Spreadsheet Modeling of Equipment Acquisition Plans

Abstract

OVERVIEWExcel spreadsheets have been used in many classrooms to teach modeling and analysis of real business problems. This can be done with relative ease but often the modeling approach may be inappropriate and the analysis results not easily implemented. In this article, we illustrate these difficulties with the modeling of the number of equipment required in future years, given demand (historical and projected) and the amount of equipment held. We show how the desired output can be, and needs to be related to the given input. For this purpose, we apply the TREND function to predict data into future years. The real learning of this article comes from deriving actionable implementation solutions from the modeling results. We discuss this in terms of converting future equipment numbers into an equipment acquisition plan. THE EXERCISEAlex Processing produces a line of food products that are used as key ingredients in mass-produced meals. The CEO, who recently hired you as his assistant, has requested you to prepare an equipment acquisition plan. After consulting the executive engineer, you are able to tabulate the number of each type of equipment held and the annual aggregate demand for the last 10 years and the expected annual aggregate demands for the next 10 years.

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