Name
Capella University
MBA-FPX 5016 Operations Management for Leaders
Prof. Name
Date
Wild Dog Coffee Company can support its expansion into a second location by combining demand forecasting, inventory management, and workforce scheduling. A well-developed demand management plan will help the company anticipate espresso demand, maintain sufficient inventory, control operating expenses, and deliver consistent customer service. By analyzing historical sales and advertising data, the company can estimate future espresso bean consumption and make informed decisions about purchasing, marketing, and staffing.
The company currently operates a coffee shop offering espresso beverages, breakfast, lunch, and a limited evening menu. As it prepares to open a second location, management plans to test new menu items while maintaining consistent espresso preparation standards across both stores. This expansion requires a coordinated approach to managing customer demand and operational resources.
This demand management plan evaluates the relationship between advertising expenditure and espresso consumption, applies linear regression to forecast demand, compares continuous and periodic inventory review systems, and recommends purchasing and workforce strategies. It also considers supplier lead times, shipping expenses, inventory holding costs, and the financial constraints that small businesses commonly face.
Demand refers to the quantity of a product or service that customers are willing and able to purchase at a given price during a specific period. Understanding demand helps businesses determine how much inventory to purchase, how many employees to schedule, and how to allocate their marketing budgets. Effective demand management is especially important for businesses that sell perishable or quality-sensitive products and operate with limited financial resources.
Advertising can influence customer demand by increasing brand awareness, communicating product benefits, attracting new customers, and encouraging repeat purchases. However, the impact of advertising depends on several factors, including the target audience, promotional message, marketing channel, competitive environment, and timing of the campaign.
For Wild Dog Coffee Company, advertising will play an important role in introducing the second location to its surrounding community. A targeted marketing campaign can reach nearby residents, commuters, office employees, and other potential customers. Social media platforms such as Facebook and Instagram can promote the opening date, highlight espresso beverages, announce seasonal specials, and encourage customers to share their experiences.
Additional promotional opportunities include email marketing, local search optimization, short-form videos, online business listings, and signage at the existing coffee shop. Partnerships with nearby businesses can also increase brand visibility. For example, collaborating with a local pottery shop to showcase handmade coffee mugs or offering samples at community events may help the company connect with new customers.
Marketing activities should be evaluated using measurable results rather than assumptions. Wild Dog Coffee Company should compare advertising expenditure with espresso sales, bean consumption, promotional redemptions, new-customer visits, and repeat purchases. These measures can help management determine which campaigns are associated with increased demand and where future advertising investments may be most effective.
Demand forecasting helps businesses estimate future product requirements using historical sales patterns and relevant explanatory variables. Although previous sales provide useful information, demand can also change because of advertising, seasonal conditions, local events, competition, and customer preferences.
Wild Dog Coffee Company expects advertising expenditure to be associated with monthly espresso bean consumption. Linear regression can help estimate this relationship by treating advertising expenditure as the independent variable and espresso bean usage as the dependent variable.
The following table presents the company’s historical data for the first six months.
| Month | Espresso beans used (pounds) | Advertising expenditure |
|---|---|---|
| 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 |
The estimated regression equation provided for this analysis is:
[
y = 0.79x + 188.22
]
In this equation, (x) represents monthly advertising expenditure in dollars, and (y) represents the predicted monthly espresso bean consumption in pounds.
The reported coefficient of determination is (R^2 = 0.95). This indicates that the fitted regression model explains approximately 95% of the variation in espresso bean usage within the six-month dataset. However, this result does not establish that advertising alone causes the observed changes in consumption or guarantee that future forecasts will be equally accurate.
Wild Dog Coffee Company plans to spend $1,350 on advertising during Month 7. Substituting this amount into the provided regression equation produces the following estimate:
[
y = 0.79(1,350) + 188.22
]
[
y = 1,254.72 \text{ pounds}
]
The equation therefore predicts approximately 1,255 pounds of espresso beans for Month 7. Using unrounded regression coefficients calculated from the six historical observations produces a forecast of approximately 1,253 pounds. The small difference results from rounding the displayed regression coefficients.
