This case study allows for the evaluation of Multiple Linear Regression as a solution to the scheduling and budgetary problems of Harmon Foods, Inc. It explains how the model could be used to evaluate promotional strategies as well as to forecast sales and shipments for the company.
William B. Whiston
Harvard Business Review (171248-PDF-ENG)
December 01, 1970
Case questions answered:
Formulate the model that could be used to evaluate promotional strategies as well as to forecast sales and shipments for Harmon Foods, Inc.
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Harmon Foods, Inc. Case Answers
This case solution includes an Excel file with calculations.
Problems with the current Forecasting Model of Harmon Foods, Inc.
Manufacturing Problems
Manufacturing lead time at Harmon Foods, Inc. is high, leading to s shortage and lost production time. This, in turn, results in greater customer dissatisfaction.
Also, it has to pay higher demurrage charges as the company lacks storage space. These problems are exacerbated by level WF strategy, which requires continuous I/O.
Budgets and Controls
The long-term expansion and dividend policy were partly related to the forecasts. There is overspending on an advertisement that caused below market profit margins in some quarters, which are later compensated in other years/quarters for offsetting.
Advertisement Expenditure
Inaccurate forecasting led to ineffective spending on advertisements. The advertisement expenditure was dependent on the cost per unit. A higher forecast increases the expenditure on the advertisement, and if the forecasting is wrong, it results in a weaker return on investments.
New Forecasting Model for Harmon Foods, Inc.
Reason for selecting Multiple Linear Regression
The factors affecting sales were…
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