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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

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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