 mont hs will be determined. Secondly, the demand forecasts of the product groups will be disaggregated into those of individual product. Thirdly, the safety stocks of individual product will be calculated based on the forecast error. Aggregate Demand Forecasts of Product Groups The typical demand pattern of each product group is seasonal. As an example, Fig. 3 shows the demand pattern of Product Group 3. Thus, three forecasting models that are suitable for making seasonal demand forecasts are considered. They are Winter’s, decomposition and Auto-Regressive Integrated Moving Average (ARIMA) models. 2-5 Because of their simplicity, the Winter’s and decomposition models are initially used to forecast the aggregate demand of each product group. If the Winter’s and decomposition models are inadequate (ie, the forecast errors are not random), the ARIMA model which is more complicated and perhaps more efficient will be applied. The Winter’s model has three smoothing parameters that significantly affect the accuracy of the forecasts. These parameters are varied at many levels using a computer program to determine a set of parameters that give the least forecast errors. There are two types of the decomposition model, namely, multiplicative and additive types. The former is selected since the demand pattern shows that the trend and seasonal components are dependent. The forecast errors of the Winter’s and decomposition models are presented in Table 1. Based on the calculated mean square error (MSE) and the mean absolute percentage error (MAPE), it is seen that the decomposition model has lower Original Series (x 1000) 16 forecast errors in all product groups than the Winter’s model. Thus, it is reasonable to conclude that the decomposition model provides better demand forecasts than the other. One way to check whether the forecasting model is adequate is to evaluate the randomness of the forecast errors. The auto-correlation coefficient functions (ACFs) of the errors from the decomposition model for several time lags at the significant level of 0. 05 of each product group are determined. The ACFs of Groups 1 and 3 are presented as examples in Fig. 4 and 5, respectively. The ACFs of Groups 4, 5, 6, 7, and 8 are similar to those of Group 1 in Table 1. Forecast errors of the Winter’s and decomposition models. MSE Products MAPE (%) Winter’s Decomposition Winter’s Decomposition 9,879,330 4,363,290 2,227,592 4,507,990 10,039,690 574,108 636,755 883,811 36. 14 48. 94 24. 25 30. 08 18. 80 53. 86 61. 99 46. 52 26. 97 31. 86 15. 97 23. 4 13. 14 34. 80 34. 45 28. 76 Group 1 16,855,149 Group 2 8,485,892 Group 3 5,433,666 Group 4 6,035,466 Group 5 23,030,657 Group 6 1,690,763 Group 7 2,034,917 Group 8 1,884,353 Estimated Autocorrelations 1 0. 5 coefficient 0 -0. 5 -1 0 4 8 lag 12 16 20 Fig 4. ACFs of the residuals from the decomposition model for Group 1. Estimated Autocorrel ations 1 0. 5 16 demand 3 coefficient 0 8 -0. 5 4 -1 0 0 10 20 30 time index 40 50 60 0 4 8 lag 12 16 20 Fig 3. Actual demand of Group 3. Fig 5. ACFs of the residuals from the decomposition model for Group 3. 274 ScienceAsia 27 (2001) Fig 4, while those of Groups 2 and 3 are similar. It can be seen from Fig. 4 that the ACFs of all lags are within the upper and lower limits, meaning that the errors are random. However, the ACF of lag 1 in Fig. 5 exceeds the upper limit. This indicates that auto-correlations do exist in the errors and that the errors are not random. From the ACFs, we can conclude that the decomposition model is adequate for forecasting the demands of Groups 1, 4, 5, 6, 7, and 8, but inadequate for forecasting those of Groups 2 and 3. Therefore, the ARIMA model is applied to Groups 2 and 3. From the original time series of the demand of Group 3 (in Fig. 3), and the ACFs of its original series (in Fig. ), it can be interpreted that the original series has a trend, and a high value of ACF of lag 12 indicates the existence of seasonality. 2 Hence, a non-seasonal first-difference to remove the trend and a seasonal first-difference to remove the strong seasonal spikes in the ACFs are tested. Fig. 7 shows the ACFs of the ARIMA (p,1,q)(P,1,Q) 12 model afte r applying the first difference. The nonseasonal plot indicates that there is an exponential decay and one significant ACF of lag 2. Thus, the AR(1) and MA(1) process denoted by ARIMA (1,1,1)(0,1,0)12 is identified. The ACFs of the residuals after applying this ARIMA model shown in Fig. reveals that there is a high value of ACF of lag 12. Therefore, the AR(1) and MA(1) process for the seasonal part or ARIMA (1,1,1)(1,1,1)12 can be identified. The ACFs of the residuals generated from this model are shown in Fig. 9. Since all ACFs are within the two significant limits, the ARIMA (1,1,1)(1,1,1)12 model is adequate. Using the Statgraphic program, the model coefficients can be determined. The demand forecast for Group 3 is presented in Eq. 1. Ft = 1. 