Nichols Company Casae Study

Nichols Company Case Study

OSC 301

Nichols Company Case Study

Joe Williams is the president of Nichols Company (NCO), which manufactures three primary products and has over 355 employees. In addition, NCO has been having some issues with their supply chain in the past few months and it has affected their customer service. This paper will summarize the case study, determine NCO's appropriate forecasting technique, discuss the impact of aggregate planning, weigh NCO's various cost factors associated with carrying inventory, and make recommendations for improvement.

Mr. Williams was approached by his Director of Marketing, Mr. Barney Thompson, and announced that they had lost a large order due to a backorder of tubing, which is used during their manufacturing process. This was not the first time that that Mr. Williams has heard bad news like this recently. NCO has had a disturbing trend recently were inventory levels are too high or there have been stock outs that have resulted in late deliveries, customer complaints, and cancelled orders. In addition, overtime has become an issue because NCO's forecasting numbers have been sub-par and the employees have to stop the production run that they are currently working on, and they have to make products that are on high demand. Consequently, Mr. Williams has had enough, so he put a meeting together in an attempt to discuss the latest problems and to come up with viable solutions.

Many different organizational entities from NCO were at the meeting. Attending the meet were Allison Bright of production and inventory control, Trevor Hansen of purchasing, and Margaret Wu of accounting. The meeting was very verbal and it lasted all morning. Mr. Bright suggested that the forecast that he receives from marketing are always off, and they are always rushing around trying to expedite products in order to meet demand. Mr. Thompson believed that the company runs too lean, and they need a large inventory of finished products, which would permit his sales team to sale 20% more product. Wu, from accounting, argued that the inventory is already too high and the company can not afford to holding costs and with the way technology changes, it causes even more inventory dilemmas. Mr. Bright chimed in again as said that the have to buy in volume in order to meet NCO's stringent cost requirements. So, Mr. Williams is determined to figure out how to remedy NCO's supply chain problems.

Nichols Company should use a combination of the Time series analysis forecasting technique in addition to the Qualitative, Grass roots forecasting technique. Time series analysis should be used to determine what the forecasting numbers should be in regards to historical sales and manufacturing data. This method will allow NCO to average their production numbers based on short or long term data and it will ensure that they can more easily recover for market shifts. In addition, NCO should also incorporate Qualitative, Grass roots forecasting. The Grass roots method lets folks closest to the customer base or market to have an input into the forecast. During the case study, Mrs. Wu mentioned that they had too much inventory on hand, and the market changes constantly due to technology changes. If the Sales force and marketing team had more input into current trends, then NCO would have a better chance producing the right quantity, but they would also see what products are more popular. Thus, reducing the amount of overstocked inventory and alleviating the need to constantly meet changing demand.

Aggregate planning affects workforce size, inventory quantity, and production levels for Nichol Company. Workforce size and inventory quantity are affected because aggregate planning takes into account demand forecasting and lays