CASE 7.2 Playtime, Inc. Playtime, Inc. manufactures toys for children under the age of 12 and has been in busi-ness for 50 years. While Playtime does not hold a major share of the toy market, it has

CASE 7.2 Playtime, Inc. 

Playtime, Inc. manufactures toys for children under the age of 12 and has been in busi-ness for 50 years. While Playtime does not hold a major share of the toy market, it has expe-rienced  significant  growth  over  the  last  five  years  because  of  its  collaboration  with  major  movie studios to introduce action figures to coincide with new movie releases. Playtime is a publicly held company.Playtime’s  executive  council  consists  of  vice  presidents  of  marketing  (includes  sales),  operations  (manufacturing),  supply  chain  (procurement,  inventory,  warehousing,  and  transportation), and finance. This group is ultimately responsible for approving the forecast for the upcoming year.The  forecast  is  developed  using  last  year’s  sales  as  historical  data.  This  forecast  is  then  given  to  the  supply  chain  and  operations  groups  to  determine  if  capacity  is  sufficient  to  accommodate  the  new  volumes.  If  capacity  is  sufficient,  the  forecast  is  then  moved  to  finance  where  it  is  analyzed  to  determine  if  volumes  are  sufficient  to  satisfy  the  needs  of  the investors.Jim  Thomas,  manager  of  supply  chain,  and  Gail  Jones,  manager  of  operations,  had  a  meeting to discuss the first version of the forecast. “I know we use last year’s sales to project for next year, but this forecast has me worried,” said Jim. “One of our major movie studio partners is coming out with a blockbuster movie next year and we have no idea what the impact of that might be on our distribution capacity.” Gail agreed, saying “I know. We have the capacity right now based on this forecast, but if volumes surge we are in trouble from a manufacturing perspective.” Jim and Gail also know that if the projected volume does not satisfy the needs of inventors, finance will send the forecast back to marketing to increase volumes until financial goals will be met. This forecast process has resulted in a disconnect among the supply chain, operations, and  marketing  functions  within  Playtime.  The  managers  in  these  functions  typically  end  up developing their own forecasts based on what they think demand will really be, regard-less of what finance presents to the investors. Over the last several years, this has presented some problems for the operations and supply chain areas because of manufacturing capacity issues (toys are very seasonal) and inventory issues. Although Playtime has been able to handle these issues, Jim and Gail are very concerned about next year because of the uncertainty the new movie release will have on the demand for their toys.

CASE QUESTIONS

1. What are the issues associated with Playtime’s current forecasting process? What impacts, negative or positive, does this process have on the marketing, operations, supply chain, and finance functions?

2. Using the S&OP process discussed in this chapter, design a more effective and efficient forecasting process that will mitigate the negative impacts you identified in question 1.