Supply Chain Operation

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Redstone Foods 2020 4th Quarter M&M Sales Forecasting Report

Date: { Sep 30, 2022}

Prepared by: {Tala Hassan}

Executive Summary

Redstone Foods is the largest and most famous wholesaler of sweet experiences in the Southwest US, with an outstanding long-term performance. The company has a wide variety of products with over 6000 selections comprising novelty candy, fine chocolate, bulky candy, and old-fashioned, which are preferred for any occasion. The company has various outlets serving customers in the Southwest USands global outlets. For instance, gift shops, Candy stores, and florists are some of the outlets operated by the company serving thousands of customers. The company's sales forecast shows consistent trends in the early months of the year, decreases in the middle of the year, and increases during the last months of the year.

Current Analysis

Demand Patterns

The trend in demand for Redstone Foods in 2017, 2018, and 2019 is subject to seasonality changes as the demand keeps rising and falling according to the prevailing seasons. The demand pattern analysis shows a pattern observed as the cases are being sold to the customers. This pattern keeps repeating itself across the seasons. More importantly, the sales show an increasing trend across the years from January to April and then fall slightly from May to September before increasing again from October to December. Over the years, the sales have been exceptionally high in April and November, and customers demand more of the products. The changing patterns in demand for the products are majorly caused by seasonality and price changes. When the prices are low, customers are attracted, thus an increase in demand for the products. The months of April through June often see a decline in sales. The change of the seasons may be responsible for the decrease in demand for the products. The consistent demand pattern of Redstone Foods across the years could also be attributed to holidays since they are always high at the end and the start of the year but declines in the middle.

Inventory Patterns

The amount of inventory to be held by the business depends on the expected demand over the period. When there is high expected demand, the business will keep more inventory to guarantee that customers' demand will be satisfied. Redstone Foods has perfected proper inventory management as the analysis shows that it holds more stock during the high demand seasons and less stock during low demand seasons. The purchase trends in the year 2020 show that Redstone Foods has been purchasing cases based on the projected 3% increase in demand from January to September. From the company's 2020 sales and purchase analysis from January to September, Redstone Foods sold 510,054 cases against 571,462. The difference in cases purchased and sold is 61,408, which shows a considerable variance in demand and supply of the cases by Redstone Foods. To this end, if the company continues with this trend of purchasing inventory, the end of the year balance is likely to be reduced as patterns of sales show that from the months of October to December, high demand has always been. Therefore the build-up in inventory from the preceding months is likely to be reduced by the anticipated high demand towards the end of the year. However, the company should closely monitor this trend to avoid potentially substantial unsold stock that could lead to high operating costs associated with storage costs and substantial unrealized profits.

Labor Analysis and Productivity Impact.

Labor productivity is influenced by various factors ranging from hourly pay to the total hours worked. In most cases, employees will be motivated to work and increase productivity if the hourly rate is high; this means that productivity and hourly rates are highly correlated (Zhao et al.,2021). The following formula will be used together with the provided data to understand labor productivity and its impact on Redstone Foods.

Productivity Rate= Total number of cases lost from January to September 2020

Total Labor hours

The total number of cases sold from January to September 2020 is 510,054, and the total labor hours are 6,240. Therefore, the total labor productivity will be calculated using this information.

Total Labor productivity=510054/6240

=81.739

On the other hand, the labor productivity per employee will be :

Labor productivity per employee= 510054/1560

= 326.958

If we use the information presented in Model one, we can determine that the number of needed cases is 791,940 by adding up all of the cases that have been purchased. 95.18 cases should be completed in one hour using four workers at the predicted productivity rate. This indicates that the total needed hours between January and December is 8,320hrs. The total number of hours worked by one employee between Jan and Sept is 1560. There were a total of 6,240 hours worked by the four workers combined. This indicates that the total number of cases completed by one employee is 148,481, whereas the number of cases produced by four personnel working a combined total of 6240 hours is 593,924.

I have calculated the total number of cases for October, November, and December using the information on the 2020 Forecast of 3% growth. The total cases for those three months are 71,073, 74265, and 75141, respectively. In a typical scenario where no employee is terminated from their position, the total number of hours worked by all employees for October, November, and December is 747, 780, and 789. Assuming no change in the number of cases, a lower staffing level would be appropriate, bringing the total amount of time needed to complete the activity closer to the maximum.

MAPE chart

Model #3 is the most practical forecasting technique among the five approaches based on MSE, MAPE, and MAD. This is because the lowest MSE, MAPE, indicates the best approach and MAD values, as the difference between the actual and the forecasted values are not great (Xu et al.,2022). From the seasonality analysis, the value of MAD, MSE, and MAPE will change. In this case, Model #2 will be the most effective because of the lowest values in the forecast.

Recommendations

The third model is ideal for predicting because it will ensure that the variance is kept to a minimum. While the consumer's tastes and preferences may change over time, the forecasting technique only works quickly. A manual change will be necessary for events outside the forecast model, and the quantities to be sold can be determined by utilizing seasonal adjustment variables. Due to the pattern change and disruption caused by the 2020 sales, it should no longer be utilized as a primary indicator. The statistics are inaccurate compared to the mean average percentage error for model 1 because of the inconsistent dispersion. The same logic holds for case model 5. Based on model 3, the MAPE is decreasing over some time. As the variance decreases with time at a more significant proportion, this is advantageous for the company. Redstone Foods Company should consider all five factors when predicting sales for the current quarter but should select Model 3.

The management of Redstone Foods should also monitor the inventory management to ensure that the purchases and sales are within the manageable levels to reduce the inventory holding costs. For instance, the purchase and sales figure of January to September 2020 shows that there were more purchases than sales over the period. It, therefore, means that Redstone Foods had considerable inventory at the end of September. In this regard, the company should review the growth of sales projection that is pegged at 3 %; this will help in providing a more accurate sales forecast that does not lead in the buildup of unsold inventory and the end of the operation period. Based on the findings of the prediction, I would suggest that Redstone make forecasts regarding the rate of productivity, demand, sales, and changes in pricing. These estimates will provide the company with a view of the performance of the final quarter in 2020, which will assist them in making fantastic decisions. Some of the most important choices may be whether or not to let employees go, whether or not to explore new markets, or whether or not to launch a new product line.

Forecast Accuracy MAPE

2020 YTD Accuracy MODEL #1 MODEL #2 MODEL #3 MODEL #4 MODEL #5 0.12126194746809056 8.3125115689548279E-2 7.5283722890961358E-2 0.11565573066088092 0.11207235075883676 1st Quarter 2020 Accuracy MODEL #1 MODEL #2 MODEL #3 MODEL #4 MODEL #5 1.7998389687442006E-2 0.16061641275100907 0.14024051799641754 0.1419016157546438 0.16611179341177121 2nd Quarter 2020 Accuracy MODEL #1 MODEL #2 MODEL #3 MODEL #4 MODEL #5 0.18522028952045991 4.48348133485490 87E-2 4.7347062824362997E-2 0.11796346782790003 0.10364281013476762 3rd Quarter 2020 Accuracy MODEL #1 MODEL #2 MODEL #3 MODEL #4 MODEL #5 0.16056716319636974 4.3924120969086676E-2 3.8263587852103556E-2 8.7102108400098896E-2 6.6462448729971452E-2 MODEL #1 MODEL #2 MODEL #3 MODEL #4 MODEL #5

Time Period

MAPE