197 X t ? 1 ? 0. 197 X t ? 2 + 0. 54408 X t ? 12 ? 0. 65126 X t ? 13 + 0. 10718 X t ? 14 + 0. 45592 X t ? 24 ? 0. 54574 X t ? 25 + 0. 08982 X t ? 26 ? 1. 6699et ? 1 ? 0. 7154et ? 12 + 0. 76332et ? 13 + 29. 34781 (1) where Ft is the demand fo recast for period t Xt is the actual demand for period t et is the forecast error for period t Similarly, the forecasting model for Group 2 is ARIMA (3,0,0)(3,0,0). 12 The demand forecast of Group 2 is presented in Eq. 2. Estimated Autocorrelations for Original Series 1 Estimated Residual ACF 1 0. 5 0. 5 coefficient coefficient 0 0 -0. 5 -0. 5 -1 0 5 10 lag 15 20 25 -1 0 5 10 lag 15 20 25 Fig 6. ACFs of the actual demand for Group 3. Fig 8. ACFs of the residuals of ARIMA (1,1,1)(0,1,0)12 model for Group 3. Estimated Residual ACF 1 Estimated Autocorrelations for 1 Nonseasonal Differences 1 Seasonal Differences 1 0. 5 0. 5 coefficient coefficient 0 0 -0. 5 -0. 5 -1 0 5 10 lag 15 20 25 -1 0 5 10 lag 15 20 25 Fig 7. ACFs after first differencing for Group 3. Fig 9. ACFs of the residuals of ARIMA (1,1,1)(1,1,1)12 model for Group 3. ScienceAsia 27 (2001) 275 Ft = 0. 36951X t? 1 + 0. 30695X t? 2 – 0. 18213X t? 3 + 0. 20132 X t? 12 ? 0. 07439 X t? 13 ? 0. 06180 X 14 + 0. 03667 X t? 15 ? 0. 03325X t? 24 + 0. 01228 X t? 25 + 0. 01021X t? 26 ? 0. 00606 X t? 27 + 0. 68660 X t? 36 ? 0. 25371X t? 37 ? 0. 21075X t? 38 + 0. 12505X t? 39 + 354. 4515 2) The forecast errors of the decomposition and ARIMA models for Groups 2 and 3 are presented in Table 2. It reveals that the ARIMA model has lower Table 2. Forecast errors of the decomposition and ARIMA models. MSE Products Group 2 Group 3 Decomposition ARIMA 4,363,290 2,227,592 3,112,974 1,235,788 MAPE (%) Decomposition ARIMA 31. 86 15. 97 29. 05 13. 18 MSE and MAPE than t he decomposition model. Therefore, the ARIMA model should be used to forecast the aggregate demands of Groups 2 and 3. For other product groups, however, the decomposition model should be used because it is more simple yet still adequate. The comparison of the demand forecast errors obtained from the forecasting models and those from the current practice of the marketing department (as presented in Table 3) indicates that the errors of the forecasting models are substantially lower than those of the current practice. Demand Forecasts of Individual Products The demand forecast of product i for period t, dit, is obtained by multiplying the aggregate demand forecast of the product group (obtained from the previous steps) by the corresponding product mix (as presented in Table 4). Table 3. Forecast errors of the current practice, decomposition, and ARIMA models. MSE Product Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 Group 7 Group 8 Current practice Decomposition 16,672,342 4,394,693 4,988,962 4,754,572 19,787,102 795,621 849,420 1,060,301 9,879,330 4,507,990 10,039,690 574,108 636,755 883,811 ARIMA 3,112,974 1,235,788 MAPE (%) Current practice Decomposition 30. 58 34. 68 23. 50 25. 73 17. 54 42. 70 38. 36 37. 93 26. 97 23. 24 13. 14 34. 80 34. 45 28. 76 ARIMA 29. 05 13. 18 – Table 4. Product mix. Product group Product 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 0. 17 0. 20 0. 26 0. 23 0. 14 1. 0 0. 53 0. 47 0. 65 0. 35 1. 0 1. 0 1. 0. 3 0. 7 2 3 4 5 6 7 8 276 ScienceAsia 27 (2001) Calculation of Safety Stock The safety stocks of finished products must be provided to protect against stock-out problems due to inaccurate demand forecasts. Based on the forecast errors obtained from the demand forecasting models, the amount of the safety stock is calculated using the following formula. 12 SSit = sf * ? j * ? ij (3) PRODUCTION PLANNING METHO D The production planning model is developed by initially defining decision variables and parameters, and then mathematically formulating the production planning model. Step 4 of the method requires that the model parameters be estimated and entered into the model. The model is solved for the optimal solution (Step 5). Step 6 recommends that the model parameters are updated, and the model is solved again after one planning period has passed. The production planning problem of the factory under consideration belongs to the class of multistage, multi-item, capacitated production planning model. The models in this class have been discussed extensively in. 6-11 They differ in assumptions, objectives, constraints, and solution methods. Our production planning model is a modification of the multi-stage, multi-product model discussed in Johnson and Montgomery. 