Leitax 19110207.docx

Leitax Leitax was the seventh largest company producing digital cameras. In 2002 it suffered poor planning for three of its camera models. One had its launch delayed, the other outsold its inventory and the third had poor sales. Leitax incurred losses equaling $19.5 million, $4.5 million and $2.5 due to these errors, respectively. This concerned the top management of the company who decided to undertake a major overhaul in the supply chain operations of Leitax.

The CEO hired Fowler for redesigning the project and supply/demand planning and distributions. Previously, there had been a lack of co-ordination between departments when planning the demand and each department estimated a different figure. This led to inaccurate data for forecasting. Fowler aimed to create a consensus forecasting method. He introduced the estimation of demand through sell through number rather than sell in. Sell through meant the quantities shipped from resellers’ DC to other regions. Secondly, he introduced the practice of ignoring capacity constraints while estimating demand. He further introduced the frequent master production schedule which was consistently published. Furthermore, he acquired the help of softwares which helped in demand planning and forecasting and supplier network planning. Fowler involved the different functional groups and acquainted them with the new process.

In the early meetings there were differences between the departments when estimating demand due to various assumptions. The newly developed Demand Management System (DMS) was aided by excel templates to account for these business assumptions such as price changes. The stating point of consensus was the business assumptions package which contained all the information relevant to the industry. This information was presented to three functional groups including the top-down forecast, bottom-up forecast and sell through forecast. The final forecast was sent to finance department who matched them with revenue targets. To measure targets, after thirteen weeks (the longest contracted lead time

in the supply chain), forecasts were compared with actual results. The results were promising, the sell-through forecast improved from 58% to 88% while sell in forecast improved from 49% to 84%.

However, two recent problems called for immediate improvement in system. SF-6000, a high-end camera was greatly overcasted while Optix-R cannibalized the existing Shoot XL even though consensus forecast did not predict so. Fowler began to wonder if statistical analysis should be applied. The problem with that was that it would rely on DMS team which would have a greater control and other departments might think they are being controlled by DMS. Fowler changed the goal of the consensus meeting to discuss product life cycle instead of next quarter, but this confused sales directors. The misestimation by DMS made it a difficult situation for Fowler. Was a greater change required?