MBA FPX 5016 Assessment 2 Demand Management Plan for Wild Dog Coffee Company

Student Name

Capella University

MBA-FPX5016 Operations Management for Leaders

Prof. Name:

Date

Demand Management Plan

Introduction

Forecasting demand is one of the most challenging aspects of business operations. While it can be demanding, it is not an insurmountable task. Accurate demand forecasting is crucial as it allows businesses to align their operations with customer demand. By analyzing shifting trends, companies gain insight into the general demand patterns for their products. Once these patterns are identified and understood, implementing a demand management plan becomes essential. This plan ensures that businesses manage current consumer demand effectively to avoid issues such as profit loss.

Demand management prepares companies to adapt to changing trends. In the coffee industry, seasonal trends are particularly significant. To stay competitive, businesses must recognize and manage these trends. Trends can be unpredictable, adding pressure on businesses to keep up. However, an actively responsive approach to changing patterns will foster business success. Data from Wild Dog Coffee Company’s current location will inform recommendations and analyses for demand management regarding inventory, forecasting, and scheduling. After establishing a demand management plan at the current location, it can be refined as needed before launching a second location. Effective forecasting of inventory needs, future demands, and strategic staff scheduling will enhance the efficiency and success of the second location.

Impact of Advertising on Product Demand

Advertising plays a crucial role in driving sales by connecting consumers to products. It creates value, engages customers, enhances competitive advantage, and increases business profits. However, simply allocating more funds to advertising does not guarantee increased sales. Wild Dog Coffee Company’s owners must strategize effective advertising by building a strong brand, targeting the right audience, and creating value for customers. While advertising budgets can drive sales, various cost-effective marketing approaches can also be successful. Social media platforms like Facebook and Twitter are excellent resources for affordable ad campaigns that reach large audiences. Spending $20 per day on Facebook can target many consumers based on specific interests, locations, demographics, and age. Targeting consumers with similar interests to the current customer base can significantly contribute to business growth. Therefore, if Wild Dog Coffee Company finds that its current advertising budget is sufficient, it is crucial to ensure that the right audience is targeted to avoid wasted marketing efforts. Various marketing tools can impact the company’s future sales at both current and new locations.

Forecasting Techniques

Forecasting is critical as it affects every aspect of a company. Understanding a product’s demand pattern is essential to maintaining adequate inventory and staying ahead of trends. This is particularly vital in the beverage industry due to its seasonal demand patterns. Wild Dog Coffee Company must be prepared to handle these specific patterns, whether daily, weekly, monthly, or seasonal, to remain competitive. The historical data supporting seasonal changes is used to plan for future demands. The forecast model for the required pounds of espresso beans for the seventh month is derived from the table below, based on a monthly advertising budget of $1,350.

Appendix A: Espresso Bean Use and Advertising Dollars

Appendix B: Forecast Linear Regression Model

Advertising Dollars (x)	Lbs./Beans (y)
$1,000.00	900
$1,100.00	1000
$1,200.00	1100
$1,300.00	1200
$1,400.00	1300
$1,500.00	1400

Regression Model: f(x) = 0.79x + 188.23
R² = 0.95

Appendix C: Forecast for Month 7 Based on Regression Model

Month	Advertising Dollars (x)	Lbs./Beans (y)
1	$1,050.00	987
2	$1,500.00	1412
3	$1,000.00	1020
4	$1,250.00	1140
5	$1,500.00	1322
6	$1,500.00	1399
7	$1,350.00	1253

The simple linear regression method was employed to create the forecast in Appendices B and C. Using the formula y = 0.7885x + 188.23, it is forecasted that 1,253 pounds of espresso beans will be needed in the seventh month with an advertising budget of $1,350.00. The analysis indicates that the company would need to prepare a daily average of 445 espresso beverages, requiring approximately 41.76 pounds of espresso beans. The R² value of 95.18% suggests that advertising dollars predict the need for espresso beans accurately. However, advertising expenditure should not be the sole factor considered; customer trends and seasonal fluctuations are also important when determining inventory needs.

Inventory Management Analysis

Inventory management aims to efficiently manage stocking, ordering, storing, and using inventory to meet customer demands and maintain product value. Factors influencing inventory management include handling and storage costs, cost of capital, and inventory shrinkage. For Wild Dog Coffee Company, the monthly demand for espresso beans is 14,000 pounds, requiring 56 packages per month, each containing 25 pounds. The per unit cost is $225, with annual holding costs of $0.10 per unit. The following figure outlines the monthly and annual costs per package.

Appendix D: Inventory Management Costs

Demand Number of Orders	56
Monthly Quantity Demanded (lbs.)	1400
Volume per Order (lbs.)	25
Ordering Costs	Cost/lb: $9.00
Cost/Package	$225.00
Holding Costs	Holding Cost per Unit: $0.10
Monthly Holding Cost	$1.88
Total Monthly Cost	$22.50

Continuous Review System (Q)

The Continuous Review System continuously tracks inventory using a stock-keeping unit (SKU) number, providing real-time updates on inventory levels. This system automatically triggers new inventory orders when stock levels reach the reorder point. The advantages include real-time inventory tracking, reduced ordering costs, and accurate accounting. However, the system is costly to implement, may have discrepancies between actual and recorded inventory, and requires training for employees.

Periodic Review (P) System

The Periodic Review System involves reviewing inventory levels at scheduled intervals to determine if new orders are necessary. This non-automated system requires manual inventory counts. Advantages include lower implementation costs, standardized delivery times, and potential discounts from vendors. However, it may increase error rates due to manual counting, requires accurate record-keeping, and can be time-consuming.

To effectively manage inventory demand, both the Continuous Review System and Periodic Review System offer valuable approaches. Evaluating their advantages and disadvantages is essential for Wild Dog Coffee Company’s management to ensure smooth operations.

Workforce Scheduling

Effective staff scheduling is crucial for successful company operations. Management should consider employees’ preferred hours and days before creating the workforce schedule to avoid negatively impacting productivity. Schedules should be posted at least a month in advance to allow employees to prepare. There are two primary scheduling techniques: fixed and rotating schedules. Fixed schedules offer predictability but may lead to burnout and lower flexibility. Rotating schedules provide a better work-life balance but may complicate scheduling and teamwork.

Recommendations

Wild Dog Coffee Company aims to provide exceptional espresso beverages and excellent customer service. To achieve this, the company should use the Continuous Review System for inventory management due to its real-time data and efficiency despite higher implementation costs. An automated inventory system aligns with lean principles, reducing waste and improving efficiency. For workforce scheduling, a fixed schedule is recommended to enhance employee morale and reduce overtime costs. Hiring an additional part-time non-barista will alleviate employee workload and prevent excessive overtime, with fixed scheduling being preferred by most employees.

References

Brachmann, S. (n.d.). Differences Between Demand Planning vs. Demand Management. Retrieved from Small Business Chron: https://smallbusiness.chron.com/differences-between-demand-planning-vs-demand-management-23565.html

Callarman, S. (2020, December 9). What is Inventory Holding Cost? The Price for Ecommerce Storage. Retrieved from Ship Bob: https://www.shipbob.com/blog/holding-costs/

Robertson, T. (n.d.). The Disadvantages of the Continuous Inventory System. Retrieved from Chron: https://smallbusiness.chron.com/perpetual-inventory-retail-mean-22738.html

Sherman, F. (2019, January 31). What is the Difference Between a Periodic and Continuous Inventory Review Policy? Retrieved from Chron: https://smallbusiness.chron.com/difference-between-periodic-continuous-inventory-review-policy-30967.html