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

Name

Capella University

MBA-FPX 5016 Operations Management for Leaders

Prof. Name

Date

Demand Management Plan for Wild Dog Coffee Company

Introduction

Wild Dog Coffee Company can prepare for expansion by combining demand forecasting, inventory control, and workforce scheduling to ensure that customers receive consistent service without creating unnecessary operating costs. The company currently operates one coffee shop serving espresso beverages, breakfast, lunch, and a limited evening menu. As it prepares to open a second location, it plans to test different menu items while keeping its established espresso preparation process consistent across both locations.

A demand management plan helps the company estimate future sales, determine how much espresso inventory to maintain, and schedule employees according to customer demand. Historical sales and advertising data can support forecasting, while an appropriate inventory system can reduce the risk of stockouts and excess inventory. Workforce scheduling can then be adjusted to cover busy periods, maintain service quality, and control labor expenses.

This plan evaluates how advertising influences espresso demand, interprets a linear regression forecast, compares continuous and periodic inventory review systems, and recommends staffing practices for the company’s expansion. It also considers purchasing costs, supplier lead times, customer satisfaction, and the financial limitations commonly faced by small businesses.

The Impact of Advertising on Product Demand

Demand represents the quantity of a product or service customers are willing and able to purchase at a given price over a specific period. Understanding demand is important because businesses must maintain enough inventory to meet customer needs without tying up excessive cash in products that may spoil, become obsolete, or remain unsold.

Advertising can influence demand by increasing brand awareness, communicating product benefits, attracting new customers, and encouraging repeat purchases. The effectiveness of a campaign depends on factors such as the target audience, advertising channel, promotional message, competition, and timing.

For Wild Dog Coffee Company, advertising will be particularly important before the second location opens. A coordinated marketing campaign can introduce the new store to nearby residents, employees, commuters, and other potential customers. Social media platforms such as Facebook and Instagram can promote the opening date, showcase espresso beverages, announce seasonal specials, and encourage customers to share their experiences. Email marketing, local search optimization, short-form video content, and online business listings can provide additional visibility.

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

Traditional marketing can complement these digital efforts. Signage at the existing coffee shop can inform regular customers about the new location, while permission-based signage and promotional materials at nearby businesses can increase local awareness. The company could also collaborate with complementary businesses, such as a local pottery shop, by featuring handmade coffee mugs alongside its espresso products or offering samples at community events.

These partnerships may create mutual promotional benefits while helping the company establish relationships in the new neighborhood. However, marketing performance should be evaluated rather than assumed. Wild Dog Coffee Company should track campaign spending alongside daily beverage sales, promotional redemptions, new-customer visits, and repeat purchases.

By comparing advertising expenditure with actual espresso consumption, the company can determine whether marketing activities are associated with increased demand and whether future spending should be adjusted.

Forecasting Espresso Demand Using Regression Analysis

Demand forecasting helps businesses estimate future product requirements using historical patterns and relevant explanatory variables. Traditional forecasting methods may rely on past sales or consumption trends, but relying exclusively on historical averages can be problematic when customer behavior changes. Advertising activity, seasonality, local events, competition, and economic conditions may also influence demand.

Wild Dog Coffee Company expects advertising expenditure to be associated with espresso bean consumption. To examine this relationship, the company can use linear regression, with advertising expenditure as the independent variable and monthly espresso bean usage as the dependent variable.

The historical data for the first six months are presented below.

Historical Advertising Expenditure and Espresso Bean Usage

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 is:

[
y = 0.79x + 188.22
]

In this equation, (x) represents monthly advertising expenditure in dollars, while (y) represents the predicted quantity of espresso beans used in pounds.

The model’s reported coefficient of determination is (R^2 = 0.95). This indicates that approximately 95% of the variation in the observed espresso usage is explained by the fitted linear relationship with advertising expenditure in this six-month dataset. It does not mean that advertising alone causes 95% of demand or that future predictions will be 95% accurate.

