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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.INTRODUCTIONThis portfolio work project, a demand management plan, will help you demonstrate competency in forecasting, inventory management, and scheduling.SCENARIOFor 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.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.YOUR ROLEAs 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.REQUIREMENTSInclude 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:Wild Dog Coffee Business InformationQuestionsResponsesHow many espresso beverages are made each hour?30, on averageHow many ounces of espresso beans are used for each beverage?1.5 ouncesHow many hours per day is the coffee shop open?6:00 a.m.–8:00 p.m., Sunday–SaturdayHow 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):Espresso Bean Use and AdvertisingMonthLbs/Beans (y)Advertising Dollars (x)1987$1,05021,412$1,50031,020$1,00041,140$1,25051,322$1,50061,399$1,500Interpret 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:Baristas – 1 full-time; 3 part-time.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 FORMATRequirements: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 (available in the MBA Program Resources), including single-spaced paragraphs.In addition to the title and reference pages, 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. mba_fpx5016_butlersullivanapri__assessment2_1.docx Unformatted Attachment Preview Running Head: DEMAND MANAGEMENT PLAN Demand Management Plan of Wild Dog Coffee Company April Butler-Sullivan Capella University Jan. 10, 2020 1 DEMAND MANAGEMENT PLAN Demand Management Plan of Wild Dog Coffee Company Demand Forecast of Wild Dog Coffee Company Are the advertising dollars of Wild Dog Coffee Company driving sales? It is apparent that advertising is driving sales for the World Dog Coffee based on its performance. In Month 1, the cost of advertising was $1,050 and it used 987lbs of espresso beans. In month 2, the cost of advertising was $1,500 and 1,412lbs of espresso beans were used. The increase of costs of advertising by $450 resulted in an increment of 425lb in espresso bean use. The cost from advertising went up by 42.8 percent and espresso beans, which was needed and rose by 43.1 percent by Month 2. In Month 3, the firm reduced the cost of advertising from $1,500 to $1,000 or from 42.8 to 33.3 percent. Similarly, this saw the reduction of espresso beans’ use to 1,020lb from 1412lb or 43.1 percent to 27.8 percent decrease. Month 4 saw an increment in advertising costs from $1,000 to $1,250, which resulted in an increase in the amount of espresso beans used by 11.8 percent. Advertisement cost rose by 25 percent. Month 5 advertisement costs were improved to $1,500 and the amount of espresso beans used increased to 1,322lb. Between Month 4 and 5, advertisement costs rose by 20 percent and espresso beans usage rose by 16 percent. Mo nth 6’s cost of advertisement was $1,500, which still resulted in a 5.8 percent increment in espresso bean usage from Month 5. Thus, there is a direct correlation between espresso bean usage and advertisement costs. Their relational impact is in sync. Data shows that as the Wild Dog Coffee continues to expand its advertisement budget so does their espresso beans’ usage continue to increase. When it they DEMAND MANAGEMENT PLAN reduce the budget, espresso bean usage decreases as well. This indicates that advertisements costs are driving the company’s sales. Linear Regression Forecasting Interpretation for Wild Dog Coffee Liner regression is used to establish the correlation between two continuous variables, namely, independent and dependent variables (Nguyen, 2009). For example, Wild Dog Coffee’s linear regression suggests an upward direction based on its data points. This suggests a positive trend or forecast for the firm. Using a linear regression equation to find values, which reduces the total of a squared deviation, the results of the were derived using the formula Y=mx +b or Y= a+ bx. For Wild Dog Coffee, its linear regression equation is Y= 0.7885x + 188.22. Pounds of Espresso Beans Needed for Month 7 with an Advertising Budget of $1,350 Wild Dog Coffee’s linear regression formula is Y= 0.7885x + 188.22. Y equals the amount