Busi5016Assessment2

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Wild Dog Coffee Company Demand Management Plan 1 Wild Dog Coffee Company Management Plan Professor Elmer Marcia Clarke MBA-FPX5014 Capella University January 4, 2024

Wild Dog Coffee Company Demand Management Plan 2 Introduction Wild Dog Coffee Company stands as a locally owned and operated coffee shop, currently operating as a single establishment. We offer a diverse array of espresso beverages, along with a selection of small breakfast and lunch items and a limited evening menu. The ownership of the company is shared among three college friends, including myself and two others. While my primary focus revolves around internal operations, my colleagues concentrate on external aspects like marketing and sales. We are currently undertaking an analysis of our ongoing processes to formulate a demand management plan, particularly for our existing location. Simultaneously, we are strategizing for the potential opening of a second location later this year. Espresso beverages take the lead as the best-selling item on our menu. We are evaluating the impacts of advertising on our sales, scrutinizing inventory management, and refining resource scheduling. This comprehensive review of the demand management plan involves analyzing various scenarios and formulating recommendations to enhance these processes. The proposed suggestions will be collectively reviewed by the three business partners, and upon approval, will be implemented at both our current and future locations. What’s the Impact placed on Advertising on Product Demand Advertising serves as a marketing communication strategy that employs openly sponsored, non-personal messages to promote or sell products, services, or ideas (Stanton, 1984). It stands out as one of the essential marketing tools, facilitating communication of a business's product benefits to customers. To quote Thierer (2012), "Advertising plays the same role in your media diet that vegetables play in your regular diet; most of us would prefer to skip that course and go straight to dessert. But, just like veggies, advertising plays an important role in sustaining a body." At Wild Dog Coffee Company, advertising has been instrumental in driving sales. To comprehend its impact on espresso product sales, we are conducting an analysis of advertising costs and their effects on espresso sales. The linear regression diagram presented in figure 2 of the appendix corresponds to the data in figure 1. This data illustrates the amount of espresso beans processed over the last six months in comparison to the advertising dollars spent at Wild Dog Coffee Company's existing location. A linear regression plot graphically represents the linear relationship between an independent variable (advertising dollars) and a dependent variable (amount of espresso beans used). The regression analysis depicts the strength of the relationship and the dispersion of results. This plot, created using the regression function in Microsoft Excel 2016, calculated the sample correlation coefficient (r). The (r) value gauges the direction and strength of the relationship between the two variables. The (r2) value, or coefficient of determination, measures the proportion of variation in the dependent variable explained by the independent variable, indicating how well the regression model fits the data. With an (r2) value of 0.9514, very close to 1, a robust correlation between advertising dollars and espresso beans is evident. This suggests a strong positive relationship, implying that advertising expenditures explain 95 percent of the sales variation.

Wild Dog Coffee Company Demand Management Plan 3 Analysis for the seventh month To consume 1,253 pounds of espresso beans within one-month, Wild Dog Coffee assumes daily operations with thirty days in the month. Consequently, a daily usage of 41.77 pounds of coffee is required. Assuming 1.5 ounces of beans are used per beverage, the company needs to prepare 445.6 drinks daily or maintain a pace of thirty-two (32) beverages per hour throughout the entire seventh (7th) month. The regression analysis highlights a direct correlation between advertising dollars and the quantity of espresso beans needed for the operation. As advertising dollars directly influence sales, the coefficient of determination (r2) indicates a remarkably strong connection to the amount of beans required for efficient operations. With an (r2) value suggesting that 95 percent of the variation in sales can be explained by advertising expenditures, this underscores the significant role of advertising in influencing operational needs. Inventory management analysis "Inventory management refers to the process of ordering, storing, and utilizing a company's inventory. This encompasses the oversight of raw materials, components, and finished products, along with the management of warehousing and processing of such items" (Hayes, A, 2021). Inventory management is a crucial aspect for all businesses, including Wild Dog Coffee Company. It involves making decisions about when to restock, when to procure raw materials, at what price, when to sell the finished product, and at what price. Inventory stands as a vital asset for the company, serving as a cornerstone for selling products and generating profits. Inadequate stock levels can be detrimental to a company, while excess inventory can incur costs related to storage, and pose risks of damage and theft. Organizations are faced with the decision of whether to maintain a small or large inventory. Each option has its merits and drawbacks, necessitating a careful evaluation by the organization before determining the most suitable approach. Large inventory Companies opting for extensive inventories can enhance customer service capabilities. With surplus stock, businesses can promptly fulfill rush orders or larger-than-normal requests without relying heavily on suppliers. Maintaining higher inventory levels allows organizations to

