Yankee Fork and Hoe Company The Yankee Fork and Hoe Company is a leading produce
ID: 343958 • Letter: Y
Question
Yankee Fork and Hoe Company The Yankee Fork and Hoe Company is a leading producer of garden tools ranging from wheelbarrows, mortar pans, and hand trucks to shovels, rakes, and trowels. The tools are sold in four different product lines ranging from the top-of-the-line Hercules products, which are rugged tools for the toughest jobs, to the Garden Helper products, which are economy tools for the occasional user. The market for garden tools is extremely competitive because of the simple design of the products and the large number of competing producers. In addition, more people are using power tools, such as lawn edgers, hedge trimmers, and thatchers, reducing demand for their manual counterparts. These factors compel Yankee to maintain low prices while retaining high quality and dependable delivery. Garden tools represent a mature industry. Unless new manual products can be developed or a sudden resurgence occurs in home gardening, the prospects for large increases in sales are not bright. Keeping ahead of the competition is a constant battle. No one knows this better than Alan Roberts, president of Yankee. The types of tools sold today are, by and large, the same ones sold 30 years ago. The only way to generate new sales and retain old customers is to provide superior customer service and produce a product with high customer value. This approach puts pressure on the manufacturing system, which has been having difficulties lately. Recently, Roberts has been receiving calls from long-time customers, such as Sears and True Value Hardware Stores, complaining about late shipments. These customers advertise promotions for garden tools and require on-time delivery. Roberts knows that losing customers like Sears and True Value would be disastrous. He decides to ask consultant Sharon Place to look into the matter and report to him in one week. Roberts suggests that she focus on the bow rake as a case in point because it is a high-volume product and has been a major source of customer complaints of late. Planning Bow Rake Production A bow rake consists of a head with 12 teeth spaced 1 inch apart, a hardwood handle, a bow that attaches the head to the handle, and a metal ferrule that reinforces the area where the bow inserts into the handle. The bow is a metal strip that is welded to the ends of the rake head and bent in the middle to form a flat tab for insertion into the handle. The rake is about 64 inches long. Place decides to find out how Yankee plans bow rake production. She goes straight to Phil Stanton, who gives the following account: “Planning is informal around here. To begin, marketing determines the forecast for bow rakes by month for the next year. Then they pass it along to me. Quite frankly, the forecasts are usually inflated—must be their big egos over there. I have to be careful because we enter into long-term purchasing agreements for steel, and having it just sitting around is expensive. So I usually reduce 2/2 the forecast by 10 percent or so. I use the modified forecast to generate a monthly final-assembly schedule, which determines what I need to have from the forging and wood working areas. The system works well if the forecasts are good. But when marketing comes to me and says they are behind on customer orders, as they often do near the end of the year, it wreaks havoc with the schedules. Forging gets hit the hardest. For example, the presses that stamp the rake heads from blanks of steel can handle only 7,000 heads per day, and the bow rolling machine can do only 5,000 per day. Both operations are also required for many other products.” Because the marketing department provides crucial information to Stanton, Place decides to see the marketing manager, Ron Adams. Adams explains how he arrives at the bow rake forecasts: “Things do not change much from year to year. Sure, sometimes we put on a sales promotion of some kind, but we try to give Phil enough warning before the demand kicks in—usually a month or so. I meet with several managers from the various sales regions to go over shipping data from last year and discuss anticipated promotions, changes in the economy, and shortages we experienced last year. Based on these meetings, I generate a monthly forecast for the next year. Even though we take a lot of time getting the forecast, it never seems to help us avoid customer problems.” The Problem Place ponders the comments from Stanton and Adams. She understands Stanton’s concerns about costs and keeping inventory low and Adams’s concern about having enough rakes on hand to make timely shipments. Both are also somewhat concerned about capacity. Yet she decides to check actual customer demand for the bow rake over the past 4 years (in Table below) before making her final report to Roberts. Questions (1) Comment on the forecasting system being used by Yankee. Suggest changes or improvements that you believe are justified. (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
Develop your own forecast for bow rakes for each month of the next year (year 5). Justify your forecast and the method you used.
