Case Study Chapter 14
Read the case study of Yankee Fork and Hoe Company on page 502-503. Answer TWO questions on page 502 regarding this case (at least 100 words each).
1. Comment on the forecasting system being used by Yankee. Suggest changes or improvements that you believe are justified.
Forecasting is a critical component of balancing supply in order to meet customer needs while ensuring costs are kept low. Without proper forecasting, companies can see a direct hit to their bottom line. For example, too little inventory leads to stock outs and the loss of customers whereas too much inventory leads to increased holding costs. There are several issues with the forecasting system used by Yankee Fork and Hoe Company. First, there is little/no communication between the marketing forecasts and the production forecasts. Therefore, these departments are creating their own demand forecasts. In addition, marketing meets only once a year to determine the demand for the entire year. In addition, the marketing forecast is based on shipping data and not actual demand data and this could be the reason for the shortage at the end of each year. Since shipping data is being used rather than actual demand, the shortages from one year can lead to shortages in the next year. Secondly, production decreases the marketing demand forecast by 10%, because they believe marketing has inflated the numbers. Therefore, when production is short, they do not have enough time for the forgers to catch up.
To solve these issues, marketing and production need to work together to create a forecast based on demand and not shipping information. In addition, the production department cannot decrease the new forecast. The new, more accurate demand forecast will allow the production department to create and maintain a more accurate production schedule to meet the demand and elevate product shortages.
2. Develop your own forecast for bow rakes for each month of the next year (year 5). Justify your forecast and the
1. Comment on the forecasting system being used by Yankee. Suggest changes or improvements that you believe are justified.
Forecasting is a critical component of balancing supply in order to meet customer needs while ensuring costs are kept low. Without proper forecasting, companies can see a direct hit to their bottom line. For example, too little inventory leads to stock outs and the loss of customers whereas too much inventory leads to increased holding costs. There are several issues with the forecasting system used by Yankee Fork and Hoe Company. First, there is little/no communication between the marketing forecasts and the production forecasts. Therefore, these departments are creating their own demand forecasts. In addition, marketing meets only once a year to determine the demand for the entire year. In addition, the marketing forecast is based on shipping data and not actual demand data and this could be the reason for the shortage at the end of each year. Since shipping data is being used rather than actual demand, the shortages from one year can lead to shortages in the next year. Secondly, production decreases the marketing demand forecast by 10%, because they believe marketing has inflated the numbers. Therefore, when production is short, they do not have enough time for the forgers to catch up.
To solve these issues, marketing and production need to work together to create a forecast based on demand and not shipping information. In addition, the production department cannot decrease the new forecast. The new, more accurate demand forecast will allow the production department to create and maintain a more accurate production schedule to meet the demand and elevate product shortages.
2. Develop your own forecast for bow rakes for each month of the next year (year 5). Justify your forecast and the