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Materials Planning: The Forecasting Department

The forecasting department, traditionally reporting to the sale manager, has historically seen a forecast accuracy of about 60%, and this in turn causes problems for the following departments:

Purchasing: What should we buy and how much?
Production: What should we really build?
Inventory management: We keep building the wrong thing.

The sales manager asked you to write her a memo, specifically addressing the following:
- How could you suggest that your new system would achieve any better levels of forecast accuracy?
- Why is forecast accuracy itself not as important under traditional methods?
- Create a chart or timeline(chart/time line (1 document)) that includes all of the following:
- Which purchase orders have to be placed, and when
- When manufacturing needs to begin, to have products delivered to a customer
- Approximate dates for all of the following:
- When the product must be shipped to meet the customer's due date
- When the application of the cover and packaging must take place to meet the customer's due date
- When the manufacturing of the widget must begin and end
- When the raw material for the widget must be ordered
- When the plastic cover must be ordered
- When the cardboard box must be ordered
- Includes notes explain your timing calculation
- Assumes all of the following conditions:
-> The factory has two departments: manufacturing and packaging
-> Product X consists of 3 components
1) a widget manufactured in the factory with a total manufacturing lead time of 1 week
2) a plastic cover purchased from vendor A with a procurement lead time of 3 weeks
3) a cardboard shipping box purchased from vendor B with a procurement lead time of 4 weeks
->The widget itself is made from steel (whose lead time from vendor C is 4 weeks).
-> It takes 1 day for the cover to be applied to the product and for the product to be inserted in the box in the packaging department.
-> The shipping time to this customer is in 3 weeks, and you do not want it to be late or early.
Assume you received the customer order on 1/1/20XX.
- Ignore any holidays
- Assume a 5-day work week
- The customer requires the product to arrive at his location on 3/31/2011.

Solution Preview

See the attached files.

In writing the memo, please consider my suggestions below:

How could you suggest that your new system would achieve any better levels of forecast accuracy?

Your company needs to utilize existing technology to increase the effectiveness and efficiency of its planning system. In this exercise, I used Microsoft Project which is a very easy way to forecast required start dates of task in order to meet deadlines and target dates. This system is relatively cheap to purchase and easy to implement

Why is forecast accuracy itself not as important under traditional methods?

Traditional methods rely heavily on the company maintaining high levels of inventory so the ...

Solution Summary

The solution discusses the forecasting department in materials planning.

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