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

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

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Capella university

MBA-FPX5016 Operations Management for Leaders

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Date

Introduction

In the modern competitive business landscape, companies face fierce competition to attract and retain customers. Demand plays a crucial role in ensuring that a company operates efficiently and remains competitive. A well-developed demand management plan acts as a blueprint for a company’s success by not only forecasting future demand but also by aligning supply with demand. This proactive approach enables companies to seize opportunities, optimize resources, and adjust to changing market conditions. Wild Dog Coffee Company, a locally-owned business with a single coffee shop, aims to expand its operations by opening a second location.

The company offers a wide variety of espresso drinks, along with a small breakfast and lunch menu. While the core processes of the business will remain the same, there may be slight variations in the menu. This report aims to provide an in-depth analysis of Wild Dog Coffee Company’s demand management plan, including forecasting, inventory scheduling, staffing scenarios, and recommendations for effectively managing demand.

Impact of Advertising on Product Demand

Advertising significantly impacts product demand by influencing consumers’ tastes and preferences. It helps in creating brand awareness and allows businesses to communicate the benefits of their products or services effectively. By drawing attention to what a brand offers, advertising encourages consumers to try new products, ultimately boosting demand. A well-executed advertising campaign can target niche segments successfully and lead to increased customer engagement. However, advertising campaigns must be carefully planned to avoid negative perceptions, as poorly executed advertisements can harm a brand’s image (Krajewski, Malhotra, & Pitzman, 2019). In the case of Wild Dog Coffee Company, advertising expenditures are positively correlated with espresso demand. As advertising budgets increase, so does the demand for espresso beans, making advertising a key driver for attracting new customers.

Analyze Demand Forecasting for Espresso Beans

Demand forecasting involves analyzing historical sales data to predict future demand. A flexible demand management plan allows companies to adapt to business growth and market fluctuations (Banker, 2017). For Wild Dog Coffee Company, demand forecasting focuses on predicting espresso bean consumption based on advertising expenditures. The historical data provided reveals a clear correlation between the amount spent on advertising and the demand for espresso beans. The relationship is further analyzed through linear regression, where the regression equation is used to predict future demand. For instance, with an advertising budget of $1,350 for the upcoming month, Wild Dog Coffee Company is forecasted to require approximately 1,253 lbs. of espresso beans.

Table: Relationship Between Advertising Dollars and Product Demand

Month	Advertising Dollars Spent	Lbs. of Espresso Beans Used
January	$1,050	987
February	$1,500	1,412
March	$1,000	1,020
April	$1,250	1,140
May	$1,500	1,322
June	$1,500	1,399

This table highlights the direct relationship between advertising expenditures and espresso bean demand. The data shows that increases in advertising dollars consistently lead to higher demand for espresso beans, while reductions in advertising result in a corresponding decline in demand.

Inventory Management Analysis

Effective inventory management is essential for balancing the costs of holding inventory while ensuring adequate supply. Wild Dog Coffee Company, being a small business, needs to carefully manage its inventory to avoid excessive holding costs and potential shrinkage due to the short shelf life of espresso beans. The company faces the challenge of ordering and storing the appropriate amount of inventory while considering the holding costs, which are estimated to be $1.88 per unit per month. The company’s demand for espresso beans is approximately 1,400 lbs. per month, with beans shipped in 25-pound packages.

Approaches to Inventory Management

Wild Dog Coffee Company can adopt two inventory management approaches: Economic Order Quantity (EOQ) and Material Requirement Planning (MRP).

• Economic Order Quantity (EOQ) is a method used to determine the optimal number of units a company should order to minimize inventory costs. By using the EOQ model, Wild Dog Coffee Company can maintain an adequate inventory level without tying up too much capital.
• Material Requirement Planning (MRP) is a computerized system that calculates the number of raw materials required to meet customer demand while minimizing inventory levels. MRP works backward from the final product to determine the necessary components and raw materials. For Wild Dog Coffee Company, MRP can help ensure a smooth flow of inventory to meet customer demand efficiently.

Recommendation of Inventory Management Plan

It is recommended that Wild Dog Coffee Company utilize the EOQ model for its inventory management. This approach would allow the company to order the optimal quantity of espresso beans while minimizing holding costs. Since the company only stocks one type of espresso bean and the demand rate is relatively steady, EOQ is a suitable and cost-effective solution for managing inventory.

Business Scheduling Management

Effective business scheduling is essential for employee productivity and satisfaction. The scheduling process involves allocating resources and time to ensure smooth business operations. Wild Dog Coffee Company has two different staffing models, each with its advantages and disadvantages.

Table: Comparison of Staffing Scenarios

Scenario	Staffing Model	Weekly Payroll Cost
Scenario 1	1 full-time barista, 3 part-time baristas, 1 full-time non-barista, 2 part-time non-baristas	$2,240
Scenario 2	2 full-time baristas, 1 full-time non-barista, 4 part-time non-baristas	$2,120

Both scenarios involve fixed schedules, which offer predictability for employees. Scenario 1 has higher payroll costs but may offer more stability for part-time employees, while Scenario 2 reduces payroll costs and provides a better balance between full-time and part-time staff.

