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 been receiving 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 major source of customer complaints. In the
mean-time, Sue McCaskey is working on modifications to the inventory management system
that 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 give the following account:

Planning is informal around here. To begin, marketing determines the forecast for
window fans by month for the next year. They then pass it along to us. Quite
frankly, the forecasts are usually inflated – 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 for the
schedules. Molding gets hits 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
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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 do not change much from year to year. Sure, sometimes we put on a sales
promotion of some kind, but we try to give Phil and Joe enough warning before demand
kicks in – usually a month or so. I meet 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. Based on these meetings, I generate a
monthly forecast for the next year. 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 on hand 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
1 61,294 44,261 35,720 69,238
2 63,659 71,182 42,846 73,816
3 17,144 52,895 27,772 34,858
4 30,831 47,786 56,943 40,519
5 23,763 43,688 35,287 18,746
6 19,001 11,452 35,631 20,989
7 20,011 50,165 66,414 39,405
8 22,070 51,648 34,121 56,888
9 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.

QUESTIONS

1. Comment on the forecasting system being used by Franklin Fan. Suggest changes or
improvements that you believe justified.
2. Develop your own forecast for window fans for each month of the next year 2015. Justify
your forecast and the method you used.
Derived from the Yankee Fork & Hoe Case; Chapter 14; Page 502; Operations Management by Krajewski, Ritzman, & Malhotra (10th) 2013
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Derived from the Yankee Fork & Hoe Case; Chapter 14; Page 502; Operations Management by Krajewski, Ritzman, & Malhotra (10th) 2013
Page 3