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Harmon Food Case

In: Business and Management

Submitted By pchen018
Words 1090
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Harmon Foods Case |

The Problem Statement
Harmon Foods was experiencing significant challenges with forecasting in the sales of Treat, their ready-to-eat breakfast cereal. Huge variations in actual sales versus forecast created a myriad of problems that led to costly production changes resulting in lower profitability. The Company must seek to develop accurate forecasting techniques that will result in low deviations from actual sales.
Key Demand Factors
Management identified seasonal factors which included Year- End Inventory reduction by Stores, Plant closing (summer) and Salespersons vacations. Non Media promotions like Consumer packs and Dealer allowances impacted sales positively during the months they were shipped. Inventory build-up from shipment of consumer packs created a lag in the subsequent months. Brand managers also provided information on competitor’s strategies and pricing.
Management did not consider the following factors and we believe they also affect the demand of shipments of Treat: 1. Increases in the price of raw material: Increases in supply costs will increase production costs and ultimately increase the price of Treat to market. If the price of Treat increases, ceteris paribus (all else remain unchanged), the quantity demanded may fall resulting in reduced shipments. 2. Substitutes and other complimentary products: Price increase in complimentary products like milk may influence consumer’s decision to find other substitutes and shift the demand curve to the left. Contrary, a rise in the price of a substitute may increase the demand and shift the demand curve to the right. 3. Changes in income levels: The customer segment of Treat that is price sensitive will be impacted by any variation in their income levels.
Recommendations to improve Company’ Forecast and Budgeting Process and to enhance Profitability 1....

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