Riordan Manufacturing has a reputation for preciseness and conception. It necessary for Riordan to develop a forecasting process that streamlines production and minimizes unsold inventory. Forecasts are vital to every business organization and for every significant management decision, (Chase, Jacobs, & Aquilano, 2006). The process of forecasting is necessary not only for inventory and production, but also for budgetary and financial purposes as well. Without sufficient information to allow for lean production and maximization of profit, Riordan will continue to operate inefficiently and may eventually go out of business.
Coordination between sales, marketing, and production and development will be required as part of the new production process. To accomplish this, Riordan will use several different forecasting methods to analyze their data and inventory. One such process is time series analysis. This type of forecasting will allow Riordan to scrutinize past data to project what products will necessary for future sales. Riordan will also use casual forecasting which means the company will assume that the demand for their products are based off of underlying environmental factors.
Environmental or seasonal factors greatly effect the demand for Riordan’s product. A seasonal factor is the amount of correction needed in a time series to adjust for the season of the year, (Chase, Jacobs, & Aquilano, 2006). Since the product is fans, it is acceptable to assume that demand for the product will increase seasonal by region. Hotter temperatures will warrant higher demand for the product and an increase in the sellable inventory and production speed. Cooler temperatures will create less demand and require less inventory and decreased production.
As the world moves into green technology, Riordan will also be required to re-develop their product to be more energy efficient and therefore more desirable to the consumers. Riordan will use multiplicative seasonal variation to accurately forecast the need for the fans during seasonal transitions. In this case, the forecast will equal trend times seasonal factor. The first step in forecasting Riordan’s product needs begin at the grass roots level or the bottom tier of the company. This will require warehouse orkers to inventory parts, supplies, and fully assembled product in order to determine exactly what the company has on hand. This information will be carried forward to each level of the company until eventually the top tier of the company is reached. It is also recommended that Riordan hire an outside research company that specializes in market research in order to assist Riordan with their forecasting. Customers, clients, and vendors will be surveyed for feedback on the product. Employees will also be asked for feedback and input on the product.
Employees will also be encouraged to share ideas to streamline the assembly process, reach the consumer faster with the product, and assist with the development of new product lines. It is important for Riordan to understand any residual errors in forecasting. Residuals occur when there are variances between the forecast and the actual results. Confidence limits will be established to allow Riordan to measure their forecasts and continue to accurately predict the future sales of the company.