6 Its objective is to minimize the total overtime and inventory holding costs. Costs of laying off and rehiring are not considered because laying off and rehiring are not allowed according to the labor union regulation. Since the production cost is time-invariant and all demands must be satisfied, the regular time production cost is thus not included in the objective function. Relevant parameters and decision variables are defined as follows: Parameters : hik = Holding cost per unit of product i at stage k (baht/unit/period) co = Cost per man-hour of overtime labor (baht/man-hour) dit = Demand forecast of product i for period t (units) aik = Processing time for one unit of product i at stage k (hours/unit) (rm)kt = Total available regular time excluding preventive maintenance and festival days at stage k for period t (man-hours) (om)kt = Total available overtime excluding preventive maintenance and festival days at stage k for period t (man-hours) W = Warehouse capacity (units) SSit = Safety stock of product i for period t (units) Iik0 = Initial inventory of product i at stage k (units) N = Total number of products (15 products) T = Total number of periods in the planning horizon (12 periods) K = Total number of stages (5 stages) where SSit = Required safety stock level of product i for period t sf = Safety factor = 1. 64 for a required service level of 95 % of the standard normal distribution ? j = Standard deviation of forecast errors of Group j. ?ij = Product mix of Product i in Group j. Since the errors of the recommended demand forecasting models are lower than those of the current practice, it is clear that SSit based on the use of the models must be lower than that determined from the current practice (assuming that the service levels of both cases are the same). Table 5 presents the required safety stocks of the current practice and the recommended forecasting models at 95 % service level. Table 5. Required safety stock of current practice and of recommended forecasting models. Safety stock (units) Product 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Current practice 1,138 1,339 1,741 1,540 937 3,438 1,941 1,722 2,324 1,252 7,295 1,463 1,511 507 1,182 Recommended forecasting models 887 1,043 1,356 1,200 730 2,905 979 868 2,274 1,224 5,258 1,245 1,323 460 1,072 ScienceAsia 27 (2001) 277 Decision variables: Xikt = Quantity of product i to be produced at stage k in period t (units) Iikt = Inventory of product i at stage k at the end of period t (units) Rkt = Regular time used at stage k during period t (man-hours) Okt = Overtime used at stage k during period t (man-hours) LP model: Minimize Z = ? ? ? hik Iikt + ? ? co Okt , (4) i =1 k =1 t =1 k =1 t =1 N K T K T Eq. 7 represents the material balance constraint in Stage 3, which produces the body of threecomponent products, for Products 13, 14, and 15. Constraint (13) must be included since the finished products are very bulky and require significant warehouse space that is quite limited. Work-inprocess inventory does not require significant storage space because it can be stacked. The non-negativity constraint (16) ensures that shortages of work-inprocess inventory do not occur. Input Parameters The initial inventory of product i at stage k, Iik0, is collected from real data of work-in-process or finished good inventories on the factory floor at the beginning of the planning horizon. The inventory holding cost of product i at stage k, hik, is estimated by assuming that the annual inventory holding cost is 25% of the cost per unit of the product at the respective production stage. Since the cost per unit is constant over the planning horizon, the annual inventory holding cost is time-invariant. The factory has enough space in the warehouse to store not more than 40,000 units of finished products. The total available regular time, (rm)kt, is estimated based on the fact that the factory is normally operated 16 hours a day and six days a week, and the total available overtime, (om)kt, is calculated by assuming that the overtime could not be more than six hours a day. The overtime cost, co, is assumed to be constant throughout the planning horizon, and is estimated to be 60 Baht per man-hour. After all related parameters have been estimated and entered into the planning model, the optimal values of all decision variables are calculated using the LINGO software. The computation time takes less than one minute on a Pentium PC. Results of the Production Planning Models with Different Levels of Safety Stock In this section, two production planning models with different safety stock levels (as shown in Table 5) are solved to determine the total cost savings when the recommended forecasting models are applied in place of the current practice. The inventory holding, overtime, and total costs of both models are presented in Table 6. Based on the optimal total cost of the current practice (4,078,746 Baht per year) and the optimal total cost of the recommended forecasting models (3,541,772 Baht per year), the total cost saving is 536,974 Baht per year, or 13. 