Introduction

The Yankee Fork and Hoe company case has some weaknesses in their
forecasting system. The forecasting system needs adjustment, where improvements are
needed will be discussed.
Method of Calculating Data
Ron Adams, the marketing manager gets his data by meeting with various other
managers. They then go over the data from the previous year. He does not explain a
mathematical technique used in his forecast; no calculations were actually made.
Instead of using actual figures he based the results off an estimate; therefore, using the
qualitative method.
Using this approach forecasts are quick and Adam can gain experience from the
other managers. There are disadvantages to this approach as group think can cause
the forecast to be inflated. According to Phil Stanton, the production manager, when
inflation occurs they reduce the forecast by 10 percent.
Instead of using the qualitative method, some quantitative should be used in the
forecasts. Collecting this data is successful when the current production demand is
available as well as historical data. The demand within the last four years has a
seasonal pattern with not much change each year. The seasonal approach can be used
with a linear trend equation to calculate future demand for the fifth year. This can
provide accuracy in their forecast with there being change in demand each month.

Figures for Shipment and Demand

The marketing department used the actual shipment for the forecasting
technique instead of the demand. This approach is an attempt to adjust for the
shortages in shipment data as they meet with other sales regions and review
promotions and other environment changes that may have causes the shortages that
occurred the year before. Even though they may find the flaws it only records past
experiences rather than what is predicted in future demand.
The records of past experiences should be implemented to predict and project
what demand will be in the future. With a forecast that is based on demand, the
production department will be more effective with their schedules and production.
Having accurate calculations for demand will provide a clear understanding of the
situation at hand. At this point having attained accurate data the marketing department
can focus on realistic quantities and allow more sales and revenue to go through the
company. This can also help when losses are anticipated in the changing market.
Communication Between Departments
According to the case, the market for garden tools is competitive. Therefore,
cooperation is essential between the production and marketing department. Their aim is
for low-cost production and on-time delivery as well as using the forecast tool to
accomplish their objectives. Currently the departments dont have an accurate
forecasting system as it is based off of qualitative techniques. In order to achieve their
objectives for low-cost production it is important to have a long-term purchasing
agreement to keep prices low for raw materials. If products are not purchased the cost

will change for production and for raw material. Even with anticipated demand there are
still problems with preparation time.
The issue with preparation time can be repaired for Yankee Fork and Hoe by
improving communication between the production department and marketing. Currently
the forecast preparation includes sales and the marketing department. In order to gain
relevant information, it is important to include the production department in the meetings
to share raw material and production schedules. They would also contribute what
should be done to improve when demand is anticipated. Additionally, these meetings
should take place each month in order to create a monthly forecast instead of
conducting a yearly forecast as it is not enough to predict demand. This way they can
avoid unexpected changes in the economy and adjust on the monthly anticipated
demand.
Low Productivity
The problem with delayed deliver was not because of the optimistic monthly
forecast but by the low productivity in the production department. The final-assembly
heavily relied on the adjusted forecast where they were not able to serve customer
orders efficiently. The capacity of production had no issue as they were producing 7,000
to 5,000 units per day compared to the sales record for the last 4 years with 83,269
units. The inventory management was a failure which causes production to produce
slowly.
Options to implement to prevent customer order delays should begin with,
tracking and gathering real demands where the top customers are influencing the

company sales. This way the stock can be set to serve each customer as these
customers often create and excess demand. Negotiations to revise the order of raw
material and their suppliers should be done. There are methods such as the annual
committed volume method that could solve the demand fluctuation. Finding those
prospect suppliers can also eliminate supplier risk.
Develop a forecasting system that you think might correctly represent the
forecasting data for the next five years.
State the method and rationale used in the forecast made.
After implementing and improving the problems with the old forecasting method,
such as communication between Marketing and Production, it is time to start a
quantitative analysis for reliability. Using the demand for the past four years we will
determine if there is any pattern. Using Bow Rakes demand in Table 1(Also on Excel
Sheet) there is a linear trend. The demand for each year has a seasonal pattern show in
Figure 1 & 2 (Also on Excel Sheet).
Demand
Year 1
Year 2

