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# Rachel's Breakfast Cafe

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by

## Rachael Deutsch

on 17 February 2015

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#### Transcript of Rachel's Breakfast Cafe

Rachael Deutsch & Steven Fingar
Rachel's Breakfast Cafe
Small cafe that specializes in breakfast foods

Opened just over a year ago

Open six days a week and is closed on Sundays

Works with one supplier for all raw materials

Sales are increasing
Rachel is having difficulty with demand forecasting

Some days she runs out of food, resulting in:
Lost sales

Some days she throws away a lot of excess food, resulting in unnecessary costs:
Raw materials
Production costs
Holding costs
Labor costs

The Problem at
Rachel's Cafe
Beyond Fridays and Saturday, her busiest days, Rachel has noticed weather affects business:
On rainy days, fewer people go for breakfast

She wants to use weather forecasts to predict demand (demand forecasting)

Rachel has collected four weeks worth of data and noted the accompanying sales
Probability of rain (%) based on a five day and a two day forecast

Rachel's Proposed
Solution
Rachel's Data
5 Day Forecast Analysis
2 Day Forecast Analysis
5 Day Versus 2 Day Forecast
Questions?
Forecast Bias (MFE):
Average forecast error over a number of periods
A positive forecast = underestimating demand
A negative forecast = overestimating demand
Forecast bias of 0 is ideal

Provides the average size of forecast errors, irrespective of their directions

Mean Absolute Percentage Error (MAPE)
Indicates how large errors are relative to the actual demand quantities

Both the 5 and 2 day forecasts have a forecast bias of 0. The MAD and MAPE of the 2 day forecast is lower. The 2 day forecast is therefore more accurate.

Open bakery on Sundays

Possibly extend hours open

Consider current season

Have wholesale prices increased?

Explore other suppliers/wholesalers who require fewer days notice

Demand Management possibilities
Pricing & promotional activities on weekdays, holidays, etc.

Time series model: Weighted moving average
Total Sales
Order Lead Time & Forecasting Accuracy
Current supplier requires at least five days notice (lead time)

Forecast accuracy is reduced with
every
error

Less accuracy = a waste or an excess of food
Works Cited

http://blogs.agu.org/wildwildscience/2012/12/29/the-most-misunderstood-part-of-tv-weathercasts/

"Managing Operations Across the Supply Chain"

Effectively Using the Rain Forecasts
By using the rain forecasts, Rachel will be able to adjust production accordingly

Fridays & Saturdays should be independent of this adjustment