Chicago Manufacturing (CM) needs to adopt a more formalized infrastructure in order to maintain or improve its competitive position in the printer and copier component markets. Regardless of the owner’s reluctance to use any data driven models, the company will likely not survive if more effective and efficient production methods are not introduced. With its current lack of a framework for determining product runs and inventory levels CM has upset its customers, presumably lost market share, and experienced a reduction in its margins. Clearly, this is not a recipe for continued success.
Why should CM implement a more structured approach to production planning and inventory management?
Labor – having some expectation of future demand for its products will allow CM to take a proactive approach to many things related to its production lines. One critical component involves its workforce. Anticipating future demand will CM to better organize its labor inputs identifying potential need for additional workers and/or overtime hours during the peak manufacturing periods. Identifying available lead times will allow CM to dedicate appropriate time to worker training and quality control.
Capacity – in competitive industries, similar to that which CM operates, the aim is to maintain or expand market share. Losing market share is not an option. However, this is precisely the risk that CM is running by not having available the inventory required to meet customer demand. CM’s relationship with retail outlets is currently frayed. No customer will ever accept a supplier’s not having what is needed. The customer will find an alternative supplier. Thus, CM must take appropriate steps to ensure it has on hand the products that customers order. Future growth plans will rely on both demand and technological forecasts that provide CM with an idea of what is coming and whether or not CM has the ability and resources to meet the future production requirements. If increased manufacturing capacity is necessary, CM will need time to adjust to its changing circumstances.
Supply Chain – the ability to accurately forecast short term future demand (this period and next at a minimum) will have significant impact on the efficiency of CM’s supply chain. Right now, room for improvement is the overriding theme. Raw material prices are on the rise and inventories are under stocked in some products. Yes, industry demand is uneven apparently, but that does not make the owner’s case for “no forecasting” stronger. On the contrary, a concerted effort on CM’s part to better understand what the seasonality of its business is will make CM more competitive longer term. The longer CM waits to make raw material purchases in the current environment the more expensive the cost is which likely will not be passed on to customers. Therefore, margins will suffer.
The case for CM to adopt forecasting as a tool to improve its operations is clear. CM’s current approach or lack thereof is not sustainable long term. Drastic changes are necessary not only for efficiency’s sake but also survival.
Agree or disagree?