Month

Year 3

55220

39875

32180

57350

64128

38600

15445

47653

25020

27776

43050

51300

21408

39359

31790

Year to Year Growth

Year 4
Year 2
Year 3
Year 4
27.79
19.30
62377
%
%
94%
11.82
39.81
66501
%
%
72%
208.53
47.50
31404
%
%
26%
54.99
19.16
36504
%
%
-29%
83.85
19.23
16888
%
%
-47%

17118

10317

32100

18909

18028

45194

59832

35500

19883

46530

30740

51250

15796

22105

47800

34443

10

53665

41350

73890

11

83269

46024

60202

12

72991

41856

55200

457949
38162.4
1

487441
40620.0
8
29492.0
0

Total
Averag
e
Growth

68088
68175

61100
55113
538654
9
44887.8 45928.
3
25
51213.0 12485.
0
00
Table 1

39.73
%
150.69
%
134.02
%
39.94
%
22.95
%
44.73
%
42.66
%

211.14
%
32.39
%
33.94
%
116.24
%

-41%
-41%
67%
-28%

78.69
%

-8%

30.81
%

13%

31.88
%

11%

42.17
%

30.05
%

7.42%

6.05%

9.51%

2.27%

Annual demand
50000
45000
38162.42
40000
35000
30000
Annual demand (units) 25000
20000
15000
10000
5000
01
1

40620.08

44887.83

45928.25

2
2

Year

Figure 1

Demand Year 1-4

Year 1

Year 2

90000
80000
70000
60000
50000
Demand (Units) 40000
30000
20000
10000
0

Year 3

Year 4

10 11 12

Month

Figure 2

Using the linear regression formlula we can find the forecast for the volume in year 5.

Equation: Ft = a + bt
Where Ft stands for demand volume of year t
t stands for the number of year
a stands for the value of Ft at t = 0
b stands for slope of the line
In order to find a and b we need to use other formulas.
b = n(t * Ft) - t * Ft / nt2 (t)2
a = Ft - bt / n

t2

Year t
1
2
3
4

10
100

Demand
(Ft)
t * Ft
1
457949 457949
4
487441 974882
161596
9
538654
2
220455
16
551139
6
525334
30
2035183
9

Table 2
The calculations on the Excel sheet give us a and b.
a= 33,078
b= 426,100

The calculated amount for the annual demand for year 5 is 591,491 after using the
linear regression formula.
With the calculation for the annual demand in year 5 we can now determine the
allocated volume in a monthly chart using seasons to calculate. After discovering the
monthly demand is season we can create a formula with a seasonal index and find the
monthly forecast for year 5.

Deman
d

Average

Average

55220

39875

32180

62377

47413

Monthly
[All
Demands/
48]
42399.64
583

57350

64128

38600

66501

56644.75

42399

15445

47653

25020

31404

29880.5

42399

27776

43050

51300

36504

39657.5

42399

21408

39359

31790

16888

27361.25

42399

17118

10317

32100

18909

19611

42399

7
8
9
10
11
12

18028
19883
15796
53665
83269
72991

45194
46530
22105
41350
46024
41856

59832
30740
47800
73890
60202
55200

35500
51250
34443
68088
68175
61100

39638.5
37100.75
30036
59248.25
64417.5
57786.75

42399
42399
42399
42399
42399
42399

Mont
h

Year 1

Year 2

Year 3

Year 4

Year 1-4
[(F1+F2+F3+
F4)/4]

Table 3

Seasonal
Year 5
Index
[Average
Year 14/Average
Monthly]
1.11824047
3
1.33599259
4
0.70474539
5
0.93534045
6

Year 5
Forecast
[F5/12xSeas
onal Index]
55,119.14
65,852.36
34,737.58
46,103.83

0.64532772 31,808.82
0.46253449
4 22,798.77
0.93489233
2 46,081.74
0.875038326
43,131.48
0.708412934
34,918.35
1.397397344
68,879.05
1.519316493
74,888.57
1.362927192
67,179.99
Total
591499.67

In conclusion, this type of calculation gives us a demand for every month of the
year based on previous calculations. When the data is collected using the quantitative
method it is important to gather the team and discuss between both the production and
management department in order to implement the suggestions that were discussed
earlier.