Comment on the forecasting system being used by Yankee. Suggest changes or improvements that you believe are justified.
Expert Answer
Forecasting system used by Yankee had a lot of weaknesses, which include:
- They used only qualitative analysis, which resulted in quick but inflated forecasted figures.
Suggestion: Implementation of quantitative method like seasonality technique with linear trend equation
- They used actual shipment figure, instead of actual demand figures, which missed out the information of the unmet demand. They were trying to adjust shortages in actual shipment data by anticipating figures due to promotions, environmental and economic changes.
Suggestion: Forecasting based on actual demand will help production department to schedule the production line more effectively. Plan using actual demand figures instead of shipment to meet the customer demand on time and keep a track of the effective demand.
- Marketing team used to generate forecasts by adjusting past shipment and not predicting future demands.
Suggestion: Marketing should develop forecast based on both past shortages and expected demands. All departments should adjust the anticipated demand monthly to avoid unexpected changes in the economy and shortage of the raw material.
- Marketing was of the opinion that delay delivery problem was caused due to low productivity of production department.
Suggestion: Production capacity didn’t seem 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. Major reason for low productivity was Inappropriate inventory management.