ACJ MANUFACTURING

A Case Study Presented to the

Institute of Accounts, Business and Finance
Far Eastern University-Manila

In Partial Fulfillment of the

Requirements for the Degree of
Master in Business Administration

Alejando, Rhea Flor

Alfonso, Josiah Raphael
Jianghao, Hans
I- Case Background

ACJ Manufacturing makes various components for printers and copiers. The company

supplies these items to a major manufacturer and distributes these and similar items to office

supply stores and computers as replacement parts for printers and desktop copiers. In all, the

company makes about 20 different items. The two markets require somewhat different handling.

II- Statement of the Problem

With the lack of proper forecasting, ACJ Manufacturing currently suffers from either being

understocked, or overstock in parts and raw materials they use in the manufacturing of their

products; therefore ACJ Manufacturing must come up with a forecasting method that would help

them foresee the needs for production planning.

What forecasting technique may be used with the given data?

Which forecasting technique gives the most accurate forecast?

How are they going to handle sudden increase in demands with the current production

method they use?

III- Assumptions

Assuming that ACJ Manufacturing would not adopt a forecasting method for their parts

and raw materials, more product and production issues might arise which may lead to profit loss

or loss in market share.

IV- Areas of Consideration

4.1 Marketing

Marketability and profitability of ACJ Manufacturing’s products differ, with some of

their products selling more than the others. However, they are experiencing some issues

with other retail managers whenever the company experiences understocking because

of wrong (or the lack thereof) of forecasting in their production.

4.2 Operations

Current operations does not use any forecasting method for production planning

and inventory management which has led to a number of overstocking and understocking

dilemmas.

4.3 Finance

The company is experiencing some dwindling in its profits as competitive

pressures arise. This is not being helped by its own production line having under and

overstocking problems which may eventually lead to loss of clientele.

4.4 Human Resource

The Operations Manager should have proceeded with a formal forecasting method

long before to have been able to deliver numbers that are much more accurate for their

production line. ACJ Manufacturing should or could hire a forecasting expert to help their

Production Manager with this new project they wish to delve into.

4.5 MIS/IT/R&D: The company does not have any forecasting methods or techniques

being implemented as of the moment.

V- SWOT Analysis

STRENGTHS OPPORTUNITIES

● ACJ Manufacturing already has an ● Possible improvement on the

established clientele
● An established production line and
method
● Fast selling products
● Wide array of products and items
company’s production line
● Streamlining their production in
producing more of their hot items,
and less of the slow moving ones.

WEAKNESS THREATS

● Lack of forecasting in the ● The eventual abandonment of

Operations, and Production Line
● Lack of inventory management
● Overstocking
● Understocking
existing clients due to their
understocking issues to look for
other suppliers.
● New competitors entering the
market.
● Possible obsoletion of their current
existing products as technology
evolves.
● Price escalation of raw materials

VI - Alternative Courses of Action

6.1 ACA 1 - Using the Naive Forecasting Method for forecasting

6.1.1 Advantages / Pros:

 It has a significantly low MAD and MAPE for Product 1, as well as

for Product 2.

 Is a more formal forecasting method

 ACJ may be able to forecast better production needs.

6.1.2 Disadvantages /Cons:

 Naive method has a significantly high number for MSE for both

Product 1 and 2.
6.2 ACA 2 - Use Linear Trend Equation as forecasting method

6.2.1 Advantages / Pros:

 Has the lowest errors for both Products.

 Is a more formal forecasting method

 ACJ may be able to forecast better production needs.

6.2.2 Disadvantages /Cons

 This forecasting method takes much longer to compute compared

to Naïve Forecasting.

6.3 ACA 3 – Acquire new suppliers that may produce their raw materials

6.3.1 Advantages / Pros:

  Lower production cost

 New supplier might have better quality products for their raw

materials.

 New suppliers found can fill in for the lacking numbers of their

original raw material supplier.

6.3.2 Disadvantages /Cons:

 Looking for a new supplier might take longer time to accomplish

 Quality of raw materials might not come into par with the standard

used by the production.

 New supplier might not be able to support the demands of the

production line.

6.3 ACA 4 – Discontinue the production of slow moving products and focus on hot

selling items.

6.4.1 Advantages / Pros:

 Lessens the number of products that need monitoring and

forecasting

 Lessens the total production costs of the company

 They can focus on the development of their currently hot selling

products.

6.4.2 Disadvantages /Cons:

 Lessens their total market share to the ones limited to

purchasing their remaining products.

 Smaller company portfolio

VII - Action Plans

 Activity Responsible Person/s, or Timeline

Department/s, Team/s, etc

Planning of the introduction of a Operations Manager, Operations Day 1 – 3

Formal Forecasting Method Department, Finance Department,
and Human Resource

Selecting the formal Operations, and Procurement Day 4

Forecasting Technique to use Department
in Production

Application of the formal Operations, and Procurement Day 4-6

Forecasting Technique Department

Monitoring and Evaluation of Operations, and Procurement Day 7- 30

the formal Forecasting Department
Technique applied

VIII - Recommendation

We would like to recommend that ACJ Manufacturing adopt the Linear Trend Equation as

their formal forecasting technique in their production to be able to make decisions in their

operations and production of which materials to procure at a week’s time since it has the lowest

value of errors.

IX - Conclusion

Forecasting is important because it provides information that will help an organization

determine what future demands will be. The benefits to forecasting include better predicting

demand, more accurate financial planning, higher on-time delivery of products/services, better

inventory control (eliminating too much or too little inventory) and higher customer satisfaction.

Forecasts play an important role in the planning process because they enable managers to

anticipate the future so they can plan accordingly (Stevenson, 2015). In the ACJ Manufacturing
case, they are experiencing overstocking and understocking on some of their products, therefore

utilizing a more formalized approach to forecasting would help decrease these problems being

encountered by the Operation Manager. Also, using a Linear Trend Equation should give their

Operations Manager the most accurate forecasting which should result to better number and

turnouts for ACJ Manufacturing.