of espresso beans and x equals advertising costs. In Month 7, x=$1,350 and y=amount of espresso beans. Based on the linear progression, the amount of espresso beans that will be used for Month 7 will be virtually 1252. Y= 0.7885x + 188.22 = Y= 0.7885 ($1350) + 188.22 Y = 1252.695 lbs. of espresso The Extent to Which Advertising Costs Predict Espresso Beans Required There is a direct association between marketing costs and the amount of espresso beans desired or used for Wild Dog Coffee Company. As the firm increased its advertising costs so did DEMAND MANAGEMENT PLAN its use of espresso beans increase. On the other hand, when the firm reduced the amount of money it spent on advertising, the amount of espresso beans used decreased as well. Using the linear equation, the firm can forecast its inventory needs that are accurate. Espresso Beverages to be Prepared Daily for Month 7 Wild Dog Coffee prepares 30 beverages per hour and each beverage has 1.5 oz. of espresso beans. Since the firm operates 7 days for 12 hours, the number of beverages 37.12 cups. This number was comes by converting 1252.70 lb into ounces, which is 20,043.20 oz of espresso beans used for Month 7. When, each cup uses 1.5 oz. of espresso beans means 13,362.13 cups of espresso would made for that month. If Month 7 has 30 days, when one divides 13,362.13 cups by 30 days the answer will be 445.40 cups/day. Since the firm operates 12 hours daily, the approximate number of beverages made is 37.12 per hour for Month 7. Pounds of Espresso Wild Dog Coffee will Need Daily on Average for Month 7 The number of espresso cups for Month 7 equals 445.40. Each cup requires 1.5 oz of espresso, which means that 668.10 oz. will be utilized daily. The conversion 668.10 into pounds is 41.76 lb. Thus, the average pounds of espresso beans per day for Month 7 will be 41.76 lb. Inventory Management analysis of Espresso Beans For Wild Dog Coffee Company According to Stevenson (2010), Inventory management is defined as a frame work employed in firms in controlling its interests in inventory. One of the key factors for a company to reach its full potential is an efficient management inventory flow across the value chain. According to Koumanakos (2008), inventory management practices have come to be recognized as a vital problem area needing top priority. DEMAND MANAGEMENT PLAN Inventory management and lot sizing are important functions not only to Wild Dog Coffee Company but to any business (Lancioni et al, 1978). This is because there isnt a lot of room for error when it comes to the companys inventory in Wild Dog Coffee Company. Apart from other companies, Wild Dog Coffee Company does not have extra space or extra capital needed to order an excessive amount of inventory for the company. In relation, the company’s espresso bean inventory plays an important role in the company’s sustainability and wellbeing. As mentioned, Wild Dog Coffee Company will come to a standstill or close its stores if it runs out of espresso beans not until another shipment is done. In this research, over 445 cups of the espresso are made daily and therefore the company cannot afford to have any inventory mishaps or be closed due to inventory inaccuracies. Inventory Management Approaches Inventory management approaches are a necessity for every firm. However, concerning Wild Dog Coffee Company, two approaches will be of great benefit. The first approach is the Periodic review (P) system is defined as the classic inventory system where the inventory level is review at a regular time intervals such as weekly, bi-weekly and monthly and guides the decision made concerning how much to order to bring the inventory level up to a given amount. Continuous review (Q) system on the other hand constantly updates the ledger as inventory sells and leaves the store while keeping a running measure of the costs of goods sold (Sherman, 2019). All the two approaches have their advantages and disadvantages however it’s important to note that having an inventory is better than not having any system at all. Advantages and disadvantages of the periodic review (P) system DEMAND MANAGEMENT PLAN Periodic review (P) system sometimes called the periodic recorder covers the following advantages. One, It applies to all business either small