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Case Yankee Hoe

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Awesome case on forecasting errors
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  The Yankee Fork and Hoe Company is a leading producerof garden tools ranging from wheelbarrows, mortar pans,and hand trucks to shovels, rakes, and trowels. The toolsare sold in four different product lines ranging from thetop-of-the-line Hercules products, which are rugged toolsfor the toughest jobs, to the Garden Helper products,which are economy tools for the occasional user. The mar-ket 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 usingpower tools, such as lawn edgers, hedge trimmers, andthatchers, reducing demand for their manual counterparts.These factors compel Yankee to maintain low prices whileretaining high quality and dependable delivery.Garden tools represent a mature industry. Unless newmanual products can be developed or there is a suddenresurgence in home gardening, the prospects for largeincreases in sales are not bright. Keeping ahead of thecompetition is a constant battle. No one knows this betterthan Alan Roberts, president of Yankee.The types of tools sold today are, by and large, the sameones sold 30 years ago. The only way to generate new salesand retain old customers is to provide superior customerservice and produce a product with high customer value.This approach puts pressure on the manufacturing system,which has been having difficulties lately. Recently, Robertshas been receiving calls from long-time customers, such asSears and Tru-Value Hardware Stores, complaining aboutlate shipments. These customers advertise promotions forgarden tools and require on-time delivery.Roberts knows that losing customers like Sears and Tru-Value would be disastrous. He decides to ask consultantSharon Place to look into the matter and report to him inone week. Roberts suggests that she focus on the bow rakeas a case in point because it is a high-volume product andhas been a major source of customer complaints of late. PLANNING BOW RAKE PRODUCTION A bow rake consists of a head with 12 teeth spaced oneinch apart, a hardwood handle, a bow that attaches thehead to the handle, and a metal ferrule that reinforces thearea where the bow inserts into the handle. The bow is ametal strip that is welded to the ends of the rake head andbent in the middle to form a flat tab for insertion into thehandle. The rake is about 64 in long.Place decides to find out how Yankee plans bow rakeproduction. She goes straight to Phil Stanton, who givesthe following account:Planning is informal around here. To begin,marketing determines the forecast for bow rakesby month for the next year. Then they pass italong to me. Quite frankly, the forecasts are usu-ally inflated—must be their big egos over there.Ihave to be careful because we enter into long-term purchasing agreements for steel, and havingit just sitting around is expensive. So, I usuallyreduce the forecast by 10 percent or so. I use themodified forecast to generate a monthly final-assembly schedule, which determines what I needto have from the forging and woodworkingareas. The system works well if the forecasts aregood. But when marketing comes to me and saysthey are behind on customer orders, as they oftendo near the end of the year, it wreaks havoc withthe schedules. Forging gets hit the hardest. Forexample, the presses that stamp the rake headsfrom blanks of steel can handle only 7,000 headsper day, and the bow rolling machine can doonly 5,000 per day. Both operations are alsorequired for many other products.Because the marketing department provides crucialinformation to Stanton, Place decides to see the marketingmanager, Ron Adams. Adams explains how he arrives atthe bow rake forecasts.Things don’t change much from year to year.Sure, sometimes we put on a sales promotion of some kind, but we try to give Phil enough warningbefore the demand kicks in—usually a month orso. I meet with several managers from the varioussales regions to go over shipping data from lastyear and discuss anticipated promotions, changesin the economy, and shortages we experienced lastyear. Based on these meetings I generate a monthlyforecast for the next year. Even though we take alot of time getting the forecast, it never seems tohelp us avoid customer problems. THE PROBLEM Place ponders the comments from Stanton and Adams. Sheunderstands Stanton’s concerns about costs and keepinginventory low and Adams’s concern about having enoughrakes on hand to make timely shipments. Both are alsosomewhat concerned about capacity. Yet, she decides tocheck actual customer demand for the bow rake over the CASE YANKEE FORK AND HOE COMPANY continued   past four years (in Table C9.1) before making her finalreport to Roberts. Questions 1.Comment on the forecasting system being used byYankee. Suggest changes or improvements that youbelieve are justified.2.Develop your own forecast for bow rakes for eachmonth of the next year (year 5). Justify your forecastand the method you used. TABLEC9.1  Four-Year Demand History for the Bow Rake DEMANDMONTHYear 1Year 2Year 3Year 4 155,22039,87532,18062,377257,35064,12838,60066,501315,44547,65325,02031,404427,77643,05051,30036,504521,40839,35931,79016,888617,11810,31732,10018,909718,02845,19459,83235,500819,88346,53030,74051,250915,79622,10547,80034,4431053,66541,35073,89068,0881183,26946,02460,20268,1751272,99141,85655,20061,100 Note  : The demand figures shown in the table are the number of unitspromised for delivery each month. Actual delivery quantities differed becauseof capacity or shortages of materials. continued 

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Jul 23, 2017
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