THREE PHASE PRODUCTION AT BOOTS

In the United Kingdom, when your sales rely on the weather, demand forecasting is understandably problematic. An extreme example of this is the manufacture of sun tan cream. A good summer can leave the shelves empty, whereas poor weather could mean a warehouse full of unwanted product. Boots, the UK manufacturer and retailer, which manufacturers the Soltan range of sun preparation products, attempts to reduce uncertainty in its sun tan product factory by phasing it production in three stages. This allows the company to compensate for weather patterns early in the season by increasing or decreasing its production rate in the final phase of production. About 70 percent of all its sales are made between the beginning of May and the end of August. The peak production time is somewhat earlier (to allow for distribution) and runs between October to April. Because of the lag between manufacture and demand in the shops, Boots has to commit itself to the first two phases. The results of the weather come too late to affect production. However, it can use the third phase to react to sales early in the season. If the weather has been poor, no product may be needed in the third phase, whereas good weather will mean production continuing throughout the summer. Nevertheless, a decision must be made by the end of May. Decisions after that would come too late to affect that years sales.

Questions

1. Why does Boots divide its production of Soltan into three phases?

2. What else could it do to cope with demand fluctuations?