Leitax Case Study
- Leitax Case:
- Before the redesign project, what factors, processes, and behaviors led to the
planning problems?
One of the major factors that led to planning problems at Leitax was the SF-6000 camera which the consensus forecasting process had overestimated its demand. Also, the cannibalization of the ShootXL had been underestimated by the Optix-R. This led to a drop in the forecast accuracy by 30% and 45%, which caused 1% and 3% write-offs in the cost volume of materials and the products. Leitax also suffered a poor planning method of three camera models in which the launching of one camera was delayed, while another outsold its inventory and the last one reported sluggish sales. This made Leitax extend the life of an existing model leading to a scramble for the product by the customers. Lack of DMS group was another factor that led to planning problems in which the demand planning process had been ill-defined. There was also a lack of consensus on the forecasts. The most relevant data to forecasting was always incomplete, inaccurate, or even unreliable.
- Based on the description of the planning system before the Redesign Project, which
function is most culpable for the planning problems in FY 2002? In FY 2004?
In 2002, there was poor planning of 3 camera models, and Leitax had to extend the life of an existing model in order to compensate for the loss. The problem arose because of a lack of coordination, cooperation, and the groups could not communicate such that each of them did their forecasts. In 2004, the SF-6000 was overestimated by the consensus forecasting process, which led to write-offs and a drop in accuracy of the products. The marketing, sales, production, and finance departments were the most culpable for the planning problems since they did not perform their jobs well enough. The marketing department had to study and evaluate the market trend, but it failed to do so while the sales department had to know the behavior of customers toward the product. The production department should have managed and worked out on the potent of the supply chain while the finance department should have estimated the future of cash flow in the company.
- Briefly describe the consensus forecasting process (CFP) used at Leitax. Explain
how this forecasting process fits in the overall planning process.
The consensus process used at Leitax is S and OP, which involves one number of the fundamental concept. This process fits in the overall planning process of Leitax since it is standard practice for the functions in developing a functional forecast that will meet in a cross-function meeting to reach a consensus. At Leitax, there are several functions generating forecasts. The functions are very efficient in the consensus forecasting meeting. After a functional forecast has been developed, the functions will use their forecasts in making several of their functional decisions.
- Describe what performance improvements followed this process redesign. What overall benefits can be attributed to the consensus forecasting process, and how are these benefits achieved?
McMillan and Fowler considered a different way of focusing on the consensus meetings after the SF-6000 forecast miss. They recommended focusing instead of lifetime quantities in meetings. The regional breakdowns were also more historically driven. The first change had positive feedback after one of the sales director complained. There was also more management of more features of overlap and product launches since the product life of the digital cameras were getting shorter. Despite some of the supporters favoring less input from the sales group in forecasting, Fowler increased the control and responsibility of the DMS group.
There was a need for further statistical forecasts to be perceived to prevent the fall of DMS group in their responsibility of mastering and to use the tools.
- Based on the description in the text and the evidence in Exhibits 6 and 9, what
went wrong with the SF6000 introduction?
SF6000 was the first camera to be launched on the market, during the spring of 2004. The camera would offer a 10x zoom and an 8-megapixel sensor priced at only 999,95 dollars. Leitax had high hopes that the camera would be at the high end of the consumer market. However, during the planning of the early sales at the supply/demand process level, the company’s consensus forecasts reflected the enthusiasm of the specialized press. The changes in the forecasting process of the company did not provide enough dampening of enthusiasm for the product. SF600, was in the end wowed, over forecasted and there write off of about 1% expectations on the volume costs of lifetime materials. This led to Leitax suffering a great deal of poor planning of the camera model.
- What happened with the ShootXL/Optix-R? Why did it happen?
In 2004, Leitax introduced the ShootXL which was a digital SLR that helped in boosting an image processor and a 6-megapixel CMOS sensor. Sitting at the low end of the professional market, the camera became one of the bestselling models ever. However, ShootXL started showing warnings that indicated possible cannibalization despite its impressive sales rates even after the introduction of Optix-R, which was its main competitor. Due to the ignorance of Leitax on the warnings from DMS group, there was a larger than expected cannibalization, which led to 3% write-off cost obsolescence of lifetime volume materials.
- What recommendations can you offer for maintaining and improving the
process?
There is a need for practicing the effects of changes for Leitax to understand the new dynamics introduced in the process. The company should also monitor the introduction of new products in the markets. This will enable them to know their competitors and find new ways to deal with the competition. There is also a need for understanding the essential elements of the consensus forecasting process, the strengths, weaknesses, and how the company should maintain its operational and organizational concerns. Leitax should also consider statistical techniques to predict the life of digital cameras, which will help them know when to upgrade their products. They will also be able to manage the product launches and mage the instances of feature overlap.
