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Yankee Fork and Hoe Company produces garden tools and is the leader in this very competitive and mature industry. A large increase in sales is not likely in the industry so providing outstanding customer service for a high quality product is key to surviving in this industry. Lately, very important and valuable customers are receiving shipments late. This is a huge problem because these customers guarantee on time delivery to their customers. To look closer into the issue, I discussed the ordering process with the marketing and production manager. These two managers described how they forecast and it is clear there are a number of issues with each of their methods. Due to the inaccurate forecasting methods, orders are not being placed correctly which leads to tools not being available to meet the customers demand.
Analysis of the Current Forecasting Methods
The forecasting method Yankee Company utilizes is inaccurate and has numerous flaws. The production team and the marketing team are not communicating with each other and they are not utilizing the same forecasting method. The marketing manager, Ron Adams, who provides pertinent information to the production team, is not creating forecasts far into the future. Ron is only pulling forecasts one month away instead of next year, the year after and so on. Therefore the production manager, Phil Stanton is having trouble ordering the correct amount of inventory. To compensate for Ron’s poor forecasting, Phil is deflating all forecasts by 10%. Phil believes the machines cannot handle the amount Ron forecasts and the cost of holding steel is expensive. Neither of these managers are utilizing a quantitative forecasting method. In order to better manage the warehouse, a quantitative forecasting method needs to be implemented.
Seasonal Index Forecasting Method
The current forecasting method in place is not working. Therefore to effectively meet the demand, Yankee Company needs to implement the season index forecasting method. This method is best for products that experience spikes or dips in demand during specific times throughout the year. This method is calculated based on demand rather than the amount shipped. Forecasting needs to be done around demand in order for it to be accurate. After using the season index forecasting method, it is evident that this is the most accurate forecasting method. This method shows that demand is quite similar during different times of the year. Please see appendix A for the forecasting for year five based on the past four year. Therefore Yankee Company will be able to better plan the production schedule so they do not get backed up. This allows for Yankee Company to plan the production schedule to accommodate for busy times since the machines only allow so much to be processed. Yankee Company needs to look at the forecast and see when the demand is slow to make extra because they will be unable to during the busy times. Through forecasting, Yankee Company will be able to plan ahead and have better communication between the production and marketing teams. By utilizing the season index forecasting method, Yankee Company will be able to meet the demand of its customers and continue to thrive in the competitive tool industry.
Krajewski, L., Ritzman, L., & Malhotra, M. (2013). Operations management: Processes and supply chains. (10th). Upper Saddle River, NJ: Pearson Custom Publication