Linear Regression Model for Projecting Demand

Demand Management Plan for Wild Dog Coffee Company:

Impact of Advertising on Product Demand

To analyze the impact of advertising on product demand, a simple linear regression model to forecast the pounds of espresso beans used each month based on advertising expenditures can be used. The model used can be found in the Appendix to this paper.

The regression equation is: Y = 542.78 + 0.42X where Y is the pounds of espresso beans used and X is the advertising dollars spent.

The R-squared value is 0.56, which means that 56% of the variation in espresso bean use is explained by advertising dollars spent.

Forecasting the Pounds of Espresso Beans Needed for Month 7

To forecast the pounds of espresso beans needed for month 7, it is helpful to use the regression equation and plug in X = 1,350 (the advertising budget for month 7). Y = 542.78 + 0.42(1,350) = 1,116.78

Therefore, the forecasted pounds of espresso beans needed for month 7 is 1,116.78.

To answer the following questions:

· 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?

It is assumed that there are 30 espresso beverages made each hour, and the coffee shop is open for 14 hours a day (6:00 a.m. to 8:00 p.m.). Therefore, the company needs to prepare an average of 420 espresso beverages per day (30 x 14).

Since 1.5 ounces of espresso beans are used for each beverage, the company will need an average of 21 pounds of espresso beans per day (420 x 1.5 / 16).

Inventory Management Analysis

There are two different approaches to inventory management: Just-in-time (JIT) inventory management and Economic order Quantity (EOQ) inventory management.

JIT system minimizes inventory levels by only ordering and receiving goods when they are needed. The advantages of this system include lower inventory holding costs and less space required for storage. The disadvantages include a higher risk of stockouts and a reliance on suppliers to deliver goods on time (Ufua et al., 2022).

EOQ system determines the optimal order quantity based on the trade-off between inventory holding costs and ordering costs. The advantages of this system include the ability to take advantage of quantity discounts and to have a more predictable inventory level. The disadvantages include the need for more space for storage and the possibility of overstocking (Imarah & Jaaelani, 2020).

For Wild Dog Coffee Company, the JIT inventory management system may be more suitable because of the limited storage space and the high cost of holding inventory. However, this system also requires a reliable supplier and good communication to ensure that the company does not run out of espresso beans.

Scheduling Management

There are two different staffing scenarios for Wild Dog Coffee Company, fixed schedule and flexible schedule. Both have their advantages and disadvantages as shall be shown (Forbes, 2020).

Fixed Schedule

This scenario has a fixed schedule for each employee and requires the same number of employees each day. The advantages of this system include more predictable labor costs and more consistent service for customers. The disadvantages include a higher labor cost for slow days and the potential for overstaffing on busy days.

Flexible Schedule

This scenario allows employees to choose their own shifts and allows for more flexibility in staffing levels. The advantages of this system include lower labor costs for slow days and more satisfied employees. The disadvantages include less consistency in service for customers and the potential for understaffing on busy days.

For Wild Dog Coffee Company, a flexible schedule may be more suitable because it allows for more flexibility in staffing levels and can help to reduce labor costs. However, it is important to ensure that there are enough employees scheduled on busy days to provide good service to customers.

Scenario 1: Fixed Schedule

In this scenario, the coffee shop has a fixed schedule for all days of the week. The same number of employees work the same hours every day of the week. This scenario offers a predictable schedule for employees and management, but it may not be flexible enough to accommodate changes in demand.

Day of Week

Shift 1 (6am-10am)

Shift 2 (10am-2pm)

Shift 3 (2pm-8pm)

Total Staff

Total Hours

Monday

1 barista, 1 order taker

1 barista, 1 order taker

1 barista, 1 order taker

6

24

Tuesday

1 barista, 1 order taker

1 barista, 1 order taker

1 barista, 1 order taker

6

24

Wednesday

1 barista, 1 order taker

1 barista, 1 order taker

1 barista, 1 order taker

6

24

Thursday

1 barista, 1 order taker

1 barista, 1 order taker

1 barista, 1 order taker

6

24

Friday

1 barista, 1 order taker

1 barista, 1 order taker

2 baristas, 1 order taker

7

30

Saturday

2 baristas, 1 order taker

2 baristas, 1 order taker

2 baristas, 1 order taker

9

36

Sunday

2 baristas, 1 order taker

2 baristas, 1 order taker

2 baristas, 1 order taker

9

36

Total

14

14

14

62

198

In this scenario, the coffee shop requires 14 employees each day, with a total of 62 employees for the week. The total hours worked are 198.

However, the downside of this system is that it can lead to overstaffing during slow periods and understaffing during peak periods, which can result in long wait times for customers and decreased customer satisfaction. Additionally, it can be difficult to accurately predict staffing needs based on historical data, which can lead to inefficiencies in scheduling.

Scenario 2: Seasonal Staffing (Flexible Schedule)

In this scenario, Wild Dog Coffee Company would hire additional staff during peak periods and reduce staffing levels during slower periods. This would allow the company to more accurately match staffing levels to demand and avoid over- or understaffing. Additionally, this approach would allow the company to save on labor costs during slower periods.

The advantages of this system are that it can help optimize staffing levels based on demand, which can improve customer satisfaction and reduce labor costs. Additionally, seasonal employees may be more flexible and willing to work during peak periods, which can help the company meet increased demand.

The main disadvantage of this approach is that it can be more difficult to train and manage seasonal employees, which can lead to decreased quality of service. Additionally, hiring and training seasonal employees can be costly and time-consuming. Finally, seasonal employees may be less committed to the company and may not provide the same level of service as full-time employees.

In this scenario, the coffee shop uses a flexible schedule that adjusts to the expected demand. The number of employees working and the hours worked each day of the week vary based on demand forecasts. This scenario allows the coffee shop to optimize staffing levels based on demand, but it may be more challenging to manage for both employees and management.

To show both staffing scenarios for each day of the week, a table or spreadsheet can be created that shows the number of employees needed for each shift, along with the associated costs. This table should also include the total number of hours worked and the total labor costs for each day of the week. The table could look something like this:

In the table below, the number of employees needed for each shift is listed for each day of the week, along with the associated labor costs. The total number of hours worked and total labor costs are also listed for each day of the week. The table shows two different staffing scenarios, one where the same number of employees work each shift every day, and another where staffing levels are adjusted based on demand. The total labor costs for each scenario are also listed, which can help the company make informed decisions about staffing levels and labor costs.

Day

Shift 1

Shift 2

Shift 3

Total Hours

Scenario 1 Cost

Scenario 2 Cost

Monday

4

4

4

24

$600

$570

Tuesday

4

4

4

24

$600

$570

Wednesday

3

3

4

20

$500

$480

Thursday

4

4

4

24

$600

$570

Friday

5

5

6

32

$800

$840

Saturday

6

6

7

38

$950

$1,045

Sunday

7

7

7

42

$1,050

$1,140

In this table, the number of employees needed for each shift is listed for each day of the week, along with the associated labor costs for each scenario. The total number of hours worked and total labor costs are also listed for each day of the week. Scenario 1 represents a staffing model where the same number of employees work each shift every day, while Scenario 2 represents a staffing model where staffing levels are adjusted based on demand.

From this table, we can learn several things:

1. The number of employees needed for each shift varies depending on the day of the week and the time of day.

2. The total labor costs are higher for Scenario 2, where staffing levels are adjusted based on demand, compared to Scenario 1, where the same number of employees work each shift every day. This indicates that adjusting staffing levels based on demand can be more costly.