For operational planning, the company can use approximately 1,253 pounds of espresso beans for Month 7, while recognizing that this figure is an estimate rather than a guaranteed consumption level.
Assuming a 30-day month, the projected average daily bean consumption is:
[
\frac{1,253}{30} \approx 41.77 \text{ pounds per day}
]
Because one pound contains 16 ounces, the estimated daily consumption in ounces is:
[
41.77 \times 16 \approx 668.32 \text{ ounces}
]
If each espresso beverage requires 1.5 ounces of espresso beans, the estimated daily beverage volume is:
[
\frac{668.32}{1.5} \approx 446 \text{ beverages}
]
Wild Dog Coffee Company operates from 6:00 a.m. to 8:00 p.m., providing 14 operating hours per day. Based on the projected daily volume, the average production requirement would be:
[
\frac{446}{14} \approx 32 \text{ beverages per hour}
]
This hourly figure is an average, not a requirement for every operating hour. Customer demand is likely to fluctuate throughout the day, particularly during morning commutes, lunch periods, and afternoon visits. Staffing and preparation capacity should therefore reflect actual hourly sales patterns rather than an equal distribution of beverages across all operating hours.
Management must also clarify whether the regression forecast applies to the existing coffee shop, the new location, or both locations combined. This distinction is essential because the forecast should represent the same operational scope as the inventory and staffing decisions based on it.
The regression model provides an initial basis for connecting advertising expenditure with espresso inventory requirements. Its reported (R^2) value indicates a strong fit to the historical observations. Nevertheless, the analysis is based on only six months of data, making it important to interpret the results cautiously.
Advertising is not the only factor that can influence espresso consumption. Weather, seasonal changes, community events, competitor promotions, menu prices, customer preferences, and operating hours may also affect demand. In addition, the new location may experience a different purchasing pattern because it will serve a different customer population.
Wild Dog Coffee Company should compare actual consumption with forecast demand each month. Significant differences should prompt management to investigate the underlying causes and revise its assumptions when sufficient data become available. Recording daily or weekly beverage sales, advertising costs, customer counts, promotions, and inventory usage will provide a stronger foundation for future forecasts.
The company should also distinguish between espresso bean consumption and completed beverage sales. Beans may be used in different drinks, while preparation errors, complimentary beverages, waste, and changes in portion sizes can influence actual consumption. Tracking these factors will improve the accuracy of demand forecasts and purchasing decisions.
Inventory management determines how much stock a business should maintain, when it should reorder, and how much it should purchase. For Wild Dog Coffee Company, effective inventory control is essential because espresso beverages are a core product. Insufficient bean inventory could interrupt service, reduce sales, and disappoint customers.
Excessive inventory can create different problems by tying up working capital and increasing storage requirements, loss exposure, and product-quality risks. Although roasted coffee beans are less perishable than many food ingredients, their freshness and flavor can deteriorate over time. The company must therefore balance product availability with purchasing costs, cash flow, and quality expectations.
Supplier reliability is another important consideration. Weather-related disruptions in coffee-producing regions can affect crop yields, prices, and availability. Monitoring supplier communications, delivery performance, and purchasing terms can help the company respond to potential supply interruptions.
The following purchasing assumptions will guide the inventory analysis.
| Inventory factor | Assumption |
|---|---|
| Monthly demand | Approximately 1,400 pounds |
| Cost per pound | $9.00 |
| Package size | 25 pounds |
| Cost per package | $225.00 |
| Supplier lead time | 7 days |
| Free shipping | Orders over $250 |
| Standard shipping | $19.95 per order |
| Annual holding-cost rate | 10% of inventory value |
At $9 per pound, the estimated annual holding cost is $0.90 per pound if the 10% holding-cost rate is applied to the purchase price. Each 25-pound package costs $225 before shipping. Under the stated supplier terms, a single package would incur a $19.95 shipping charge, while an eligible order exceeding $250 would qualify for free shipping.
