After her holiday, Karen Mazzoli, buyer-sch

eduler for Necanko, Inc., reviewed the

latest sales demand. Although sales were usua
lly stable and predictable, during the
last three weeks sales had tripled the fo
recast for most products. Coming after a
three-month layoff and sluggish sales, production capacity had returned to
typical
levels. Now, in the first week of January, Mazzoli was uncertain about the
forecast
reliability, why sales were spiking and what action she should take.
NECANKO, INC.
Necanko, Inc. was an international food conglomerate with headquarters in
the
United States that had recently merged
with a cigarette manufacturer. The U.S.
food manufacturing operation had six
divisions, organized around the food
categories. The smallest division, nuts a
nd candy, had seven manufacturing plants:
two produced nut products, four produced candy for retail sale and one
produced
raw chocolate, which supplied the four candy plants, the cookie division and
external customers that required high-quality chocolate. An eighth plant had
recently been sold to several of the pl
ant staff to be managed independently.
The Philadelphia plant was built in the early 1900s and supported several
different
businesses over the years. In the 1950s, a local business man, Jack Wing,
began
producing specialized chocolate confections
in the building. Ten years previously,
when Wing retired, he had sold the business to Necanko, Inc.
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Each year, the divisional managers at co
rporate headquarters hired approximately
20 university graduates for their mana
gement training program. Karen Mazzoli
had been hired by the nuts and candy di
vision 18 months earlier and was assigned
to the Philadelphia plant as an operations
assistant. After one year, Mazzoli was
promoted to the position of buyer-scheduler.
Production Planning at the Philadelphia Plant
The Philadelphia plant produced 52 SKUs in seven categories (chocolate-
covered
mints, caramel pops, caramel buttons, chocolate-covered caramel buttons,
chocolate-covered nougat bars, chocolate-
covered peanuts and chocolate-covered
raisins) and four sizes (juniors, whic
h was used for the Halloween bags and
change-makers, count, theatre and econo
my). The count-sized mints, Necankos
most popular product, were offered in multi-packs of 12 or 24.
With the exception of the Halloween bags, candy sales were relatively stable.
Mazzoli received a sales forecast from the corporate marketing brand
manager
once a quarter. In addition, she relied on the weekly sales reports from
corporate
and inventory reports from the Wilkes Barre warehouse, a company-leased
warehouse facility outside Philadelphia. This information was used to
determine
the quantity of each product
needed within the month a
nd when, during
the month,
they should be produced. Raw material
orders were then derived from the
production schedule and raw material invent
ory. Most material lead times were
short; for example, liquid sugar and chocol
ate took about four or five hours from
order to receipt. However, some of the individual boxes took up to 16 weeks
because of the difficulty in obtaining pape
r board, so inventory tended to be high
on those components.
Mazzoli used a level production strategy for
the plant, with a two-week shut-down
in July for summer vacations and peri
odic maintenance. Halloween production
started in January and finished in early
September. The Philadelphia plant used a
two-shift operation with approximately
200 hourly workers and 40 salaried staff.
During the off-Halloween season, the numb
er of hourly workers dropped to about
175. Product was produced, shipped and sold within a year since the research
and
development division had established a 12-month shelf life.
After production, the product was shipped daily by an independent trucking
company to the Wilkes Barre warehouse to be distributed with other Necanko
products to customers at a later time. Occasionally, when there was a
significant
sales commitment, a truckload of candy woul
d ship directly from the Philadelphia
plant to California or Canada. Most product was sold by candy brokers
(independent salespeople who represente
d many candy manufacturers and did not
take ownership of the product) to distributors, wholesalers and retailers,
although
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9B04D020
Wal-Mart and the U.S. military bypassed
the broker system to purchase their
product directly from Necanko.
As Halloween production ramped down this past September, Mazzoli noticed
that
sales on all products were lower than forecast and had been for several
weeks. The
plant manager agreed with Mazzolis reco
mmendation to lay off an additional 30
positions. The six production supervisors had f
ound this to be particularly difficult
since they felt a strong sense of fam
ily with the employees, having been line
employees themselves before being prom
oted to supervisors. Sales remained
sluggish during autumn.
Now, in the first week of January, employee levels had returned to normal,
with
the exception of the second-shift Halloween
line, which was scheduled to begin in
two weeks. At the 9 a.m. m
eeting, Arnie Johnson, the supervisor in charge of the
Halloween production, announced that star
t-up was at 75 per cent of standard
output. Mazzoli considered this rate to be
expected during the first few hours of
their first day