Specialty Packaging Corporation, Part A

Julie Williams had a lot on her mind when she left

the conference room at Specialty Packaging Cor$-$

poration $($SPC$).$ Her divisional manager had in$-$

formed her that she would be assigned to a team

consisting of SPC$\text{'}$s marketing vice president and

several staff members from their key customers. The

goal of this team was to improve supply chain per$-$

formance, as SPC had been unable to meet all the

demand of their customers over the past several

years. This often left SPC$\text{'}$s customers scrambling to

meet new client demands. Julie had little contact

with SPC$\text{'}$s customers and wondered how she would

add value to this process. She was told by her divi$-$

sion manager that the team's first task was to estab$-$

lish a collaborative forecast using data from both

SPC and their customers. This forecast would serve

as the basis for improving their performance as they

could use this more accurate forecast for their pro$-$

duction planning. With this in place, SPC would have

a key tool to improve delivery performance.

SPC

SPC turns polystyrene resin into recyclable$/$dispos$-$

able containers for the food industry. Polystyrene is

purchased as a commodity in the form of resin pel$-$

lets. The resin is unloaded from bulk rail containers

or overland trailers into storage silos. Making the

food containers is a two$-$step process. First, resin is

conveyed to an extruder, which converts it into poly$-$

styrene sheet wound into rolls. The plastic comes in

two forms$-$clear and black. The rolls are either

used immediately to make containers or are put into

storage. Second, the rolls are loaded onto thermo$-$

forming presses, which form the sheet into contain$-$

ers and trim the containers from the sheet. The two

manufacturing steps are shown in Figure $7\mathrm{.}9.$

Over the past five years, the plastic packaging

business has grown steadily. Demand for containers

made from clear plastic comes from grocery stores,

bakeries, and restaurants. Demand for black plastic

trays comes from caterers and grocery stores, who

use them as packaging and serving trays. Demand

for clear plastic containers peaks in the summer

months, whereas demand for black plastic contain$-$

ers peaks in the fall. Capacity on the extruders is not

sufficient to cover demand for sheets during the

peak seasons. As a result, the plant is forced to build

inventory of each type of sheet in anticipation of

future demand. Table $7\mathrm{.}4$ and Figure $7\mathrm{.}10$ display his$-$

torical quarterly demand for each of the two types

$($clear and black$)$ of containers. This demand data

was modified from SPC$\text{'}$s sales data by the team to

take into account the lost sales when SPC was out of

stock. Without the customers involved in this team,

SPC would never have known this information as

they did not keep track of lost orders.

FORECASTING

As a first step in the team's decision making, they

want to forecast quarterly demand for each of the

two types of containers for the years $2003$ to $2005.$

Based on historical trends, demand is expected to

continue to grow until $2005,$ after which it is

expected to plateau. Julie must select the appropri$-$

ate forecasting method and estimate the likely fore$-$

cast error. Which method should she choose?