Yankee Fork and Hoe

Yankee Fork and Hoe
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 by keeping
too much inventory resulting in capacity issues, as well as by losing
customers due to not having enough inventory. In the case of Yankee Fork
and Hoe Company there are several issues with the forecasting system used
in each department and these issues need to be rectified in order to improve
cross-functionality and customer service for the company.
The Marketing Department
When Sharon Place is tasked with figuring out the issues in forecasting within
the company, one of the people she sees is Ron Adams, the marketing
manager. Adams explains that he meets with several managers from each
sales region and goes over the shipping data from the prior year as well as
upcoming promotions, economic conditions, and shortages from the prior
year. He then creates a monthly forecast for the following year. This process
is clearly not working, and since the production department relies heavily on
the forecasting from marketing, adjustments must be made.
Recommendation:
Adams needs to find a quantitative method to create a forecast as opposed
to the qualitative one he is currently using. He is also using the shipping data
to make his suggestions as opposed the actual demand data. This is a
problem since the company has had issues meeting the demand, therefore
relying on the shipping data will not be helpful. Future demand is what should
be of concern to the marketing department, and by viewing past shipping
records Adams is only getting data on past problems with on time delivery.
When deciding which quantitative method to use, Sharon Place needs to
look at what type of data she has regarding the bow rake. When examining
the demand for each month, it appears to fluctuate heavily. In some months,
the demand can equal that of the prior three months and this seems to be a
pattern throughout each of the 4 years that Place has data for. This indicates
that the multiplicative seasonal method could be used to create the best
forecast. It also appears that over the years, demand has increased as a
whole so this needs to also be accounted for. It is recommended that the
company use a combination forecast of multiplicative season method as well
as nave forecast.
Marketing also needs to communicate more effectively with the production
department. A meeting should take place between these departments in
order to effectively communicate how the forecasts are being calculated.
This will prevent the production department from taking liberties in adjusting
the forecast based on opinion.
The Production Department:
The production department manager Phil Stanton seems to have his own
opinions about the forecast. When he gets the annual forecast reports, he
feels that the marketing department is over-estimating the amount of
products that are needed. This is bad for his department because he has
long term purchasing agreements for steel and it can get expensive if it sits
around for too long. He seems to choose an arbitrary number of 10% and
decides to shave that off the top of the forecast for each month. He then
generates an assembly schedule based on that number which is extremely
troublesome. He indicates that his system works well as long as the forecasts
are accurate, but when they are not the department falls behind.
Recommendation:
With better forecasting from the marketing department, it will make the
production schedule more manageable for Stanton as long as he does not
take any liberties with it. The marketing department must make sure that it is
getting the forecasting reports to Stanton in a timelier manner so that
adjustments can be made to the productions schedule when necessary.
Since he indicated that as long as he has an accurate forecast then he does
not have any issues, getting this from marketing should solve the majority of
productions problems and on time delivery.
Since low cost is a goal of the production department in order to remain a
player in a majorly competitive market, it is crucial that the company can
continue to get discounts from suppliers for larger orders. However, this
savings must be weighed against the cost of holding inventory so Stanton
will need to calculate this. He may also see that discounts for seasonal
orders that are even larger than what he is currently saving on a monthly
basis.
The Forecast: Multiplicative Season Method and Nave Forecast:
First, we must calculate the seasonal factor for each quarter. Quarters were
chosen since it seems that in quarter 1 and quarter 4 demand is typically
highest, and in quarter 2 and 3 demand drops. First, the average units per
quarter were calculated, and the demand for that quarter is divided by the
average. The table below shows the seasonal factor calculated for each year
of production.
Year 1 Year 2 Year 3 Year 4
Q Demand Seasonal Factor Q Demand Seasonal Factor Q Demand
Seasonal Factor Q Demand Seasonal Factor AVG
1 128,015 1.12 1 151656 1.24 1 95800 0.71 1 160282 1.16 1.06
2 66,302 0.58 2 92726 0.76 2 115190 0.86 2 72301 0.52 0.68
3 53,707 0.47 3 113829 1.07 3 138372 1.03 3 121193 0.88 0.86
4 209,925 1.83 4 129230 1.06 4 189292 1.41 4 197363 1.43 1.43
Total 457,949 487,441 538,654 551,139
Average 114487 121860 134664 137785
Once the average seasonal index is calculated, we must find the forecast for
year 5 by first using the nave forecast.to account for the increase in demand
each year.
year 2 29492
year 3 51213
year 4 12485
Average 31063
Now we can add these averages to the demand from the prior year, and then
multiply by the seasonal index to get an accurate forecast.
Average with demand increase Seasonal Factor Year 5 Forecast
Q1 145551 1.06 154284
Q2 145551 0.68 98975
Q3 145551 0.86 125174
Q4 145551 1.43 208138
It is evident that it can be very difficult to determine the right course of action
in determining forecast. However, both departments should both be in
communication and aware that these forecasts should always be quantitative
and should never be adjusted without communication and understanding as
to why. If the Yankee Fork and Hoe Company can make these adjustments
to its forecasting process for all products, the company will be able to retain
good customer service and on time delivery, as well as keep costs low by
eliminating inventory costs.

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What issues are there with the current forecasting system used by each department at Yankee Fork and Hoe Company?

What recommendations are made to improve forecasting in the marketing department?

Yankee Fork and Hoe

Forecasting is a critical component of balancing supply in order to meet

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