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Wild Dog Coffee Company Demand Management Plan 4 leverage bulk discounts from suppliers, contributing to increased profits or the ability to offer discounts and attract new customers. Additionally, a substantial inventory empowers companies to better manage customer deliveries, responding promptly to increased demand and meeting customer expectations. In manufacturing, higher inventory levels can reduce setup costs associated with changes in production items, contributing to overall cost savings in labor, equipment utilization, and transportation. Many of these advantages stem from the economies of scale achieved through holding higher inventories. However, adopting a strategy of maintaining higher inventory levels also poses challenges for organizations. This approach typically requires increased upfront investments, as the inventory is considered a current asset with substantial value. With capital tied up in stock, there may be reduced cash flow available to the organization. Adequate storage space becomes essential, incurring potential significant costs based on the nature of the inventory. Higher inventory levels also necessitate additional expenses for insurance coverage to protect the investment. The workforce managing this expanded inventory will incur higher labor costs. Furthermore, the strategy of holding a large inventory introduces the risk of products becoming outdated before reaching the customer, leading to losses due to waste. As such, organizations need to carefully weigh the benefits and drawbacks before deciding on their inventory strategy. Small inventory Companies opting for a small inventory management approach can achieve more efficient product management. Maintaining a smaller inventory allows organizations to enjoy reduced overheads related to decreased storage space requirements, fewer staff needed for product management, lower taxes and insurance expenses, and diminished waste. The risk of products expiring is lower due to faster turnover. Lower inventory levels also mean that customers receive fresher products, and the organization benefits from increased working capital. Wild Dog Coffee Company embraces these advantages, driven by its low inventory levels influenced by limited storage space and minimal available capital. This strategy ensures that more funds are accessible to manage various business aspects. However, Wild Dog Coffee Company's approach of maintaining a small inventory of espresso beans may present potential drawbacks if not carefully managed. Holding a limited quantity of espresso beans raises the risk of product depletion during periods of higher demand, potentially leading to closures and revenue losses, negatively impacting customer service. Low inventory levels might necessitate ordering products at higher-than-average prices, including increased shipping costs. The need for expedited product receipt will also contribute to higher labor costs, as staff members must be available to receive the products at the coffee shop. Careful management is crucial to mitigate these potential negative impacts of the small inventory strategy. Two approaches to managing inventory Inventory management systems address three fundamental questions: the level of control to impose on an item, the optimal order quantity, and the appropriate timing for placing orders (Krajewski, L. J., Malhotra, M. K., & Pitzman, L. P. 2019). These questions play a pivotal role in effectively managing inventory levels, which significantly influence a business's profitability. The following paragraphs explore two widely accepted inventory management methods, outlining the pros and cons of each approach.

Wild Dog Coffee Company Demand Management Plan 5 From the current operations, data was gathered indicating a demand approaching 1,400 pounds of espresso beans per month. The inventory comprises a single type of espresso bean, with demand not following a constant daily or weekly pattern. Running out of espresso beans would necessitate closing the business until the next shipment arrives. Espresso beans are supplied in 25-pound packages, costing an average of $9.00 per pound. Delivery occurs seven (7) days after placing an order and is available on any day of the week. Shipping is free for orders exceeding $250.00; otherwise, a flat rate of $19.95 applies, irrespective of weight. Holding costs are 10 percent per year per unit. The standard deviation for daily demand is 1.84 pounds, assuming an average lot size of 350 pounds. This dataset will undergo analysis using continuous (Q) and periodic (P) review systems. The continuous review (Q) system A continuous review (Q) system, alternatively known as a reorder point (ROP) system or fixed order quantity system, operates by continuously calculating the stock level of a product in real-time as it enters or exits the system. Thanks to modern technology, this calculation occurs dynamically and in real-time. Additionally, this technology facilitates the automatic initiation of stock orders as soon as the inventory level drops below a predefined reorder point. Pros: 1. The continuous review system enables the independent monitoring of each stock-keeping unit (SKU), allowing for individual reordering as needed without waiting for other products. This reduces overall ordering and holding costs for inventory, benefiting the business. 2. With the continuous review inventory management system, the organization can establish distinct lot sizes for different SKUs, effectively managing factors like storage space, bulk discounts from suppliers, and transportation costs. 3. This method permits the organization to maintain low safety stock levels, as individual SKUs are automatically reordered when the reorder point is reached. Cons: 1. There is a potential for stock-outs during the lead time, especially if there is a sudden increase in demand. While Wild Dog Coffee maintains minimal safety stock to address such issues, there is no guarantee that it will be sufficient. 2. Stock-outs can have a negative impact on customer service, as customers may choose to go to a competitor. In the case of Wild Dog Coffee Company, this poses a risk to customer satisfaction. 3. The continuous review system often incurs higher costs due to the necessary investments in labor and technology for constant inventory level monitoring.

