Demand Management Plan 2

Prepare a 7-page demand management plan, including a forecasting, inventory management,
and scheduling analysis, as well as recommendations, for a provided scenario or business of
your choice.
Introduction
Scenario
For this assessment, choose either Option 1 or Option 2. You do not need to do both. You will
apply one of these scenarios in the Requirements below. Both options will be graded using the
same scoring guide.
Option 1
Wild Dog Coffee Company, a locally owned company with a single coffee shop location, serves
a wide selection of espresso beverages, small breakfast and lunch menu items, and a limited
evening menu. The company is planning to expand the business by adding an additional
location. While different menu items may be tested at the new location, their core processes will
remain the same. You have been working on a process improvement in preparation for the
expansion and are now turning your attention to demand management.
Option 2
If you chose Option 2 for Assessment 1, use the same business for this assessment, or select a
different business. Note that it is recommended that you use the same business for each
assessment in this course, using the following criteria for your selection:
● The company fits the assessment requirements and you have access to the information
needed to complete the assessment.
● The business information is disclosed in the assessment for faculty’s reference.
● You can distribute the business data without disclosing confidential information.
Contact faculty with questions.
Your Role
Option 1
As an owner of Wild Dog Coffee Company, you and your business partners are planning the
opening of a second location. You need to prepare an analysis and recommendations for
demand management, including forecasting, inventory, and scheduling, for your current
location, so you can refine the model before opening the second location.
Option 2
Your boss, a director, has tasked you with a demand management project. She is relying on you
to prepare an analysis and recommendations for demand management that can be presented to
the executive team of the company. You completed a special project for her a few months ago
that went very well, and you are pleased to have received this new assignment.
Requirements
Include the following in your demand management plan:
● Assess the impact of advertising on product demand.
○ If using Wild Dog Coffee Company, the following basic assumptions will help you
prepare a demand forecast:
The other owners of Wild Dog Coffee Company handle the business’ marketing and sales
functions, and they believe that advertising expenditures impact the sale of coffee beverages.
They want you to confirm whether or not their advertising dollars are driving sales. Here is what
was agreed upon by all the owners:
Questions Responses
How many espresso beverages are made
each hour?
30, on average
How many ounces of espresso beans are
used for each beverage?
1.5 ounces
How many hours per day is the coffee
shop open?
6:00 a.m.–8:00 p.m., Sunday–Saturday
How many days each month is the
business open?
364 days per year. The coffee shop is closed
on Christmas day.
You have the following six months of data to work with for pounds of espresso beans (y) used
each month and monthly advertising expenditures (x):
Month Lbs/Beans (y) Advertising Dollars (x)
1 987 $1,050
2 1,412 $1,500
3 1,020 $1,000
4 1,140 $1,250
5 1,322 $1,500
6 1,399 $1,500
● Interpret the forecasting model for the selected product.
○ Use a simple linear regression model to show your forecast.
○ If using Wild Dog Coffee Company, forecast the pounds of espresso beans
needed for month 7 if the advertising budget for month 7 is $1,350. Interpret the
model and respond to the following questions for Wild Dog Coffee Company:
■ How many espresso beverages will the company need to prepare, on
average, each day?
■ How many pounds of espresso beans will the company need, on average,
each day?
■ To what extent do advertising dollars predict the need for espresso
beans?
● Prepare an inventory management analysis for the selected product.
○ In your analysis, include two different approaches to inventory management.
What are the pros and cons of each system you analyzed?
■ If using Wild Dog Coffee Company, the following provides additional
information you have gathered from the inventory management analysis:
■ Since Wild Dog Coffee Company is small, the company must
manage inventory very carefully. While larger companies can have
lots of inventory on the shelf, Wild Dog simply does not have the
cash to do that. As such, you have a number of pressures for
small inventories. Wild Dog does not have the ability to store a lot
of beans, to cover the cost of capital, or to withstand unnecessary
expenditures for taxes, insurance, and shrinkage. Shrinkage is
important because roasted espresso beans only maintain their
optimal freshness for two weeks.
■ Demand is approaching 1,400 pounds of espresso beans per
month.
■ Only one type of espresso bean is stocked.
■ Demand is not constant on a daily or weekly basis.
■ If you run out of espresso beans at any point, you will have to
close the business until the next shipment of beans arrives.
■ Espresso beans are shipped in 25-pound packages. (This is your
base inventory unit.)
■ The cost per pound of beans averages $9.00.
■ Espresso beans are delivered seven (7) days after placing the
order and on any day of the week.
■ Shipping is free on orders over $250. Otherwise, shipping is
$19.95 per order, regardless of weight. (This is the only ordering
cost you incur.)
■ Holding costs are 10 percent/year/unit.
■ Standard deviation for daily demand is 1.84 pounds.
● Analyze the business’ scheduling management.
○ In your analysis, detail two different staffing scenarios for Wild Dog Coffee
Company or your selected business. What are the pros and cons of each staffing
scenario?
○ Use a Word table or Excel spreadsheet to show both staffing scenarios for each
day of the week. Include the daily and weekly total staffing costs and number of
hours worked for each employee.
■ If using Wild Dog Coffee Company, the following provides additional
information you have gathered from the staffing analysis:
■ Shifts have been scheduled according to who wants to work which
shift. This has generally worked out well, but you realize you need
to tighten up the scheduling process in order to optimize a staffing
model. Two employees are required to make a coffee beverage.
One employee takes the orders, and a barista makes the coffee
drink and hands it to the customer.
■ Baristas are paid $14/hour, regardless of whether they are
full-time or part-time.
■ Full-time employees (up to 40 hours/week), other than baristas,
are paid $12/hour.
■ Part-time employees (up to 20 hours/week), other than baristas,
are paid $9/hour.
■ All full-time employees receive company benefits that equate to 15
percent of their hourly rate. (This is known as a benefits load.)
■ All full-time employees are paid at 150 percent of their regular rate
for all hours worked over 40 hours per week. Full-time employees
can only work a maximum of 50 hours per week. The benefits load
is not applied to overtime hours.
■ All part-time employees are paid at 150 percent of their regular
rate for all hours worked over 20 hours per week. Part-time
employees can only work a maximum of 26 hours per week.
■ It costs $500 to hire each additional employee, and it costs $250
to terminate an employee.
■ Full-time employees are likely to resign if moved to part-time
status.
■ The coffee shop is open 84 hours per week. There are two
additional hours allocated each day for one employee to perform
opening and closing activities. (That is, one hour is allocated for
opening duties and one hour is allocated for closing duties.)
■ Your current level of staffing for coffee beverages is as follows:
i. Baristas – 1 full-time; 3 part-time.
ii. Non-barista – 1 full-time; 2 part-time.
● Recommend an inventory management system and staffing plan for a selected business
and product.
○ Detail the results of your analysis for Wild Dog Coffee Company or your selected
business’ product to substantiate your recommendations.
Deliverable Format
Requirements:
● The demand management plan is to be a minimum of 7 pages, not including the title,
reference, and appendix pages.
● Use a demand management plan template of your choice.
Related company standards:
● The demand management plan is a professional document and should therefore follow
the corresponding MBA Academic and Professional Document Guidelines
● Include the following in the appendix:
○ Linear regression model for product forecasting.
○ Word table or Excel spreadsheet for staffing scenarios.
● Use 2–3 scholarly or academic sources, where applicable, one of which must come from
the Wall Street Journal, Forbes, or MIT Sloan Management Review.
● Use APA formatting for citations and references.