2003 Words9 Pages
Leitax 2004 Leitax 2004 Analysis of the new forecasting process Analysis of the new forecasting process Assignment questions 1. Based on the description of planning system before the Redesign Project which function or individuals should be held responsible for the planning problems in FY 2002? In FY 2004? In 2002, Leitax had suffered through poor planning of 3 camera models: the launch of one camera delayed (cost: $19.5 million), another outsold its inventory (costs: $4.5million) and a third model reported sluggish sales ($2.5million). To compensate, Leitax extended the life of an existing model and made a mad scramble to find product and customers but the most costumers preferred to wait for the delayed camera. These…show more content…
Moreover, the whole team didn’t do adequate forecasts which generated errors and costs for the company. In 2004, the firm overestimated the demand for a new product family for the high end consumer market (need to extend the scheduled end-of-life by six months) and underestimated the cannibalization of the ShootXL by another newly introduced product the OptixR. Leitax didn't have a single, unified forecast to coordinate their operations. Sales developed their own projections, which production distrusted because the sales organization has the incentive to produce low-ball projections so they can "beat the mark." 2. Why focus on fixing the forecasts? What are the implications of a poor forecast? Fixing the forecasts allows to build the communication between the different departments of a firm (communication between the operational staff, the financial staff, etc.). It should be also a guide for financial planning and monitoring the activity and the performance. It is a tool to evaluate profitability and productivity, to identify an eventual gap between actuals and OP (operating plan), and to fix it. Having a poor forecast could generate a lot of costs. For example in this case, it was mentioned that one executive estimated the cost of this delay including lost sales and the opportunity cost of inventory, warehousing space, and capital totalized $19.5 million. The lost sales on the second camera were estimated to be about $4.5 million in gross

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