Managing Operations Across the Supply Chain 1st Edition by Morgan Swink,Steven Melnyk,Bixby Cooper, Janet Hartley

Exercise 24

Many supply managers use a monthly reported survey result known as the purchasing managers' index (PMI)as a leading indicator to forecast future sales for their businesses.Suppose that the PMI and your business sales data for the last 10 months are the following:
a.Construct a causal regression model using PMI as the causal variable.How well does your model fit the data?
b.Suppose that the PMI is truly a leading indicator.That is, the PMI value in one period influences sales in the following period.Construct a new regression model using this information.Is the new model better or worse than the model you made for part a? This new model is better because it explains 91% of the variance in sales.
c.Pick the best model from parts a and b, and create a forecast if the PMI is 47.3.