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CASE 1

Yankee Fork and Hoe


Company

CASE FACT

Yankee Fork and Hoe Company is a leading producer of


garden tools.
Long time customers are experiencing frequent late
shipments because of manufacturing issues which cannot
fulfil customer demand.
Phil Stanton, is in charge of inventory and is concerned
about high costs and keeping the inventory low.

Ron Adams, the marketing manager, is concerned about


having enough rakes on hand for timely shipments.
They both have bias views on how the forecasts should

The Problem


Phil
Stant
on
Ron
Adam
s

CAPACITY & INVENTORY

QUESTIONS 1
1. Comment on the forecasting
system being used in Yankee.
Suggest changes orimprovements
that you believe are justified.

1.Using only Qualitative


analysis

Suggestion:

Implementation of quantitative
method like seasonality
Forecasting figures are
technique with linear trend
based on the meetings with
equation

managers

No mathematical technique
is involved
Benefits: quick forecast &
advantage of experience of
each manager

1.Using actual shipment


figure, instead of actual
demand figures

Suggestion:

Focus on past demand to project


future demand

Forecasting based on actual demand


Marketing forecast is
will help production department to
based on actual shipment schedule the production line more
effectively.
data

Trying to adjust for


shortages in actual
shipment data by
anticipated promotions

Provide a more clear picture to


project realistic volume

Suggestion:
1.Lack of communication between Production and
Marketing should develop a forecasting
Marketing department
system that reflect both past shortages
and future expected demands.

Both do not have accurate forecasting system


and have different perception for the same. Meeting between the two should
Production department think that marketing conduct at the end of each month
Both departments should adjust the
department overinflates forecast.

anticipated demand monthly to avoid

Marketing generate unfaithful forecasts by


unexpected changes in the economy and
adjusting past shipment and not predicting future
shortage of the raw material.
demands.
To maintain low-cost production, the long-term
purchasing agreement is needed in order to keep
the price low for the raw material from
suppliers, but having it just thereis the price to

1.Marketing division may not be optimistic

Delay delivery problem was caused due to low


productivity of production department.

Current production is not sufficient to serve customer


needs as it is based on adjusted forecast.

Production capacity seemed not to be a problem as rake


head & bow could be produced 7,000 & 5,000 units per
day respectively, compared to the highest sales record in
the last 4 years (month 11 year 1) at 83,269 units.

Inappropriate inventory management was the major cause


of unproductive production.

QUESTIONS 2
2. Develop your own forecast for
bow rakes for each month of the
next year (year 5).Justify your
forecast and the method you used.

FORECASTING
APPROACH
Qualitative Methods

Judgmental - Executive Opinions

- Sale force opinions


- Consumer survey
- Delphi method

Quantitative Methods

Time series - Naive approach

Technique for Averaging


average

Weighted moving average

Exponential smooting

Technique for trend


trend equation

Exponential smooting with trend adjustment

- Moving
-

Linear
-

90000

67500

45000

22500

Month

Four-Year Demand History for the Bow


Rake

Y1

Y2

Y3

Y4

JAN 55,220

39,875

32,180

62,377

FEB 57,350

64,128

38,600

66,501

MAR 15,445

47,653

25,020

31,404

APR 27,776

43,050

51,300

36,504

MAY 21,408

39,359

31,790

16,888

JUN 17,118

10,317

32,100

18,909

700000

560000

420000
Value Title
280000

140000

0
Y1

Y2

Y3

Y4

( Linear Pattern)
Linear Trend 5

TECHNIQUE FOR TREND


TREND
EQUATION
t Month
t
y Demand
2

- LINEAR
ty

62,377

62,377

66,501

266,004

31,404

282,636

16

36,504

584,064

25

16,888

422,200

36

18,909

680,724

49

35,500

1,739,500

64

51,250

3,280,000

81

34,443

2,789,883

10

100

68,088

6,808,800

11

121

68,175

8,249,175

SEASONAL
VARIATION

90000

67500

1
2
3
4

45000

22500

0
1

10

11

12

SEASONAL INDEX

DEMAND

Mon
th

Y1

Y2

Y3

Y4

Avara
Year
Avera ge Seas
5
ge 1- Mont onal Forca
4
hly Index st

55,22 39,87 32,18 62,37 47,41 42,40 1.118 55,11


JAN
0
5
0
7
3
0
23
9
57,35 64,12 38,60 66,50 56,64 42,40 1.335 65,85
FEB 0
8
0
1
5
0
96
1
MA 15,44 47,65 25,02 31,40 29,88 42,40 0.704 34,73
R
5
3
0
4
1
0
73
7
27,77 43,05 51,30 36,50 39,65 42,40 0.935 46,10
APR 6
0
0
4
8
0
32
3