Explanation / Answer
Comment on the forecasting system being used by Yankee. Suggest changes or improvements that you believe are justified.
The forecasting system mentioned in the question, we find the following existing conditions of Yankee Fork and Hoe Company 1.Marketing managers meet up only once a year near the end of the year, and then forecast for next year.
2. Instead of actual demand, they use shipment data to predict.
3. When the data are sent to production apartment, the manager reduce the forecast by 10percent.
Based on the conditions mentioned above, we put forward corresponding improvements for each weaknesses:
1. Instead of qualitative analysis only, add quantitative methods. The company forecast for next year only by managers’ meeting which does not include any mathematical technique. The results of the prediction only based the managers’ experience which is not steady and convincing. Suggestions:
Using quantitative methods, such as Seasonal Pattern, Simple Moving Averages, Linear Regression, etc.
2. Instead of shipment data, use actual costumers demand. The managers from the various sales regions simply get the shipment data of last year and forecast for next year. The meetings focus on changes in the economy, shortcomings experienced last year which waste much time but finally does not work very well. Suggestions: Focus on the actual costumers demand to forecast for next year which is also better to schedule the production line correctly. Use more than one year’s data to do the job which increases the validity of predictions. Learn about the trend of demand changes each month and use graphs to show the results strengthen the communication between production and marketing departments. Neither production apartment nor marking apartment has systematic forecast methods, and also they both have no confidence in the other apartment. Based on low-cost principle, production apartment reduce the prediction by 10% which decrease the cost of forging and wood working areas. Suggestions: The Company should set up a system that enhances the communications between two apartments. The meetings should be at least once a month and managers present both past shortages and future expected demands which is called “adjusted forecast”. In addition, strengthen inventory management to void unproductive production
There are several weaknesses of current forecasting system:
1)Using only Qualitative analysis
Forecasting figures are based on the meetings with managers
No mathematical technique is involved
Benefits: quick forecast & advantage of experience of each manager
Demerits: forecast tends to be over inflated
Suggestion:
Implementation of quantitative method like seasonality technique with linear trend equation
2)Using actual shipment figure, instead of actual demand figures
Marketing forecast is based on actual shipment data
Trying to adjust for shortages in actual shipment data by anticipated promotions and environmental and economical changes.
Suggestion:
Focus on past demand to project future demand
Forecasting based on actual demand will help production department to schedule the production line more effectively.
Provide a clearer picture to project realistic volume
Create more sales and revenue for the company when anticipating the upward trend of demand.
Prevent losses when anticipated downward trend in the market.
3.Lack of communication between Production and Marketing departmentBoth do not have accurate forecasting system and have different perception for the same.
Production department think that marketing department over in flats forecast.
Marketing generate unfaithful forecasts by adjusting past shipment and not predicting future 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 there is the price to pay for the company
Develop your own forecast for bow rakes for each month of the next year (year 5). Justify your forecast and the method you used.
1. Naïve method
Naïve forecasts are the most cost-effective and efficient objective forecasting model, and provide a benchmark against which more sophisticated models can be compared. For stable time series data, this approach says that the forecast for any period equals the previous period's actual value
2.
Moving average method
Moving average techniques forecast demand by calculating an average of actual demands from a specified number of prior periods. Each new forecast drops the demand in the oldest period and replaces it with the demand in the most recent period; thus, the data in the calculation "moves" over time
3.
Weighted moving average method
When using a moving average method described before, each of the observations used to compute the forecasted value is weighted equally. In certain cases, it might be beneficial to put more weight on the observations that are closer to the time period being forecast. When this is done, this is known as a weighted moving average technique. The weights in a weighted MA must sum to 1-4
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