Forecast for Month 7

Wild Dog Coffee Company plans to spend $1,350 on advertising in Month 7. Substituting this amount into the rounded regression equation produces the following estimate:

[
y = 0.79(1,350) + 188.22
]

[
y = 1,254.72 \text{ pounds}
]

Using the unrounded regression coefficients calculated from the six historical observations produces a forecast of approximately 1,253 pounds. The difference occurs because the displayed equation uses rounded coefficients. For planning purposes, the company can use approximately 1,253 pounds of espresso beans for Month 7, while recognizing that this is a forecast rather than a guaranteed consumption level.

Daily Espresso Demand and Beverage Production

Assuming a 30-day month, the projected daily espresso bean requirement is:

[
\frac{1,253}{30} = 41.77 \text{ pounds per day}
]

Because one pound contains 16 ounces, the daily requirement is approximately:

[
41.77 \times 16 = 668.32 \text{ ounces}
]

If each espresso beverage uses 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., giving it 14 operating hours per day. To prepare approximately 446 beverages across those hours, the average production requirement would be:

[
\frac{446}{14} \approx 32 \text{ beverages per hour}
]

This is an average, not a requirement for every hour. Actual demand is likely to fluctuate, so staffing and preparation capacity should be based on hourly sales patterns as well as the daily forecast.

The company should also clarify whether the regression forecast applies to the existing location, the new location, or both locations combined. That distinction is essential before using the forecast to establish purchasing quantities and staffing levels.

Interpreting the Forecast and Its Limitations

The regression model offers a useful starting point for connecting marketing expenditure with espresso inventory requirements. Its high reported (R^2) suggests that the model fits the six historical observations closely. Nevertheless, the sample is small, and the results should not be treated as proof that advertising is the only factor affecting demand.

Other influences may include seasonal changes, weather, local events, customer preferences, menu promotions, competitor activity, and changes in operating hours. The new location may also experience a different sales pattern from the established shop because it will serve a different customer base.

Wild Dog Coffee Company should therefore compare actual espresso usage with the forecast each month. If the difference between predicted and actual consumption becomes substantial, management should investigate the reasons and update the model when sufficient data are available. Recording daily or weekly consumption, advertising costs, customer counts, and promotional activity would provide a stronger foundation for future forecasts.

The company should also distinguish between bean consumption and finished beverage sales. Espresso beans may be used for different drinks, and preparation errors, waste, complimentary beverages, or changes in portion sizes can affect actual consumption. Tracking these factors can improve forecast reliability and inventory decisions.

Inventory Management Analysis

Inventory management determines how much stock a business should keep, when it should reorder, and how much it should purchase. For Wild Dog Coffee Company, maintaining appropriate espresso bean inventory is especially important because espresso beverages are a core product. Running out of beans could interrupt sales, disappoint customers, and damage the company’s reputation.

However, keeping too much inventory can create unnecessary expenses. Holding costs may include storage, insurance, capital tied up in stock, loss, theft, and deterioration in product quality. Because the company has limited available cash, its inventory policy should balance product availability with affordability.

Coffee supply conditions also deserve attention. Weather-related disruptions in major coffee-producing regions can affect crop yields, prices, and delivery availability. Such disruptions make it important for the company to monitor supplier communications, purchasing costs, and lead times instead of relying exclusively on historical consumption.

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

The purchasing assumptions provided for this analysis are as follows:

Inventory factor	Assumption
Monthly demand	Approaching 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 annual holding cost is estimated at $0.90 per pound if the 10% rate is applied to the purchase cost. One 25-pound package costs $225 before shipping. Under the supplied terms, a single package would incur a $19.95 shipping charge, whereas an order above $250 would qualify for free shipping. The company should confirm the supplier’s exact shipping terms before finalizing its purchasing policy.

Continuous Review Inventory System

A continuous review system tracks inventory whenever stock is received or consumed. The inventory position is monitored against a predetermined reorder point, and a new order is placed when the inventory position reaches that threshold. The calculation should account for available stock, outstanding orders, and any backorders or other commitments.