or large. Two, it creates a routine by streamlining all delivery schedules. Three, the system is designed to keep up with supply and demand and therefore all the companys demands are met since new orders are placed at the end of each inventory review. Four, it is less expensive. Despite the pros discussed above, this approach presents some cons as well as explained. Using Wild Dog Coffee Company as our case study, observing inventory on a weekly basis or occasionally may not be enough. Advantages and disadvantages of the Continuous Review (Q) system This system is also referred to as a fixed order quantity or a reorder point system. In this, the remaining inventory is trucked by their SKU number each time that a piece of inventory is removed from the system. This is done on a daily basis and it is through this that the company makes decisions as to whether stock needs to be reordered or not. The good thing is this system is based on the frequency of how the system is reviewed. Based on todays modern technology, the review process has been made easier. Everything linked to the companys inventory is linked through one system. This makes keeping up with supply and demand smooth for the company. On the other hand, the only con for this system is the malfunctioning of the system causing the store to shut down unless the records are printed on a daily basis to prevent this tragedy. Inventory Management System Recommended for Wild Dog Coffee Company When it comes to wild Dog Coffee Company and the main goals the Company is trying to achieve with its inventory, there is only one main inventory management system that will help this company flourish. The recommended inventory management system for this company is the DEMAND MANAGEMENT PLAN continuous review inventory management system. So that the company can do, both review the company and keep track of the inventory on a daily basis. Looking at month seven, espresso bean usage is expected to be 125693ibs. But the usage is expected to increase to 1, 40026. This is because the companys espresso bean usage is heavy and the product is only important for up to two weeks. The inventory of the company cannot exceed two weeks. Doing a continuous review, the inventory management system, orders can be placed at whatever times that the company chooses to. Analysis of Wild Dog’s Scheduling Management There are two different staffing structures that are used by Wild Dog Coffee Company. Amongst the many options, the company hires an extra two full-time employees and markets one of their part-time employees and hires one additional staff member. All the two may benefit the company but come with costs. The first scenario indicates that four part-time employees were moved to different days leaving the company’s Monday to Friday shifts with many gaps causing the need for more employee for Monday to Friday. The pro for this scenario is a promotion for an employee and zero gaps in coverage hence allowing breaks to be taken during busy times. Despite the above pros, the scenario presents a con of increasing the cost of having employees which comes with the wage increase. In relation to the above, the second scenario presents a shift of staff members from Saturday to Sunday schedule which leaves gaps in the coverage of Wild Dog Company. The pro for this is that these staff members have to work two days out of the week giving them plenty of time for other activities like going to school, and also extra time discussing the companies DEMAND MANAGEMENT PLAN developmental strategies. The four staff members that were moved to cover Saturday and Sunday shifts will not have to work from Monday to Friday where this can be good for the staff it is a bad for the company. When a new Barrister and new employee needs to be hired, that will add cost to the company and that is not good for the moment. With regards to our case study, $500 is spent by the company every time a new employee is hired and therefore this is a loss for the company. Excel Spreadsheet Explanation of the two Different Staffing Scenarios As described above, the staffing arrangement designed in the first scenario is hiring a fulltime barista and promoting a part-time employee to a full-time barista. The overall cost for this scenario is $3,812. This