Yankee Fork And Hoe Company Case Solution

The current forecasting method being used by Yankee Fork and Hoe is informal and based on subjective expectations of the managers. First the marketing department prepares the forecast for the next year based on previous year’s shipping data, shortages experienced in the previous year and changes in the economy. Moreover, the marketing department also considers the increase in demand for occasional promotional activities. On the other hand, production department arbitrarily reduces the forecast by 10%, which results in shortages near the end of the year. 

There are a number of issues with the forecasting method being used by the company. Firstly, the marketing department has not identified any formal system in place for forecasting demand. Secondly, there is a lack of communication between both the departments in terms of managing inventory and demand. Both, the production department’s concern for keeping inventory low and the marketing department’s concern for having enough to meet the demand on-time are justified. However, there is a lack of communication between marketing and production department which leads to shortages by the end of the year. 

Based on the issues identified, we recommend a number of changes to improve the forecasting method in place at Yankee Fork and Hoe. Firstly, the forecast prepared is based on the actual number of products delivered and shortages instead of the actual number of units that were committed to be delivered. The actual number of units promised for delivery depicts the actual demand faced by the company in each month while the actual shipment gives a past-looking estimate. Therefore, we have used the data on the actual number of units promised for delivery for each month as a base for our forecast (see exhibit 1 for raw data on demand for the past four years). 

Furthermore, the marketing department of Yankee uses data for last year to forecast demand for the coming year. This method relies on the assumption that the demand for products remains constant throughout the year. On the contrary, it is evident from the graph in exhibit 2 that the demand is usually higher at the beginning and end of the year as opposed to that in the middle of the year. This provides evidence for seasonality in demand for Bow Rakes, making the demand overestimated for months in the middle of the year. We have used monthly demand data for the past years to estimate/forecast the demand separately for each month respectively.