Case: Wilkins, A Zurn Company: Demand Forecasting

Q. As Bernie Barge, what would you recommend to management and why? How should Barge
convince management to follow his recommendations? Develop an action plan.
I believe the current method of forecasting needs to be changed because of the below reasons –
1. The forecasting master works fine at the aggregate level, but it is quite inaccurate at the
individual level.
2. Forecasting for a new product (fixed setting valves) with nonexistent historical data will
yield inaccurate results. As per Exhibit 2, the Q1 2004 total sales of fire valve was 285
but after the introduction of new product the sales jumped to 580 in Q1 2005.
3. As per Exhibit 3, the percentage increase in production has led to a similar percentage
increase in forecasted demand. Factors considered were limited to supply of goods and
weather only. Factors like occasional promotions, used to sell of excessive finished goods

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should also be considered.

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I would recommend to the management that due to the above problems it won’t be feasible to

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go ahead with the forecast master and the method used to forecast new product sales with
historical data. Also, change the statistical forecasting method to include the effect of

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unemployment rate, bank loan rates and new housing since it indirectly affects our sales. As
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per Exhibit 5,6 and 7, as unemployment rate increases, the bank loan rate falls. This in turn
increases the number of houses being built and it impacts our sales positively. The below
table summarizes it.
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Interval Unemployment rate Bank Loan Rate New

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Housing
Oct-Dec 3.90% 9.50% 357000
2000
Oct-Dec 5.53% 5.16% 366000
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2001
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Oct-Dec 5.87% 4.45% 403000

2002
Oct-Dec 5.87% 4.00% 472000
2003
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Oct-Dec 5.43% 4.94% 460000

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2004

I would suggest to include the above points and frame a new forecasting model for our sales.
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Down the line once we get the historical data we could utilize it in our new model.

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