Wild Dog Coffee Company Demand Management Plan 6 The periodic review (P) system

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Wild Dog Coffee Company Demand Management Plan 7 The periodic review (P) system, also known as a fixed interval reorder system or periodic reorder system, is an alternative method for inventory management. In this approach, inventory levels are reviewed at regular intervals, usually following a fixed schedule. This system entails a fixed order pattern and generally maintains a consistent delivery time. Pros: 1. The periodic review system offers the advantage of a fixed order interval, streamlining the scheduling of delivery and order times. This predetermined schedule contributes to more efficient inventory management, reducing the time spent on analysis. 2. With the periodic review system, organizations can consolidate different Stock Keeping Units (SKUs) in a single order. This consolidation not only cuts transportation costs but also makes the company eligible for bulk order discounts. Additionally, it results in savings on labor costs associated with overall inventory management. Cons: 1. One drawback of the periodic review system is that the inventory status is only known during the scheduled review. This means that any stockouts may go unnoticed until the designated review time, potentially leading to inaccurate accounting and projections. 2. This method tends to provide limited control over inventory management.

Wild Dog Coffee Company Demand Management Plan 8

Wild Dog Coffee Company Demand Management Plan 9 Schedule Management Organizations formulate both long-term and short-term plans to guide their operations. Long- range Sales and Operations Planning (S&OP) acts as the overarching strategy aligning with organizational goals. These S&OP objectives are further detailed into resource plans with a shorter time horizon, and scheduling then translates these resource plans into specific operational tasks (Krajewski, L. J., Malhotra, M. K., & Pitzman, L. P. 2019). A schedule serves to break down organizational operational plans into actionable tasks. It requires inputs from higher-level plans and strategies, including forecasts, customer orders, staffing and machinery availability, due dates, and supplier constraints. Consideration of system constraints, such as time-off requests and environmental impacts, is essential in creating schedules. The generated schedule must account for the necessary equipment, human resources, and raw materials for product or service development. Common scheduling tools include the Gantt chart, Gantt workstation chart, or workforce scheduling. In the analysis for Wild Dog Coffee Company below, the Gantt Workstation Chart and the Gantt Progress Chart will be used, along with an examination of the pros and cons of each scheduling method. Assumptions for the analysis include the need for two employees to prepare a coffee beverage—one taking orders, and a barista making the drink and handing it to the customer. Employee compensation is outlined, considering factors like full-time or part-time status, benefits, overtime rates, and hiring/termination costs. The coffee shop operates 84 hours per week, with an additional two hours allocated daily for opening and closing activities. The existing staffing levels for coffee beverages are provided below.  Baristas – 1 full-time; 3 part-time.  Non-barista – 1 full-time; 2 part-time

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Wild Dog Coffee Company Demand Management Plan 10 Gantt Workstation Chart Schedule The Gantt workstation chart, depicted in Figure 4 of the appendix, serves as a scheduling tool for resources and facilities, illustrating how Wild Dog Coffee Company's staff can be planned. This type of Gantt chart utilizes the Y-axis to represent employees and the X-axis for days of the week. Notably, Monday exhibits the highest total daily staff hours, reflecting historical customer patterns with increased traffic on Monday mornings. The remainder of the week is scheduled consistently, accounting for an expected consistent customer flow each day. Each day is planned with a minimum of 24 total staff hours to adequately cover workstations, considering legal requirements regarding regular working hours and overtime implications. The schedule ensures that no employee works overtime, minimizing business expenses. To address resource needs for opening, closing, and emergencies, Wild Dog Coffee may benefit from adding one more part-time employee or allowing an existing employee to work overtime. The schedule calculates the maximum allowable hours each employee can work without overtime pay. Wild Dog Coffee does not allow overtime, except in unforeseen high-demand conditions. Columns in Figure 4 detail the weekly hours worked by each employee, raw labor costs, and the benefit load for full-time employees. These calculations reveal the need for 180 staff-hours weekly, translating to $2,296 in labor costs before accounting for opening, closing, and overtime. Figure 5 in the appendix breaks down the daily costs for each position, helping calculate the daily raw labor costs. After factoring in the benefits load for full-time employees, the daily staffing cost is determined. The total of daily costs aligns with the weekly labor cost. To cover additional opening and closing hours, Wild Dog Coffee can choose between paying overtime or hiring a new employee. Assuming a cashier can handle these duties, hiring an additional part-time cashier incurs an extra $126 in labor costs. The cost to hire is $500, and the hiring expense would be recuperated from overtime savings in 111 weeks, making this a viable long-term business strategy. However, the current schedule makes it challenging to confirm if all shifts have both a cashier and a barista covering all opening hours. Pros:  Gantt workstation charts offer a visually intuitive tool that all team members can readily comprehend, providing a snapshot of the tasks assigned to each resource and their respective timing. Cons:  The Gantt workstation chart method of scheduling may not be optimal for Wild Dog Coffee Company, as it lacks specific details like the exact start and end times for each employee. To enhance effectiveness, a more detailed breakdown of the schedule is necessary. Gantt Progress Chart "A Gantt chart is a valuable tool for scheduling, managing, and tracking specific tasks and resources within a project. This visual representation illustrates the project timeline, encompassing both planned and completed work over a defined period. Project managers leverage Gantt charts to communicate project status, plans, and to ensure the project stays on course" (Grant, M., 2021). The Gantt progress chart, as applied to Wild Dog Coffee Company, provides a graphical depiction of the project or employee schedules, facilitating daily updates to reflect actual worked hours and offering an accurate overview for management.

