Assignment 1: Biddys Bakery Case Study

1. Explain the challenge Elizabeth faced in meeting her capacity needs and what she should have considered before moving into the larger facility. Capacity is the maximum output rate that a facility achieves. Planning for capacity needs is essential to the successful operation of a facility for a company. Elizabeth faced challenges because there was no capacity planning, which involves the process of establishing the output rate that can be achieved by a facility. (Reid & Sanders, 2010, pg. 316) If there is no careful planning, there may not be enough output capability to meet customer demands or that there could be too much capacity sitting idle. If a company wants to grow and take full advantage of demand, capacity should be carefully planned. (Reid & Sanders, 2010, pg. 317) A lot of capacity planning and demands relies heavily upon customer demand and knowing how to meet those demands. For example There are several needs that are part of capacity planning that Elizabeth should have considered before making the move to a larger facility. The first that should have been determining the market need of the community. Determining the amount of baked goods that would be sold would have helped her understand the space necessary for purchase. After determining the market need, research on the premises, location, prices, and other pertinent information should be obtained to ensure that the proper capacity is used for the physical premises of Biddys Bakery. 2. Determine what is wrong with the proposal made by the team of the business students and why. One major issue of the proposal was the fact that they planned for Biddys Bakery to primarily focus on the production of the McDoogle pie in large volumes. According to

Balachandran, Balakrishnan, and Sivaramakrishnan, Organizations typically make long-term cost commitments to acquire certain resources because it is more economical to do so than to acquire them on an as-needed basis. (Fall 1997, pg. 49) There are several products that Biddys Bakery sells, and it would be important to focus on the other goods to ensure that all the products get a chance to boost Biddys to the next level of marketing. Although the McDoogle pie is the best-selling good at Biddys, there are still several other products that could boost sales and help with the overage in capacity that Elizabeth is now facing because of improper planning and research. By listening to the students, Elizabeth would almost surely set herself up for failure because the recipes and ingredients for the production of the other baked goods, would cause a high loss in profits. Elizabeth would more than likely create a deficit in which would add to the over capacity that she is already experiencing. 3. Explain how the business would be different if Elizabeth accepts the proposal made by the students. If Elizabeth accepts the proposal made by the students the businesss primary financial income will come from the McDoogle pies and the other products the Biddys Bakery made will not garner enough sales to continue production on them. It would only solve the capacity issues, but would bring a different feel and meaning to Elizabeths company. Elizabeth wants to sell a variety of baked goods with old-fashined style and taste to the general public and local restaurants. If Elizabeth allowed the business students plans to come to fruition, only the McDoogal pies would be sold and only at the bakers and with one store location of a local grocery store chain.

Assignment 1: Biddys Bakery Case Study

That doesnt bode well for business because there isnt much room for growth, nor is there any focus on the other products that are produced by Biddys Bakery. It would undermine Elizabeths entire method of operation and what the company has always stood for. Because the focus of the business would change so drastically, Biddys could end up losing many of the customers who already purchase Elizabeths baked goods. Because Elizabeth has old-fashioned methods of operation, making the goods part of a restaurant chain would take away from the homey feel the Elizabeth has strove to provide for her customers. 4. Discuss the advice you would give Elizabeth on how to proceed. Before actually moving to a larger facility, Elizabeth should have actually conducted the proper research necessary to help her ascertain the capacity needs of her company. Market research is essential to determining I would tell Elizabeth to create a plan that would help Elizabeth control capacity. Typically, the following information is available at the time of capacity planning: a. The firm's product portfolio, which consists of all the products, product prices and the variable cost of producing each product are also known and are assumed to be time-invariant. b. The realized demand for all of the products. c. Resources used to make the products. d. The cost of a unit of resource when acquired on an as-needed basis. product costing system because it plays a valuable role in the identification of products that are profitable over the long run, so that capacity planning can be done on a

product-by-product basis. (Balachandran, et al, Fall 1997, pg. 50) In a planning situation there are various capacity planning methods to choose from: capacity planning using overall factors (CPOF), capacity bill procedure, resource profile, and capacity requirements planning (CRP). Of the 4 methods, CPOF and CRP are also the most used planning methods. More than 80% of the studied companies reported using CRP, and more than half-reported CPOF. Capacity planning with capacity bills or profiles is used by about a fourth of the companies. (Jonnson & Mattsson, Summer/Fall 2002, pg 89) I would recommend to Elizabeth that using the CPOF method would be the simplest capacity planning method and is done manually. It is based on planning factors derived from end products and is used for resource and rough-cut capacity planning. Its advantage is that calculations and data requirements are minimal. (Jonnson & Mattsson, Summer/Fall 2002, pg 89)

Assignment 1: Biddys Bakery Case Study References Balachandran, Bala V., Balakrishnan, Ramju, &. Sivaramakrishnan, K. (Fall 1997). Capacity Planning with Demand Uncertainty. The Engineering Economist.

Container Terminal Expansion will meet long-term capacity needs. (2009). Canadian Sailings. Jonsson, Patrik, and Mattsson, Stig-Arne. (Summer-Fall 2002) Use and Applicability of Capacity Planning Methods. Production & Inventory Management Journal. Reid, R Dan. & Sanders Nada R. (2010). Operations Management: An Integrated Approach. (4th ed). Hoboken, NJ: John Wiley & Sons, Inc.