For Wild Dog Coffee Company, a point-of-sale (POS) system connected to inventory records could automatically deduct estimated bean usage as beverages are sold. This would give management more timely information about remaining stock and help identify unexpected consumption or discrepancies. A shared system could also make it easier to monitor inventory at both locations.

A major benefit of continuous review is that the company can respond quickly when stock approaches the reorder point. This is particularly valuable when running out of espresso beans would prevent the business from selling its main beverage product. Automated alerts and purchasing reports can reduce reliance on manual calculations and help management identify inventory losses.

However, continuous review requires reliable data and appropriate technology. A POS system with inventory-management features may involve setup costs, subscription fees, staff training, and ongoing maintenance. The actual costs depend on the vendor, the number of locations, and the features selected. Wild Dog Coffee Company should obtain current quotations before deciding whether the benefits justify the expense.

Calculating a Preliminary Reorder Point

A basic reorder point can be estimated by multiplying average daily demand by supplier lead time. Using the planning assumption of 1,400 pounds per month over 30 days:

[\text{Daily demand} = \frac{1,400}{30}
\approx 46.67 \text{ pounds}]

With a seven-day supplier lead time:

[\text{Reorder point} = 46.67 \times 7
\approx 327 \text{ pounds}]

The company should therefore consider placing an order when its inventory position approaches approximately 327 pounds, before adding any safety stock. Since the supplier sells beans in 25-pound packages, the precise reorder quantity and timing should be aligned with package sizes and actual inventory records.

This estimate assumes demand and lead time remain stable. It does not include a safety-stock allowance for unexpected sales increases, delivery delays, or supply interruptions. Management should calculate safety stock using observed demand variability and supplier performance when sufficient data are available.

Periodic Review Inventory System

A periodic review system checks inventory at predetermined intervals, such as weekly or every two weeks. At each review, management determines how much stock is available and places an order to bring inventory toward a target level. Unlike a continuous review system, the company does not need to trigger a new order every time stock reaches a specific point.

Periodic review can be attractive for a small business because it supports routine purchasing and may require less sophisticated inventory software. Staff can conduct physical counts, compare actual quantities with sales records, and place orders according to a purchasing schedule.

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

However, this method has limitations. Inventory can fall unexpectedly between reviews, particularly when demand increases or a delivery is delayed. Manual counts can also be time-consuming and vulnerable to recording errors. To reduce these risks, Wild Dog Coffee Company would need a carefully selected review interval, accurate records, and enough stock to cover demand during both the review period and supplier lead time.

The company should compare the full costs of both approaches. A less expensive inventory system may still create greater total costs if it increases the frequency of stockouts, requires excessive safety stock, or consumes substantial employee time.

Recommended Inventory Control Approach

A continuous review system is the preferred option for Wild Dog Coffee Company if the cost of suitable POS software is financially manageable. It provides more timely visibility into inventory levels and can help prevent stockouts of the company’s core product. Its benefits may become more important when the company begins operating two locations.

Before purchasing a new system, management should compare vendor prices, subscription costs, inventory-reporting features, multi-location functionality, staff training requirements, and integration with existing POS equipment. If a full continuous review system is too expensive, the company can begin with a lower-cost POS system and scheduled physical counts, supported by clearly defined reorder thresholds.

Regardless of the selected method, the company should record stock received, bean consumption, waste, transfers between locations, and discrepancies. These records can help distinguish genuine sales growth from inventory loss or inaccurate usage estimates.

Purchasing Costs and Order Quantities

The company’s purchasing decisions should account for package size, supplier lead time, shipping costs, inventory holding costs, and available cash. Because one 25-pound package costs $225, a single-package order falls below the stated free-shipping threshold and incurs the standard shipping charge. Purchasing more than $250 in eligible products may avoid that charge, but it also requires a larger immediate cash outlay.

The company should not automatically purchase the largest possible order to save on shipping. Larger purchases increase the amount of cash tied up in inventory and may increase storage requirements. Conversely, frequent small orders can increase transportation expenses and administrative work.