2 %. It can be also seen Subject to – Finished product requirement constraints I i 5,t? 1 + X i 5t ? I i 5t = dit – ? i, t ; k = 5, (5) Material balance between stages constraints ? i, t ; k = 4, (6) (7) ? i, t ; k = 2, (8) ? i, t ; k = 1, (9) I i 4 ,t? 1 + X i 4 t ? I i 4 t = X i 5t I i 3,t? 1 + X i 3t ? I i 3t = X i 4 t ?t ; i = 13, 14, 15; k = 3, I i 2,t? 1 + X i 2t ? I i 2t = X i 4 t I i1,t? 1 + X i1t ? I i1t = X i 2t Capacity constraints ? aik X ikt ? Rkt + Okt i= 1 N ?k , t , (10) – Available regular and overtime constraints. Rkt ? (rm) kt Okt ? ( om) kt ?k , t , ? k , t , (11) (12) – Inventory capacity of finished product constraints. ? I ikt ? W i= 1 N ?t ; k = 5, (13) – Safety stock of finished product constraints. I ikt ? SS it ?i, t ; k = 5, (14) – Non-negativity conditions X ikt ? 0 I ikt ? 0 ?i, k , t , ? i, t ; k = 1, 2, 3, 4 (15) (16) 278 ScienceAsia 27 (2001) Table 6. Comparison of the optimal costs of production planning models. Optimal costs (Baht/year) Model based on the current practice Inventory holding cost Overtime cost Total cost 2,117,051 1,961,695 4,078,746 Model based on recommended forecasting models 1,775,552 1,766,220 3,541,772 REFERENCES 1. Nahmias S (1993) Production and Operations Analysis, 2nd ed, Irwin, New York. 2. Vandaele W (1983) Applied Time Series and Box-Jenkins Models, Academic Press, New York. 3. Winters PR (1960) Forecasting Sales by Exponentially Weighted Moving Average. Management Science 6(4), 324-42. 4. Box GE and Jenkins GM (1970) Time Series Analysis, Forecasting, and Control, Holden-Day, San Francisco. 5. Makridakis S Wheelwright SC and McGee VE (1983) Forecasting Methods and Applications, 2nd ed, John Wiley & Sons, New York. 6. Johnson LA and Montgomery DC (1974) Operations Research in Production Planning, Scheduling, and Inventory Control, John Wiley & Sons, New York. 7. Bullington P McClain J and Thomas J (1983) Mathematical Programming Approaches to Capacity Constrained MRP Systems: Review, Formulation, and Problem Reduction. Management Science 29(10). 8. Gabbay H (1979) Multi-Stage Production Planning. Management Science 25(11), 1138-48. 9. Zahorik A Thomas J and Trigeiro W (1984) Network Programming Models for Production Scheduling in MultiStage, Multi-Item Capacitated Systems. Management Science 30(3), 308-25. 10. Lanzanuer V (1970) Production and Employment Scheduling in Multi-Stage Production Systems. Naval Research Logistics Quarterly 17(2), 193-8. 11. Schwarz LB (ed) (1981) Multi-level Production and Inventory Control Systems: Theory and Practice, North-Holland, New York. 12. Tersine RJ (1994) Principles of Inventory and Materials Management, 4th ed, Prentice Hall, New Jersey. that the optimal inventory holding cost and overtime cost in the production planning model based on the recommended forecasting models are almost equal which indicates that the model can efficiently achieve a tradeoff between both costs. Normally, the optimal decisions in the first planning period will be implemented. After the first period has passed, the new forecasts will be determined, and the model parameters will be updated. The updated model is solved again to determine the optimal decisions in the current period. This is called a rolling horizon concept. However, the details and results of this step are not shown in this paper. DISCUSSION AND CONCLUSION The ARIMA model provides more reliable demand forecasts but it is more complicated to apply than the decomposition model. Therefore the ARIMA model should be used only when the decomposition model is inadequate. When compared against those of the current practice of the company, the errors of our selected models are considerably lower. This situation can lead to substantial reductions in safety stocks. Consequently, the lower safety stocks result in decreased inventory holding and overtime costs. The results of the production planning model are of great value to the company since the model can determine the optimal overtime work, production quantities, and inventory levels that yield the optimal total overtime and holding costs. The production planning method is more suitable than the existing one that does not consider any cost factors. Moreover, it has been proven that an application of appropriate forecasting techniques can reduce total inventory holding and overtime costs significantly. In conclusion, this paper demonstrates that an improvement in demand forecasting and production planning can be achieved by replacing subjective and intuitive judgments by the systematic methods.