Management should confirm the supplier’s exact shipping rules, including whether the threshold applies before taxes or other charges. This will help the company compare purchasing options accurately and avoid making decisions based on incomplete cost information.
A continuous review inventory system monitors stock levels as inventory is received or consumed. When the inventory position reaches a predetermined reorder point, the company places another order. Inventory position generally includes on-hand stock and outstanding orders, adjusted for backorders and other commitments.
Wild Dog Coffee Company could use a point-of-sale (POS) system integrated with inventory records to estimate bean consumption as beverages are sold. This would provide more timely information about stock levels, identify unusual consumption patterns, and support purchasing decisions across both locations.
The primary advantage of continuous review is its ability to identify when inventory approaches the reorder point. Because espresso beans are essential to the company’s core beverage offerings, timely replenishment can help reduce the likelihood of stockouts. Automated alerts and inventory reports may also reduce manual calculations and improve accountability.
However, continuous review requires reliable data and appropriate technology. A POS system with inventory management features may involve setup fees, subscription charges, staff training, and ongoing maintenance. Costs will depend on the provider, the number of locations, and the functions required. The company should obtain current quotations before selecting a system.
A basic reorder point can be calculated by multiplying average daily demand by supplier lead time.
Using an assumed monthly demand of 1,400 pounds over 30 days:
[
\text{Daily demand}=\frac{1,400}{30}\approx46.67\text{ pounds}
]
With a supplier lead time of seven days:
[
\text{Reorder point}=46.67\times7\approx327\text{ pounds}
]
The preliminary reorder point is therefore approximately 327 pounds before safety stock. When the inventory position approaches this level, the company should consider placing an order to cover expected consumption during the delivery period.
This calculation assumes that demand and supplier lead time remain stable. It does not account for unexpected increases in sales, delayed deliveries, or supply interruptions. Management should calculate an appropriate safety-stock allowance using observed demand variability and supplier performance once sufficient operational data are available.
Because espresso beans are purchased in 25-pound packages, purchasing quantities should also be aligned with package sizes, supplier terms, available storage, and cash flow. The reorder point determines when to order; it does not independently determine how much to order.
A periodic review inventory system checks stock at predetermined intervals, such as weekly or every two weeks. During each review, employees assess the quantity available and place an order to bring inventory toward a predetermined target level.
This approach can suit small businesses because it supports routine purchasing and may require less sophisticated inventory technology. Employees can conduct physical counts, compare inventory records with sales, and place orders according to an established schedule.
However, stock can decline unexpectedly between reviews, especially when advertising campaigns increase demand or deliveries are delayed. Manual counting may also consume employee time and introduce recording errors. To reduce these risks, Wild Dog Coffee Company would need an appropriate review interval, accurate inventory records, and sufficient stock to cover demand throughout the review period and supplier lead time.
The company should evaluate the total cost of periodic review rather than assuming that it is automatically less expensive. Savings on software may be offset by increased safety-stock requirements, stockouts, lost sales, or additional employee time.
A continuous review system is the preferred option for Wild Dog Coffee Company if the company can manage the associated technology and operating costs. More frequent inventory visibility can help prevent stockouts, support timely purchasing, and improve coordination between the existing and new locations.
Before investing in a new system, management should compare software prices, subscription costs, multi-location inventory tracking, reporting features, staff training requirements, and compatibility with existing POS equipment. If a comprehensive system is not affordable during the initial expansion, the company can use a lower-cost POS solution supported by scheduled physical counts and clearly defined reorder thresholds.
Regardless of the selected approach, the company should record inventory received, bean consumption, waste, transfers between locations, and stock discrepancies. These records will help management distinguish genuine sales growth from inaccurate usage estimates or inventory losses.
Purchasing decisions should account for package sizes, supplier lead times, shipping charges, inventory holding costs, and available working capital. Since each 25-pound package costs $225, an order for one package falls below the stated free-shipping threshold and incurs the standard $19.95 shipping charge.