An economic order quantity (EOQ) analysis may help identify a cost-effective order size, but it requires a reliable estimate of ordering costs in addition to annual demand and holding costs. The $19.95 shipping charge alone may not represent the company’s full ordering cost, and the free-shipping threshold changes the cost structure. Therefore, an exact EOQ should not be calculated until the company has confirmed its administrative ordering costs and supplier pricing rules.

Management should compare several practical order sizes in 25-pound increments. Each option should be evaluated for total annual purchase, ordering, shipping, and holding costs, as well as its effect on cash flow and stockout risk. The best choice is the one that provides reliable product availability at an acceptable total cost rather than the one with the lowest shipping expense alone.

Workforce Scheduling Analysis

Workforce scheduling ensures that enough employees are available to meet customer demand without creating unnecessary labor costs. For Wild Dog Coffee Company, staffing decisions should reflect operating hours, the expected number of espresso beverages sold, preparation time, employee availability, wage rates, and applicable labor requirements.

The Month 7 forecast suggests that approximately 446 espresso beverages may be prepared each day under the stated assumptions. However, this figure represents an average daily volume rather than a complete staffing model. Employees must also handle cashiering, food preparation, cleaning, restocking, customer questions, opening and closing tasks, and breaks. The staffing plan should therefore account for the full range of duties at each location.

As the second location opens, the company should use hourly sales records from the existing shop and early sales data 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.

Recommended Staffing Strategy

Wild Dog Coffee Company should build its staffing plan around expected hourly demand rather than dividing total daily beverage volume evenly across all operating hours. During busy periods, additional employees may be needed to prepare drinks, manage orders, and maintain service speed. During quieter periods, staffing can be reduced where operational requirements permit.

At least two full-time employees at the new location may provide a starting point for the staffing plan, but this assumption must be tested against total weekly coverage requirements. Two employees alone may not cover every operating hour, employee absences, breaks, opening and closing tasks, and peak demand. Part-time employees can provide additional coverage during the busiest periods and offer greater flexibility as demand becomes clearer.

Cross-training can also improve workforce flexibility. Employees who can prepare beverages, operate the register, restock supplies, and complete routine cleaning tasks can be reassigned as customer traffic changes. Cross-training should be supported by documented procedures and practical instruction so that flexibility does not reduce product consistency or service quality.

Employee breaks and scheduling practices must comply with applicable labor laws. Managers should also consider fatigue, adequate rest between shifts, fair distribution of weekend work, and employee availability. A realistic schedule can support productivity, employee morale, and customer satisfaction.

Controlling Labor Costs While Maintaining Service Quality

Labor costs are an important part of the company’s operating expenses, but reducing staffing too aggressively can increase wait times, create employee stress, and lead to lost sales. Wild Dog Coffee Company should aim to match labor capacity with demand rather than simply minimizing the number of scheduled employees.

Management should compare scheduled labor hours with sales and beverage production by hour. Useful measures include labor cost as a percentage of sales, beverages prepared per labor hour, customer wait times, overtime, and customer satisfaction. These indicators can show whether staffing levels are appropriate and whether schedule changes are improving performance.

After the new location opens, managers should review staffing data regularly and adjust shifts based on observed demand. A flexible approach will allow the company to respond to seasonal changes, promotions, special events, and differences between the two locations.

Recommendations for Improving Demand Management

Wild Dog Coffee Company can strengthen its demand management plan by connecting marketing, inventory, and scheduling decisions rather than treating them as separate activities.

First, the company should maintain a rolling demand forecast using advertising expenditure, actual bean consumption, beverage sales, and seasonal patterns. Comparing predicted and actual demand will help management identify changes and improve forecast quality over time.

Second, the company should adopt a continuous review inventory system if the total cost is justified. A shared inventory platform would improve visibility across both locations and support timely purchasing decisions. If the company cannot afford this system immediately, scheduled physical counts and a clearly defined reorder point can serve as an interim approach.