Hayek and alfred marshal Assignment Example | Topics and Well Written Essays - 500 words

Hayek and alfred marshal - Assignment Example While the price system has the disadvantages of its own, it’s should still be thought of as a marvel of the economically driven coordination. Hayek explains that the contrast exists between the natural and social sciences. In the sciences of the natural type, if advances are to be made, scientists should recognise that things are actually not what they might seem. Science undoubtedly dissolves the existing categories of subjective experience only to replace them with causes that are hidden and lie beneath the surface. Hayek believes that contrary to this principle the study of society ought to take to use as its raw material the subjective ideas and beliefs expressed by members of the society. To illustrate, Hayek says, â€Å"the position of man, midway between natural and social phenomena (...) brings it about that the essential basic facts which we need for explanation of social phenomena are part of the common experience, part of the stuff of our thinking† (Hayek 126). In brief, one should perceive the society in relation to the role of men’s conscious reflection of the done actions. While people in a soc iety are all the time choosing among a variety of choices of how to act, in a collective sense the outcome is an unintended result of decisions taken consciously. Central planning is a wrong way to shape the social economic order. Hayek is against centralization, when economic planning is carried out by one authority over the system, but thinks that this economic planning has to be distributed among many individuals. Based on his review of the Mise’s work, Hayek agrees that rational calculation, applicable to an economic order, has been made impossible by socialism the way Hayek saw it functioning in practice. Indeed, central direction of the overall economic activity at once at distribution of the income that is not dependent on private property in the situation when output is greater than production is doomed to failure. Yet,

Consumer Culture in Modern Europe Term Paper Example | Topics and Well Written Essays - 1500 words

Consumer Culture in Modern Europe - Term Paper Example The author reveals that German press insisted that French women adopted in Germany were a disguise to German female morals. This was a very unethical way of treating women in Germany because there is freedom of dressing all over the globe. Consumer culture that involves buying and selling existed in Berlin. Berlin was a heart of profitable garment business and Frankfurt wanted to emulate it. Berlin sold expertly tailored finished clothing and accessories for all sexes in Europe. On top of this, Berlin housed some of successful fashion ventures such as saloons and luxurious shops. German fashion industry wanted to surpass the French one when the World War 2 was over. This was a move to dominate the world of fashion with stylish, noble, and self-respecting outfits. Germany kept the move to dominate fashion industry as a secret. Fashion industry in Germany did not disclose any information about the shapes, textures, colors, and method of making their clothes. In order to achieve this no ble step towards dominance in fashion industry, Germany founded organizations that to united fashion businesses. The aim of unification of fashion business was to give German a winning force in its endeavor to dominate stylish industry (Guenther 290). Some groups wanted Germany to utilize art academies, which to offer training in fashion designing. In order to win domestic purchasing power, German forced violently Jews out of their fashion industry. Likewise, Nazi occupiers’ restricted French fashion exports in the international markets although few exceptions made. Germany’s rivals, who were real and imagined, in the fashion world eventually vanquished (Guenther 162-166). Although German rivals had gone, Nazi government made little... Consumer culture that involves buying and selling existed in Berlin. Berlin was a heart of profitable garment business and Frankfurt wanted to emulate it. Berlin sold expertly tailored finished clothing and accessories for all sexes in Europe. On top of this, Berlin housed some of successful fashion ventures such as saloons and luxurious shops. German fashion industry wanted to surpass the French one when the World War 2 was over. This was a move to dominate the world of fashion with stylish, noble, and self-respecting outfits. Germany kept the move to dominate fashion industry as a secret. Fashion industry in Germany did not disclose any information about the shapes, textures, colors, and method of making their clothes. In order to achieve this noble step towards dominance in fashion industry, Germany founded organizations that to united fashion businesses. The aim of unification of fashion business was to give German a winning force in its endeavor to dominate stylish industry (Gue nther 290). Some groups wanted Germany to utilize art academies, which to offer training in fashion designing. In order to win domestic purchasing power, German forced violently Jews out of their fashion industry. Likewise, Nazi occupiers’ restricted French fashion exports in the international markets although few exceptions made. Germany’s rivals, who were real and imagined, in the fashion world eventually vanquished. Although German rivals had gone, Nazi government made little advancement in developing a unique German fashion.

Relationship between Serving Space and Structural Elements in Louis Essay

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