CASE STUDY NO.

9
IMPROVING THE FORECASTING AND
PRODUCTION PLANNING PROCESSES

CASE PROBLEM
A major producer/distributor of household electrical
and hardware products suffered from poor customer
service, manufacturing bottlenecks and organizational &
functional

inadequacies.

New

ownership

was

disappointed with financial performance and realized

that significant improvements were necessary. Customer
service metrics hovered below 70% (Orders shipped
complete in 3 days or less), and a bloated SKU base
included nearly 100 out of stock items. Inventory
planning was ad-hoc and the forecasting process was
inadequate. Ownership decided that immediate relief to
service performance was required. DHC was retained to
develop process improvements in the forecasting and
planning

areas,

including

organizational

recommendations and IT integration.

CASE ANALYSIS
I.

Brief Summary
A

household

electrical

and

hardware

producer/distributor has been suffering poor customer

service,

manufacturing

bottlenecks,

and

other

organizational and functional inadequacies on areas

such as the forecasting and planning, which resulted to

disappointments

with

financial

performance.

New

ownership decided that immediate relief was required to

regain service performance.

II.

Situational Analysis
STRENGTHS
The
major
1.
company
being
a
producer/distributor indicating well-rootedness
2. Immediate response to suffering service
performance

OPPORTUNITIES
1. Market expansion, and increase in sales
2. High chances of putting the organization
forward with greater productivity

WEAKNESSES
1. Manufacturing bottlenecks, poor customer
service,
and
organizational
&
functional
inadequacies
2. Inventory planning was ad-hoc and the
forecasting process was inadequate

THREATS
1. Opportunity losses, loss of sales and loss of
distinctive competency

III. Statement of the Problem

The focal points of this case study are the
weaknesses identified in the company under study.
The analysis invested will be used to seek answers to
the following questions:
1. What recommended alternatives could be indorsed

IV.

to address the identified issues?

2. What are the benefits of the chosen alternative?
Alternative Course of Action

Alternative 1
ABC Item Classification,
Customer Segmentation, and
Inventory Analysis
PROS

Alternative 2
Implement a much appropriate
layout
PROS

1. Reduced working capital

and activity costs in
support of unproductive
items
2. Increased improvement
percentage
on
the
number of items out of
stock
3. More
efficient
order
shipping
and
better
allocation
of
total
marketing budget
CONS
1. Does
not
ensure
accuracy, and may carry
the risk of intrusion and
fraud
2. Higher
cost
of
implementation
in
specialized
equipment
and software
3. Cost of production rises
due to shorter production
runs and variations

V.

1. Elimination
of
manufacturing bottlenecks
in relation to the existing
production facility layout
2. Process improvements and
a more balanced production
line
3. Easier
and
better
supervision and may reduce
unnecessary handling
CONS
1. It
requires
great
investment of time and
money
2. Time
required
for
adaption to changes in
the layout
3. May threaten efficiency of
firm
on
the
implementation phase

Recommendation

It is most recommended to choose and implement the

first alternative. The company must pursue with its

improvement plans, and ask for third-party consultants to
develop and implement process improvements throughout
the organization. A replacement for the inadequate
demand forecasting should be researched, identified, and

recommended. Also, IT integration through installation of

new software is advised to develop business processes
that

will

strengthen

relationship

between

various

departments.

VI. Implementation Plan

In resolving the weaknesses identified on the firm, the

chosen

alternative

and

recommendations

should

be

applied with the implementation of Lean Thinking and

FMEA Synergy. FMEA leads to more speed, more power
and better implementation of Lean thinking; and Lean
thinking, in return, leads to less operational costs and
maximizing efficiency.
Call

meeting

with

the

management and consultants

Disclosing to them the issue
and

opening

possible

discussion

decisions

solutions
Presenting

the

for
and Lean Thinking

chosen

alternative
Settlement and finalization of
decision
Implementation

of

improvement plan with the aid

of

the

basic

management

FMEA
Basic
Manageme
nt
Functions