The only way for Franklin Fan to generate new sales and retain old customers is to provide superior customer service 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 consultant Sharon Place 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 high-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 should also improve product availability. A window fan’s main components consist of molded fan blades (5 per fan), a molded motor housing (1 per fan), an electric motor (1 per fan), and various hardware items. Place decides to find out how Franklin Fan 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 forecast 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 careful 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 forecast by 10% or so. We then use the modified forecast to generate a monthly final-assembly schedule which determines what materials we need from suppliers and what 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 example, 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.

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, from the table below, before making her final report to Block and Spriggs.

Demand
Month	2011	2012	2013	2014
1	61,294	44,261	35,720	69,238
2	63,659	71,182	42,846	73,816
3	17,144	52,895	27,772	34,858
4	30,831	47,786	56,943	40,519
5	23,763	43,688	35,287	18,746
6	19,001	11,452	35,631	20,989
7	20,011	50,165	66,414	39,405
8	22,070	51,648	34,121	56,888
9	17,534	24,537	53,058	38,232
10	59,568	45,899	82,018	75,578
11	92,429	51,087	66,824	75,674
12	81,020	46,460	61,272	67,821

QUESTIONs:

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 forecast and the method you used.