covers the hiring cost of $500 of a new employee, wages ($3000) and the benefit load ($312) of the full-time employees. Staffing Plan for Wild Dog Coffee Company The First setting may be the best staffing plan recommended for Wild Dog Coffee Company. This structure contains 8 employees in number as compared to the second setting which contains 9 employees in total. With regards to the second setting, it is $780 more expensive than the first one if a comparison is made on a weekly basis. Even if the extra $780 includes the ninth employee, the cost will immediately equal to an extra $3120 every month. If the same job can be done by 8employees at $3120 less every month, The Company should consider taking this. DEMAND MANAGEMENT PLAN References Gibbon, K. (2017, April 8). One Step Ahead: The Importance of inventory planning for SMBs. Retrieved from https://www.forbes.com/sites/kevingibbon/2017/04/05/one-step-aheadthe-importance-of-inventory-planning-for-smbs/ Koumanakos, D. P. (2008). The effect of inventory management on firm performance. International Journal of Productivity and Performance Management, 57(5), 355-369. doi:10.1108/17410400810881827 Krajewski, L. J., Malhotra, M. K., & Pitzman, L. P. (2019). Operations management: Processes and supply chains (12th ed.). New York, NY: Pearson. Lancioni, R., & Howard, K. (1978). Inventory Management Techniques. International Journal of Physical Distribution & Materials Management, 8(8), 385-428. Nguyen, J. (2009, July 19). Regression Basics For Business Analysis. Retrieved from https://www.investopedia.com/articles/financial-theory/09/regression-analysis-basicsbusiness.asp Sherman, F. (n.d.). What Is the Difference Between a Periodic and Continuous Inventory Review Policy? Retrieved from https://smallbusiness.chron.com/difference-between-periodiccontinuous-inventory-review-policy-30967.html Stevenson, B. (2010). Operations Management (10th ed.). New York: McGraw Hill publishing. DEMAND MANAGEMENT PLAN Appendix WILD DOG COFFEE COMPANY WEEKLY SHIFT SCHEDULE WITH PAY # 1 WEEK BEGINNING : Month 7 MON TUE WED THURS FRI SAT SUN HOURS 1/1/2020 1/2/2020 1/3/2020 1/4/2020 1/5/2020 1/6/2020 1/7/2020 Barista Full-time(OPENER) 5-1PM 5-1PM 5-1PM 5-1PM 5-1PM OFF OFF 40.00 Barista Part-time OFF OFF OFF OFF OFF 5-3PM 5-3PM 20.00 Barista Part-time OFF OFF OFF OFF OFF 10-8PM 10-8PM 20.00 Barista Part-time to FULL TIME 12-8PM 12-8PM 12-8PM 12-8PM 12-8PM OFF OFF 40.00 Non Barista Full-time(OPENER) 6-2PM 6-2PM 6-2PM 6-2PM 6-2PM OFF OFF 40.00 Non Barista Part-time OFF OFF OFF OFF OFF 6-4PM 6-4PM 20.00 Non Barista Part-time(Closer) OFF OFF OFF OFF OFF 11-9PM 11-9PM 20.00 NEW NON BARISTA FULL TIME(CLOSER) 1-9PM 1-9PM 1-9PM 1-9PM 1-9PM OFF OFF 40.00 $416 $416 $416 $416 $416 $460 $460 EMPLOYEE ID RATE $14.00 $14.00 $14.00 $14.00 $12.00 $9.00 $9.00 $12.00 PAY BENEFIT LOAD NEW HIRE $560.00 $280.00 $280.00 $560.00 $480.00 $180.00 $180.00 $480.00 $31,000.00 $84.00 $0 $0 $84.00 $72.00 $0 $0 $72.00 $312.00 TOTAL $5.00 $5.00 $3,812.00 WILD DOG COFFEE COMPANY WEEKLY SHIFT SCHEDULE WITH PAY # 2 WEEK BEGINNING : Month 7 EMPLOYEE ID Barista Full-time(OPENER) Barista Part-time Barista Part-time Barista Part-time Non Barista Full-time(OPENER) Non Barista Part-time Non Barista Part-time NEW BARISTA FULL TIME NEW NON BARISTA FULL TIME MON TUE WED THURS FRI SAT SUN HOURS 1/1/2020 1/2/2020 1/3/2020 1/4/2020 1/5/2020 1/6/2020 1/7/2020 5-1PM 5-1PM 5-1PM 5-1PM 5-1PM OFF OFF 40.00 OFF OFF OFF OFF OFF 5-3PM 5-3PM 20.00 OFF OFF OFF OFF OFF 10-8PM 10-8PM 20.00 11-3PM 11-3PM 11-3PM 11-3PM 11-3PM OFF OFF 20.00 6-2PM 6-2PM 6-2PM 6-2PM 6-2PM OFF OFF 40.00 OFF OFF OFF OFF OFF 6-4PM 6-4PM 20.00 OFF OFF OFF OFF OFF 11-9PM 11-9PM 20.00 12-8PM 12-8PM 12-8PM 12-8PM 12-8PM OFF OFF 40.00 1-9PM 1-9PM 1-9PM 1-9PM 1-9PM OFF OFF 40.00 $472 $472 $472 $472 $472 $460 $460 RATE PAY $14.00 $14.00 $14.00 $14.00 $12.00 $9.00 $9.00 $14.00 $12.00 $560.00 $280.00 $280.00 $280.00 $480.00 $180.00 $180.00 $560.00 $480.00 $3,280.00 BENEFITS $84.00 $500 $72.00 $500 $312.00 $1,000.00 $4,592.00 Lbs of espresso beans used 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 200 400 600 800 1000 Advertising Cost 1200 1400 TOTAL $72.00 Linear Regression Chart Wild Dog Coffee Company 0 NEW HIRE $84.00 1600 ... 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