Franklin Fan Company

 

 

Forecasting

The only way for Franklin Fan to generate new sales and retain old customers is to provi de
superior customer ser’si ce and produce a product with high customer value. This approach puts
pressure on the manufacturing system, which has been having difficulties lately. Recently, Dan
Block has been receiving calls from long-time customers, such as Sears and Home Depot,
complaining about late shipments. These customers advertise promotions for fans and require
on-time delivery. Block knows that losing customers like Sears and Home Depot would be
disastrous. He decides to ask consul tant Sharon Pl ace to look into the matter and report to him
and Ed Spriggs in one week. Block suggests that she focus on the window fan as a case-in-point
because it is a hi gh-volume product and has been a major source of customer complaints. In the
mean-time, Sue McCaskey is working on modifications to the inventory management system
that shoul d also improve product availability.
A window fan’ s main components consist of mol ded fan blades (5 per fan), a molded motor
housing (1 per fan), an electric motor ( l per fan), and various hardware items. Place decides to
find out howPranklin Pan plans window fan production She goes straight to Phil Stanton, the
Production Manager, and Joe Donnell, the Purchasing Manager, who give the following account:

Planning is informal around here. To begin, marketing determines the fore cast for

window fans by month for the next year. They then pass it along to us. Quite

frankly, the forecasts are usually inflated – must be their big egos over there. Joe

Donnell mentions that he has to be carefirl because Franklin Fan enters into long-

term purchasing agreements for plastic resins, and having it just sitting around is

expensive. So Phil and I usually reduce the fore cast by 109-6 or so. We then use

the modified fore cast to generate a monthly final-assembly schedule which

 

 

determines what materials we need from suppliers and “hat products we need
from the molding and assembly areas. The system works well if the forecasts are
good. But when marketing comes to us and says they are behind on customer
orders, as they often do near the end of the year, it wreaks havoc for the
schedules. Molding gets hits the hardest For exampl e, the molding machines that
mold the fan blades and motor housings from the plastic resin can only produce
about 7,000 housings and 30,000 blades per day, and the assembly department
can do only 5,000 fans per day. Both operations are also required for many other
products.

 

 

 

Because the marketing department provides crucial information to Stanton and Donnell, Place
decides to see the marketing manager, Ron Adams. Adams explains how he arrives at the
window fan forecast-
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 and Joe enough warning before demand
kicks in – usually a month or so. I meet with several managers from the various 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, Donnell, and Adams. She understands Stanton’s and
Donnell ’ s concerns about costs and keeping inventory low. She also understands Adams’
concern about having enough window fans on hand to make timely shipments. All are somewhat
concerned about capacity. She decides to check actual customer demand for the window fan over
the past four years, firom the table below, be fore making her final report to Block and Spriggs.
Demand
Month 2011 2014
1 61.294 69,238
3 63-659 73.816
3 17,144 52,895 27,772 34,858
5 23,763 43,688 35,287 18,746

 

5 23,763 43,688 35,287 18,746
7 20,011 50,165 66,414 39,405
8 22,070 51,648 34,121 56,888
10 59.568 75.578
11 92,429 51,087 66,824 75,674
7.6, ..5- 13. figures £01911 if. 315 tie 315 3152111! . amnsprmxse. ICE-45 ‘-§!’}’i§£3’.2£mfii . ‘tua we ‘-§f}’-:._IL§1‘111225 -.:nars-.
beams of capacity at £3 rages of material
QUE STIONS
1. Comment on the forecasting system being used by Franklin Fan. Suggest changes or
improvements that you believe justified
2. Develop your own forecast for window fans for each month of the next year 2015. Justify
your fore cast and the method you used.