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Parker Earth Moving: Implement revised business practice using forecasting

Background

Parker Earth Moving Company has been in business for 34 years and has traditionally been profitable. The company has an excellent reputation for producing high-quality small earthmoving equipment used in the home and small-business landscaping industries. The company produces four models of earthmoving equipment. The owner and founder of the business is a person who likes to act on instinct instead of establishing formal plans and is a genius in designing and building small home-use equipment. Taylor, however, is not well suited to leading a team-oriented and fully coordinated business effort. Sales forecasting and determining specific customer needs have never been high on his list of priorities. While the four models have many interchangeable parts and some assembly line operations and activities could be consolidated, Taylor has refused to do so and maintains four separate assembly lines for the four models.

The Current Situation

Foreign competition has reduced market share of PEMC from 47% to 29%. Quality is still regarded as the best in the industry. PEMC has suffered losses of 3%, 7%, and 11% in the last 3 years. Inventories of raw materials and work-in-process are too high. Severe interruptions in the manufacturing processes on the assembly line are occurring with increasing frequency due to the correct parts not being immediately available. The parts are in stock but not in the right place at the right time and not stored in racks that are compatible for use at the assembly line. There is widespread bickering and finger pointing between department heads and workers on a daily basis. Effective coordination and communication between departments is virtually nonexistent. The manual inventory system leaves much to be desired. Productivity in the plant is down sharply and customer complaints are mounting because ship dates of finished equipment are often 45 to 60 days late. Understanding of customer needs is at an all-time low.

1. Recommend a way to implement revised business practice that will achieve profitability based on forecasting.

Solution Preview

1. Recommend a way to implement revised business practice that will achieve profitability based on forecasting.

The best way to implement the revised business practice is to use forecasting. Parker Earth Moving Company should first use forecasting to determine the exact quantity of each model that will be produced. This will enable production planning and help avoid large inventories. Second, Parker Earth Moving Company should make sales forecasts about the demand for small ...

Solution Summary

The solution is approximately 200 words in length and provides two references.

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