Week 4 Case: Franklin Fan Company (Cont'd) Based on the Yankee Fork & Hoe Case in Operations Management by Krajewski, Ritzman, & Malhotra (10th) 2013 Forecasting 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 received 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 primary source of customer complaints.

In the meantime, Sue McCaskey is working on modifying the inventory management system, which 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 gives the following account: Planning is informal around here. To begin, marketing determines the forecast for window fans by month for the following year. They then pass it along to us. The estimates are usually inflated - it 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 on the schedules.

Molding gets hit 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. Derived from the Yankee Fork & Hoe Case; Chapter 14; Page 502; Operations Management by Krajewski, Ritzman, & Malhotra (10th) 2013 Page 2 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 mostly stay the same year to year. Sure, sometimes we advertise, but we try to give Phil and Joe enough warning before demand kicks in - usually a month or so. I met 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.

I generate a monthly forecast for the next year based on these meetings. 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 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 61,294 44,261 35,720 69,238 63,659 71,182 42,846 73,816 17,144 52,895 27,772 34,858 30,831 47,786 56,943 40,519 23,763 43,688 35,287 18,746 19,001 11,452 35,631 20,989 20,011 50,165 66,414 39,405 22,070 51,648 34,121 56,888 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 Note: The demand figures shown in the table are the number of units promised for delivery each month. Actual delivery quantities differed because of capacity or shortages of material