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Suncrest is challenged with meeting its customer demand of new seed-corn in the

upcoming growing season. Over the past decade of business, Suncrest has become accustomed
to using the same forecast models causing over production, due to seed variety increasing and
the weather providing optimal harvests. Due to their lack of forecast accuracy caused by this
over production, their holding costs and inventory have outpaced their sales and literally grown
out of control. Variation in seed-corn shapes (whether they are flat or round) has added a degree
of uncertainty. In order to account for this uncertainty, Suncrest has typically over produced due
to the fluctuation in shape. This over production wasnt always perfect, as customer service
levels did lag as stock outs due to the lack of customer flexibility from one seed to another. The
challenge to minimize total production costs when determining how much of the Guacho variety
of seed needs to be planted is what Suncrest is facing.
From the data provided, it is easy to determine that typically Suncrests demand signal is
poor. Their actual customer demand is always behind forecasted demand. Their customer
service levels are always at risk, as are their inventory costs. On average, their forecast error is
22.3%. When looking at how their yield of the harvest ends up, it is a much tighter range on
harvested bags vs actual demand. In general, the more acreage they plant, the more seed-corn
they harvest, which is a linear relationship.
The new hybrid seeds demand was the main subject of the production meeting. The
Gaucho seed has a forecasted demand of 48,010 bags, with a potential yield of 41 bags per acre.
Varying forecasts and reasons to support each forecast were discussed and reviewed. Some
believed that weather would impact yield, and leaned to a lower forecast because of current on
hand inventory. Others stressed customer service levels and stock out preventions, and leaned
towards a higher forecast.
Simulating demands of 48,010 bags, 45,897 bags, and 43,785 bags, and using acreage
levels ranging from 1,000 to 1,450, the below table of KPIs was created.

Table 1: Simulation Results

Demand of 48010 Demand of 45897 Demand of 43785


Simulation # of acre Profit SD Service Simulation # of acre Profit SD Service Simulation # of acre Profit SD Service
1 1000 $6,428,382 $572,766 0.43 1 1000 $6,207,108 $438,195 0.58 1 1000 $5,923,853 $311,944 0.71
2 1050 $6,476,152 $467,406 0.57 2 1050 $6,197,017 $339,976 0.70 2 1050 $5,867,561 $240,814 0.80
3 1100 $6,469,937 $367,834 0.69 3 1100 $6,145,654 $264,450 0.79 3 1100 $5,781,236 $205,349 0.87
4 1150 $6,423,273 $288,575 0.77 4 1150 $6,064,266 $221,831 0.86 4 1150 $5,673,783 $202,671 0.92
5 1200 $6,346,613 $239,586 0.84 5 1200 $5,961,263 $212,287 0.91 5 1200 $5,551,754 $217,271 0.96
6 1250 $6,247,966 $223,229 0.90 6 1250 $5,843,010 $223,588 0.95 6 1250 $5,420,138 $235,475 0.98
7 1300 $6,133,426 $230,345 0.93 7 1300 $5,714,223 $241,501 0.97 7 1300 $5,282,607 $250,961 0.99
8 1350 $6,007,663 $247,372 0.96 8 1350 $5,578,700 $258,418 0.99 8 1350 $5,141,970 $262,749 1.00
9 1400 $5,874,336 $265,288 0.98 9 1400 $5,439,161 $271,726 1.00 9 1400 $5,000,253 $272,563 1.00
10 1450 $5,736,226 $280,267 0.99 10 1450 $5,297,829 $282,298 1.00 10 1450 $4,858,502 $282,297 1.00
Table 2: Simulation Financial Summary
Forecast
Demand
43,785 45,897 48,010
48,010 $781,625 $390,905 $0
Actual

45,897 $390,720 $0 $48,599


43,785 $0 $48,576 $97,175

1. Red figures are lost revenues


2. Orange figures are inventory holding costs

Result and Conclusion

Reviewing the above tables Suncrest should use the marketing forecast and plan for 48010 bags
and at 41 bags per acre, harvest 1350 acres. This would minimize holding/production costs, and
ensure a service level of 96% to their customers. This represents the least risky scenario, as all
others based on the underlying data, would come at a more significant risk than carrying the
extra inventory.