Wild Dog Coffee Company Demand Management Plan 11 Figure 6 in the appendix illustrates the Gantt Progress Chart for the analysis conducted on Wild Dog Coffee Company's staffing requirements. This schedule enhances visibility by detailing the actual start and end times for each employee. Attempts were made to maximize each employee's scheduled hours within the allowable limits, while the red bars indicate instances where baristas and cashiers will incur overtime costs, amounting to $170 weekly. The schedule reveals that using the current staff alone cannot fully meet the store's staffing needs, particularly in ensuring continuous coverage with a cashier and barista during opening and closing hours. Given the $500 cost to hire an additional employee, it is advisable for Wild Dog Coffee Company to recruit one more part-time barista. The expense of hiring this employee will be recouped after three weeks, solely through overtime savings. The schedule also provides insights into weekly and daily expenses, along with the associated benefits load. All calculations adhere to the guidelines specified in the analysis requirements above. This schedule optimizes the use of existing resources while acknowledging that full shift coverage without incurring overtime necessitates hiring an additional employee. Pros: 1. The Gantt progress chart offers a clear and visually accessible representation of Wild Dog Coffee Company's staffing plan. 2. It provides an efficient way to grasp the overall staff utilization and allows for easy adjustments, such as shifting schedules. 3. This organized approach accurately communicates the actual resources required to cover shifts. Cons: 1. Gantt progress charts may become overly complex for larger organizations; however, they suit Wild Dog Coffee Company well due to its small team of resources. 2. The length of each bar in the chart does not convey the actual time a staff member works, as it does not account for breaks. 3. Continuous updates are necessary to accurately reflect the actual time worked. Conclusion and Recommendation Due to the size of our small business and the crucial importance of cash flow, meticulous inventory management is imperative. Given the constraints of limited storage capacity and the optimal freshness window of espresso beans for up to two weeks, Wild Dog Coffee Company should adopt a continuous review system for inventory management. Utilizing available technology, fixed order points can be established and updated in real-time, ensuring timely orders during periods of increased demand. This technological solution enables the monitoring and automatic ordering of various stock-keeping units (SKUs), allowing us to maintain minimal inventory levels and maximize cash flow. The analysis reveals that the coffee shop requires an average of one hundred and seventy-five (175) pounds of espresso beans per week, shipped in twenty-five (25) pound packages. Implementing the continuous review system indicates a need for fourteen (14) units per week, with an Economic Order Quantity (EOQ) of thirty-six (36) units. Based on the calculated EOQ, 21 orders per year are necessary, with a reorder point of 46.2 units.

Wild Dog Coffee Company Demand Management Plan 12 The schedule management analysis for Wild Dog Coffee Company involved two different methods to determine the most effective staffing plan. The Gantt workstation chart schedule format lacked the required level of detail for our business type. The Gantt progress chart emerged as the most suitable schedule format for our current needs. Utilizing existing resources at Wild Dog Coffee, considering overtime and operating hour constraints, the Gantt progress chart proved to be the best fit. The analysis revealed that the existing staff is insufficient to operate the business effectively, considering opening hours and office time constraints. To ensure efficient operations without incurring overtime costs, the analysis suggests hiring one additional part-time barista. The associated overtime costs would provide a payback period of three weeks, making this a cost-effective solution for optimal operations.

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Wild Dog Coffee Company Demand Management Plan 13

Wild Dog Coffee Company Demand Management Plan 14

Wild Dog Coffee Company Demand Management Plan 15

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Busi5016Assessment2

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