Discussion Questions
1. Develop a forecast to use as a basis for aggregate production planning.
2. Develop an aggregate production plan by month for fiscal 2011. Consider the use of
several different production strategies. Which strategy do you recommend? Hint: Use of
Excel will greatly save time in making these plans.
Lawn King is a manufacturer of lawn mowers facing a highly seasonal demand for its
products. At the present time the demand forecast for the coming year has just been
increased. This is causing management to evaluate the accuracy of the forecast, and to
construct several different production strategies (level, chase, second shift) for meeting
demand.
The purpose of this case is to illustrate the issues typically encountered in aggregate
planning. The student is asked to make a demand forecast, to construct alternative
production strategies and to recommend a particular strategy. A substantial amount of
“pencil pushing” and “computer pushing” is required in this case to develop and evaluate
the various strategies. The case illustrates the tradeoffs involved in aggregate production
planning.
Analysis
The first step in analysis of this case is to evaluate the demand forecast. This can be done
by calculating the actual increase in total demand over the past year. The increase from
FY09 to FY10 was:
The projected increase from FY10 to FY11 is:
Thus a larger increase is being projected than was experienced last year.
We also observe that forecasts in the past have been very accurate (e.g., FY09 actual
compared to forecast and FY10 actual compared to forecast). But, the forecasts by model
type have not been nearly as accurate as total demand forecasts. Furthermore, the case
states that demand is highly influenced by the economy and the weather. In view of these
insights, we can conclude that past forecasts have been remarkably accurate.
For purposes of analysis we will accept the new forecast of 110,000 units. Although the
projected demand increase is larger than last year’s actual increase, the forecast still
appears reasonable. It may be, however, that marketing is attempting to drive production
through a higher forecast to avoid stockouts. Therefore, we may wish to evaluate a
somewhat lower forecast, as well as the one given in the case.
It is best to evaluate the various production strategies in terms of aggregate demand.
Evaluating these strategies by model type results in a tremendous amount of detailed
calculation.