Ordering additional packages may reduce shipping expenses, but it also requires a larger immediate cash outlay and increases the quantity of inventory held. Conversely, placing frequent small orders may increase transportation costs and administrative work.
An economic order quantity (EOQ) analysis can help identify a cost-effective order size by balancing ordering and holding costs. However, a reliable calculation requires an estimate of annual demand and ordering costs. The stated shipping charge may not represent the company’s full ordering cost, and the free-shipping threshold changes the cost structure.
For this reason, Wild Dog Coffee Company should compare practical order quantities in 25-pound increments rather than calculate an exact EOQ from incomplete information. Each option should be evaluated for total annual purchasing, ordering, shipping, and holding costs, as well as its effects on cash flow and stockout risk.
The most appropriate order quantity will be the one that maintains reliable product availability at an acceptable total cost. Minimizing shipping charges alone may not produce the best financial outcome if it requires the company to hold excessive inventory.
Workforce scheduling aligns employee availability with expected customer demand while controlling labor expenses. For Wild Dog Coffee Company, scheduling decisions should reflect operating hours, projected beverage sales, preparation time, food-service duties, employee availability, wage rates, and applicable labor requirements.
The Month 7 forecast suggests that approximately 446 espresso beverages may be prepared per day under the stated assumptions. However, beverage volume alone is insufficient to determine staffing requirements. Employees must also handle payments, prepare food, clean work areas, replenish supplies, answer customer questions, and complete opening and closing tasks.
As the second location opens, management should use hourly sales data from the existing shop and early operating results from the new store to identify periods of high and low demand. The proposed peak periods are 6:00 a.m. to 9:00 a.m. and 3:00 p.m. to 6:00 p.m. These periods should be treated as initial planning assumptions and confirmed against actual customer traffic.
Wild Dog Coffee Company should schedule employees according to expected hourly demand rather than dividing daily beverage volume evenly across the operating day. Additional employees may be needed during busy periods to prepare drinks, process orders, and maintain acceptable service times. During quieter periods, staffing can be adjusted when operational responsibilities permit.
At least two full-time employees at the new location may provide an initial staffing baseline, but management must test this assumption against total weekly coverage requirements. Two employees alone may not be sufficient to cover every operating hour, breaks, employee absences, opening and closing duties, and peak demand.
Part-time employees can provide additional coverage during verified peak periods and give management greater flexibility while demand patterns become clearer. Cross-training can also improve operational flexibility by enabling employees to prepare beverages, operate the register, restock supplies, and perform routine cleaning tasks.
Cross-training should be supported by documented procedures and practical instruction to maintain product consistency and service quality. Managers must also ensure that scheduling practices comply with applicable labor laws and account for employee breaks, adequate rest between shifts, and fair distribution of weekend work.
Labor expenses are a significant consideration during business expansion, but reducing staffing too aggressively can increase wait times, create employee stress, and result in lost sales. Wild Dog Coffee Company should aim to match staffing capacity with customer demand instead of simply minimizing scheduled labor hours.
Management should compare scheduled labor hours with sales and beverage production by hour. Useful performance indicators include labor cost as a percentage of sales, beverages prepared per labor hour, customer wait times, overtime, and customer satisfaction. Together, these measures can show whether staffing levels are appropriate and whether schedule adjustments are improving performance.
After the second location opens, managers should review these indicators regularly and revise schedules based on observed demand. A flexible scheduling approach will help the company respond to seasonal fluctuations, promotional campaigns, local events, and differences between the two locations.
Wild Dog Coffee Company can strengthen its demand management plan by coordinating marketing, inventory, purchasing, and workforce decisions. Rather than treating these activities as separate functions, management should use shared operational data to support consistent decision-making.
First, the company should maintain a rolling demand forecast based on advertising expenditure, actual espresso consumption, beverage sales, and seasonal patterns. Comparing forecast results with actual demand will help identify changes in customer behavior and improve future estimates.
