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Rachel's Breakfast Cafe
Transcript of Rachel's Breakfast Cafe
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
About Rachel's Breakfast Cafe
Rachel is having difficulty with demand forecasting
Some days she runs out of food, resulting in:
Overhead costs not utilized
Some days she throws away a lot of excess food, resulting in unnecessary costs:
The Problem at
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
5 Day Forecast Analysis
2 Day Forecast Analysis
5 Day Versus 2 Day Forecast
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
Mean Absolute Deviation (MAD):
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
Order Lead Time & Forecasting Accuracy
Current supplier requires at least five days notice (lead time)
Forecast accuracy is reduced with
Less accuracy = a waste or an excess of food
"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
This adjustment will ideally lead to:
Fewer wasted resources
High customer satisfaction
Weekly Average Total Sales