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Case Study: Playtime, Inc.

Aayush Choudhary

Schulich School of Business, York University

OMIS 6560 U – Supply Chain Management

Prof. Ashay Gude

19 Sep. 2023
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Executive Summary:

Playtime, Inc., a toy manufacturer with a successful history, has recently seen significant

growth due to its collaboration with movie studios. The company's forecasting process is integral to

its operations, with the previous year's sales serving as the primary basis for projecting the upcoming

year's demand. However, there are pressing concerns in its forecasting and supply chain

management processes. The forecasting method relies heavily on historical data, leading to

operational challenges, including issues related to manufacturing capacity. There is also a disconnect

between the supply chain, operations, and marketing functions, leading to the departments

developing their own forecasts, deviating from the financial forecast presented to investors. The

upcoming blockbuster movie release adds to the uncertainty. A new, more effective forecasting

process, based on the S&OP method, is suggested to enhance accuracy and interdepartmental

alignment. The new forecasting process is divided into five steps, including running a sales forecast

based on historical data, creating a demand forecast considering new releases and market conditions

in mind, checking manufacturing, inventory, and transportation against the proposed demand plan,

and making appropriate changes based on supply chain, having pre-S&OP meetings to align the

demand forecast with finance expectations, and finally top executives from various functional areas

will foster consensus and make final decisions regarding the sales forecast, capacity issues, and

operational plans. By adopting and implementing this more effective forecasting process, Playtime,

Inc. will be better equipped to navigate market uncertainties, capitalize on opportunities, facilitate

transparent communication and alignment among departments, and achieve sustainable growth in

the dynamic toy industry.

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Question 1: What are the issues associated with Playtime’s current forecasting process? What

impacts, negative or positive, does this process have on the marketing, operations, supply chain, and

finance functions?

Answer: Playtime, Inc. faces two critical issues in its current forecasting process:

1. Relying Solely on Historical Data for Forecasting: forecasting is done based on last year's sales

as historical data. It doesn't consider the release of new movies planned for the year. If the

new movies are a hit, the demand for toys will increase; if it is a flop, the demand will

decrease. in both cases, the demand will be different from the forecast.

2. Lack of Cross-Functional Collaboration in Forecasting: There is a disconnect between

marketing, operations, supply chain, and finance because of which various department

managers end up developing their forecast based on their ideas of demand.

These issues have several negative impacts on the organization. Marketing will struggle to meet sales

targets without accounting for the potential impact of new movie releases, resulting in missed

opportunities during blockbuster releases. In operations, misalignment with manufacturing capacity

leads to problems of overproduction or underproduction, causing inventory issues and inefficiencies.

The supply chain faces procurement challenges and difficulties optimizing transportation and

warehousing resources. Finance sets unrealistic financial goals based on historical data, straining the

company's ability to meet investor expectations and potentially causing dissatisfaction.

The absence of collaboration negatively impacts the company in various ways. Marketing's

expectations for demand might not match those of other functions, leading to internal misalignment.

Operations struggle with inefficient resource allocation and a reactive approach to changing demand.

The supply chain faces procurement and inventory imbalances due to inaccurate forecasts. Finance's

financial analysis is inconsistent with other departments, potentially creating investor uncertainty.

These issues hinder Playtime's ability to adapt to changing market dynamics and disrupt the

company's overall efficiency.

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Question 2: Using the S&OP process discussed in this chapter, design a more effective and efficient

forecasting process that will mitigate the negative impacts you identified in question 1.

Answer: The new, more effective forecasting process at Playtime, Inc.:

1. Run Sales forecast: The marketing team will collect historical sales data and utilize

forecasting techniques such as exponential smoothening to create demand forecasts.

2. Demand Planning: Marketing should collaborate closely with major movie studios to gain

insights into upcoming releases, market trends, consumer preferences, and potential

marketing tie-ins. The team will develop a new forecast considering the impact of new movie

releases (blockbusters or flops).

3. Supply Planning: operations and supply chain teams align manufacturing capacity with

projected demand scenarios. They allocate manufacturing resources efficiently based on

projected demand and capacity constraints. Supply Chain will implement inventory

optimization strategies to buffer against demand variability.

4. Pre-S&OP Meeting: Hold Pre-S&OP meetings where functional managers from marketing,

operations, supply chain, and finance teams discuss preliminary forecasts, capacity

constraints, and emerging issues and align financial goals with demand forecasts and

operational capabilities, addressing potential tradeoffs between revenue and costs.

5. Executive S&OP Meeting: Top executives from various functional areas get together in the

Executive S&OP meeting and will make final decisions regarding the sales forecast, capacity

issues, and operational plans. They will foster consensus among functional areas to ensure

alignment with the plan. Key performance metrics for each functional area are designed to

track and incentivize compliance with the approved plan.

The revised process incorporates advanced forecasting techniques and scenario analysis, improving

the accuracy of demand forecasts. This will help Playtime align manufacturing capacity with

projected demand. Efficient resource allocation will ensure that manufacturing resources are utilized

optimally, preventing overproduction or underproduction.

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The S&OP process fosters clear communication and alignment among departments,

mitigating the chances of misalignment. Early involvement of the finance team and collaborative

decision-making will help set realistic financial targets aligned with operational capabilities.