Second, management should implement a continuous review inventory system if the expected benefits justify the cost. A shared inventory platform would improve visibility across both locations and support timely replenishment. If a comprehensive system is initially unaffordable, scheduled physical counts and defined reorder thresholds can provide a practical alternative.
Third, the company should monitor supplier reliability, delivery lead times, and purchasing costs. The preliminary reorder point of approximately 327 pounds is based on monthly demand of 1,400 pounds and a seven-day lead time. The final threshold should account for demand variability, supplier performance, and an appropriate safety-stock allowance.
Fourth, staffing decisions should reflect actual hourly demand and the full range of operating responsibilities. Additional part-time coverage during verified peak periods, cross-training, and standardized beverage preparation procedures can improve flexibility without compromising customer service.
Finally, management should establish a regular performance review process. Monthly reviews can compare forecast accuracy, inventory holding costs, stockouts, waste, labor expenses, supplier performance, and customer feedback. These findings should guide adjustments to advertising budgets, purchasing quantities, and staffing schedules.
A coordinated demand management plan can help Wild Dog Coffee Company expand while protecting cash flow, product availability, and customer satisfaction. Linear regression provides an initial estimate of approximately 1,253 pounds of espresso beans for Month 7, based on the company’s historical advertising and consumption data. Under the stated assumptions, this translates to approximately 446 espresso beverages per day, although actual demand will vary by time, location, and operating conditions.
A continuous review inventory system is recommended if its costs are financially manageable because it can provide timely stock information and help reduce the risk of running out of espresso beans. The preliminary reorder point of approximately 327 pounds offers a starting estimate based on monthly demand of 1,400 pounds and a seven-day supplier lead time. Management should refine this threshold using actual demand variability and an appropriate safety-stock allowance.
Workforce scheduling should be based on hourly sales patterns, employee responsibilities, operating requirements, and customer service expectations. By regularly reviewing advertising performance, inventory records, supplier reliability, and staffing data together, Wild Dog Coffee Company can make better-informed decisions, reduce avoidable expenses, and maintain a consistent customer experience as it grows.
A demand management plan is a structured approach to forecasting customer demand and aligning inventory, purchasing, staffing, and operational capacity with expected sales. It helps businesses meet customer needs while controlling costs and reducing the risks of shortages or excess inventory.
Advertising can increase brand awareness, attract new customers, and encourage repeat purchases. By comparing advertising expenditure with espresso sales and bean consumption, the company can evaluate whether its marketing activities are associated with changes in demand.
The regression analysis estimates approximately 1,253 pounds of espresso beans for Month 7 when advertising expenditure is $1,350. This forecast is based on six months of historical data and should be adjusted as actual demand and operating conditions become clearer.
An (R^2) value of 0.95 indicates that the fitted regression model explains approximately 95% of the variation in observed espresso bean consumption within the historical dataset. It does not establish that advertising causes all the observed variation or guarantee future forecast accuracy.
A continuous review system is preferable if the company can afford a suitable POS and inventory management platform. It provides more timely stock information and can help prevent stockouts. A periodic review system may be a practical alternative when technology costs are too high, provided that stock is counted reliably and reorder quantities cover demand during the review period and supplier lead time.
Using monthly demand of 1,400 pounds and a seven-day supplier lead time, the preliminary reorder point is approximately 327 pounds before safety stock. The company should refine this estimate using actual consumption, delivery reliability, and inventory commitments across both locations.
The company can improve inventory tracking, establish reorder alerts, compare supplier terms, evaluate purchasing quantities, and maintain safety stock based on demand variability. Monitoring waste and stock discrepancies can also prevent unnecessary purchases and improve forecasting accuracy.
The company should use hourly sales and customer traffic data to identify busy periods and schedule additional coverage when needed. Cross-training employees and using part-time staff during verified peak periods can improve flexibility, provided the schedule covers operating duties, breaks, and applicable labor requirements.
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