Flexible Work Schedule and Turnover Considerations

In this scenario, there is no overtime, meaning employees will not receive work calls at unusual or inconvenient times. Sundays are designated as days off, similar to Scenario 1. However, in Scenario 2, the scheduling becomes more flexible since there are four part-time non-baristas. Wild Dog Coffee Company should be prepared for higher turnover rates among part-time workers. If an employee leaves, the company can anticipate this and adjust accordingly.

Some disadvantages of Scenario 2 include the potential for high employee turnover. Since part-time non-baristas work fixed hours each week with changing schedules, this could contribute to higher turnover. Additionally, frequent changes in staff might lead to inconsistencies in service quality, as new non-barista workers will need to adjust and learn the company’s standards.

Recommended Staffing Plan for Wild Dog Coffee Company

For an efficient scheduling model, Scenario 2 is recommended for several reasons. Many employees prefer a fixed work schedule, which Wild Dog Coffee Company can implement to reduce costs while maintaining productivity. A fixed schedule, combined with the absence of overtime, enhances employee satisfaction and increases overall efficiency.

The proposed staffing model includes full-time baristas paired with part-time non-baristas. This structure ensures work is divided evenly, which helps maintain service consistency. Part-time non-baristas will learn from full-time employees, reducing the need for costly overtime payments. A cost comparison between the two scenarios shows that Scenario 1 has a weekly cost of $2,240, whereas Scenario 2 costs $2,120. Over 52 weeks, Scenario 2 would save the company $6,000 annually, making it a more economical option.

Conclusion

Wild Dog Coffee Company is poised for growth, with plans to expand into a new location. However, expansion brings challenges, particularly the need for a robust Demand Management Plan. This plan will help the company allocate resources more effectively, utilizing historical data to forecast future demand. Advertising expenditure has been shown to have a significant impact on the demand for espresso beans, with a variance of 95%, leaving only 5% attributed to other factors.

Maintaining appropriate inventory levels is another critical factor for the company’s efficiency. By employing the Economic Order Quantity (EOQ) method, Wild Dog Coffee Company can minimize both holding and ordering costs, ensuring they meet demand without overstocking. Additionally, employee productivity and satisfaction are essential, and a fixed schedule with a mix of full-time and part-time employees is recommended. This model not only reduces costs but also prevents the need for overtime, giving employees more predictability and work-life balance.

While Wild Dog Coffee Company faces several challenges, implementing a strategic Demand Management Plan will help achieve its long-term goals.

References

Advantages and Disadvantages of Economic Order Quantity. (2021). Retrieved from https://www.letslearnfinance.com/advantages-disadvantages-economic-order-quantity.html

Advantages and Disadvantages of Utilizing Materials Requirements Planning (MRP) Systems. (2021). Retrieved from https://www.planettogether.com/blog/advantages-and-disadvantages-of-utilizing-materials-requirements-planning-mrp-systems

Croxton, K. L., Lambert, D. M., García-Dastugue, S. J., & Rogers, D. (2002). The Demand Management Process. International Journal of Logistics Management, 13(2), 51-66. Retrieved from https://doi.org/10.1108/09574090210806423

Hayes, A. (2019, May 8). R-Squared definition. Investopedia. Retrieved from https://www.investopedia.com/terms/r/r-squared.asp

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

Krajewski, L. J., Malhotra, M. K., & Pitzman, L. P. (2019). Operations management: Processes and supply chains (12th ed.). New York, NY: Pearson.

Lee, J., Brown, M., & Fairchild, G. (1989). Some observations on the impact of advertising on demand. Agribusiness, 5(6), 607-618. doi: 10.1002/1520-6297(198911)5:63.0.co;2-i

Material Requirements Planning (MRP) Definition. (2021). Retrieved from https://www.investopedia.com/terms/m/mrp.asp

Ong, M. (n.d.). 5 Ways to make employee scheduling easy. Bplans. Retrieved from https://articles.bplans.com/5-ways-to-make-employee-scheduling-easy

Table: Cost Comparison Between Scenario 1 and Scenario 2

Scenario	Weekly Cost	Annual Cost	Savings per Year
Scenario 1	$2,240	$116,480	$0
Scenario 2	$2,120	$110,240	$6,000

Table: Employee Turnover Risk

Staff Type	Fixed Hours	Turnover Risk	Impact on Service
Full-Time Baristas	Yes	Low	Consistent service quality
Part-Time Non-Baristas	Yes	High	Potential for inconsistency

Table: Scheduling Flexibility

Schedule	Overtime Availability	Flexibility for Employees	Cost Impact
Fixed Work Schedule	No	High	Reduces overtime costs
Part-Time Non-Baristas	Yes, flexible	Medium	Higher turnover potential