Third, management should monitor supplier performance and maintain an appropriate safety-stock allowance. The preliminary reorder point of approximately 327 pounds is based on demand of 1,400 pounds per month and a seven-day lead time. The final threshold should reflect actual daily consumption, demand variability, supplier reliability, and the cost of a stockout.

Fourth, staffing decisions should be based on hourly demand and total operating requirements. Additional part-time coverage during verified peak periods, cross-training, and consistent preparation procedures can help the company maintain service quality while controlling labor expenses.

Finally, the company should establish a regular review process. Monthly meetings can compare forecast accuracy, inventory costs, stockouts, waste, labor expenses, and customer feedback. The results should guide adjustments to advertising budgets, purchasing quantities, and staffing schedules.

Conclusion

A well-designed demand management plan can help Wild Dog Coffee Company expand while protecting product availability, cash flow, and customer satisfaction. Regression analysis provides an initial forecast of approximately 1,253 pounds of espresso beans for Month 7, based on the company’s historical advertising and consumption data. At the stated usage rate, this equates to approximately 446 espresso beverages per day, although actual demand will vary throughout the day and across locations.

A continuous review inventory system is recommended if its costs are manageable because it can provide timely stock information and reduce the risk of running out of espresso beans. The preliminary reorder point of approximately 327 pounds offers a starting estimate for planning purchases under the assumption of 1,400 pounds of monthly demand and a seven-day delivery lead time. The company should refine this figure using observed demand variation and an appropriate safety-stock allowance.

Workforce scheduling should reflect hourly sales patterns, employee responsibilities, labor requirements, and the service expectations of each location. By reviewing marketing performance, inventory records, supplier reliability, and staffing data together, Wild Dog Coffee Company can make more informed decisions, control avoidable costs, and support a consistent customer experience as the business grows.

Frequently Asked Questions

What is a demand management plan?

A demand management plan is a structured approach to estimating customer demand and aligning inventory, purchasing, staffing, and operating capacity with expected sales. It helps businesses meet customer needs while controlling costs and reducing the risk of shortages or excess inventory.

How does advertising affect demand at Wild Dog Coffee Company?

Advertising can increase awareness of the coffee shop, attract new customers, and encourage repeat purchases. By comparing advertising expenditure with actual espresso usage and sales, Wild Dog Coffee Company can evaluate whether its marketing activities are associated with changes in demand.

How much espresso will Wild Dog Coffee Company need in Month 7?

The regression analysis estimates approximately 1,253 pounds of espresso beans for Month 7 when the advertising budget is $1,350. This is a forecast based on six months of historical data and should be adjusted if actual demand or operating conditions differ from the assumptions.

What does an R² value of 0.95 mean in demand forecasting?

An (R^2) value of 0.95 means that the fitted regression model explains approximately 95% of the variation in the observed espresso usage in the historical dataset. It does not prove that advertising causes all of that variation or guarantee that future forecasts will be accurate.

What inventory system is best for Wild Dog Coffee Company?

A continuous review system is preferable if the company can afford a suitable POS and inventory platform. It provides more timely inventory information and can help prevent stockouts. A periodic review system may be a practical alternative if technology costs are too high, provided that inventory is counted reliably and reorder levels account for demand during the review period and supplier lead time.

What is the estimated reorder point for espresso beans?

Using a monthly demand assumption 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 demand, delivery reliability, and the inventory position across both locations.

How can the company reduce inventory costs without running out of espresso beans?

The company can track consumption accurately, set reorder alerts, compare supplier terms, review purchasing quantities, and maintain safety stock based on demand variability. It should also monitor waste and discrepancies so that inventory losses do not undermine purchasing decisions.

How should Wild Dog Coffee Company schedule employees during peak hours?

The company should use hourly sales and customer traffic data to identify busy periods and schedule additional coverage when necessary. Cross-training employees and using part-time staff during verified peaks can improve flexibility, but the final schedule must cover all operating tasks, breaks, and applicable labor requirements.