GLOSARY

Ordering cost – the cost associated with replenishing the stock of inventory being held.

Periodic inventory system – an order is placed for variable amount after a fixed passage of time.

Reorder point – when inventory reaches a specific level

EOQ – the optimal order quantity that will minimize total inventory costs.

Quantity discount – price discount on an item if predetermined number of units are ordered.

Base – is the basic of a cake

Safety stock – a buffer added to the inventory on hand during lead time

GALLERY

RESULTS FROM THE INTERVIEW: FORECASTING

As we discuss before, a forecast is a prediction of what will occur in the future.

Puan Roslina Ahmad forecast the demand for her products by using qualitative forecast method. This means she will forecast customers’ based on her judgment and past experience. She said that she never use any quantitative forecast method in determine customers’ demand behavior.

She will forecast demand in short range to midrange up to at least next year’s demand. Lyn Bakery and Café’s demand behavior is seasonal pattern. The demand for her cakes will increase during celebration days like mother’s day and teacher’s day in May, father’s day in June and of course during school holidays whereby bride and grooms will buy their wedding cakes (as people love to get married during school holiday).

For biscuits, the demand will increase extremely high during festive seasons, which is Hari Raya Puasa where people nowadays thought it is easier to buy biscuits than make it by themselves.

We will go deeply on how she forecasts her demand for his biscuits on August (specifically on Hari Raya Puasa festival).

We have mentioned before that Puan Roslina Ahmad predict her demand based on last year’s performance.

Lyn Bakery started its business on 2009. So, for that particular year, the demand for her biscuits was not so good. But in 2010, people getting to aware of the existence of her products. So, she forecast demand for her biscuits for August will be ten percent of her total sale for the whole year. The total sale for that particular year was RM70, 000 (not the real amount). So, ten percent from RM70, 000 will be RM 7,000.

Puan Roslina said that she doesn’t worry if all of RM7, 000 of biscuits didn’t finished by August. This is because, what she is going to do is she will put them at her shop to meet next month’s demand.

Those forecast biscuits that cannot meet the demand or she called them ‘balance group’ or we called them forecast error, will not be selling at any discounted price.

She said, she does not want to sell her forecast error at discounted price because she spent the same cost and effort for forecast error as same as other forecasted, inventories that meets demand during Hari Raya Puasa.

She predicts the demand for this year 2011 will be 30 percent from the total sale for the whole year. She increases the target from 10 percent in 2010 to 30 percent in 2011 because she is confident on her customer. She said that this year, her business is stable enough to compete with other bakery. Plus, her customer has increase their awareness towards her products because she has done extremely on promoting her bakery as well as her products.

Comment on forecast:

Lyn Bakery will face problems if forecast not meet demand for this becoming Hari Raya Puasa. Puan Roslina maybe expect too much on her customer. We would like to suggest to Puan Roslina to do some research on how to forecast the demand. In addition, she has to learn the forecasting process. From that, she can make a realistic and achievable forecasted demand.

RESULTS FROM THE INTERVIEW: INVENTORY

As we mention before, inventory is a stock of items kept by an organization to meet internal or external customer demand (Russell & Taylor, 2009).

Lyn Bakery’s inventories can be divided into five groups:

i. Raw materials – flour, eggs, butter, sugar, … etc

ii.Purchased parts and suppliers – Lyn Bakery got inventories supply from Yummy Bakery.

iii.Work-in-process products – sponge cake and butter cake base. There are two flavors chocolate
and vanilla.

iv.Tools and equipment – mixer, orange, … etc

v.Finished goods – cakes, biscuits, bun, … etc

Madam Roslina manages her inventories very well. She will drive to suppliers store to buy raw materials by herself. If the supplier delivers inventories, they will charge extra cost for delivery, even though she always buys from the same supplier. By doing this, it will decrease ordering cost rather than if the suppliers deliver to the shop.

Core raw materials are flour, eggs, sugar and butter. These materials including all other materials are bought weekly. This shows that Lyn Bakery is using periodic inventory system.

Madam Roslina will check on her inventories weekly and buy inventories that reach reorder point. She didn’t do calculation on EOQ to determine the optimal order size that will minimize her total inventory cost. She estimates reorder point of her inventories based on her past experiences.

There are some times when she goes and buy her inventories (raw materials), the suppliers offer price discount on item that are bought in higher quantities. This is called quantity discount.

As she didn’t practice calculation on EOQ, she will decide which amount to buy based on her customer’s demand on that specific date or month (this will be explaining further in forecast).

Cakes and bun will last for three to four days. So, because of this, Madam Roslina will makes work in process inventories for her cakes (or she called them ‘base’ for her cakes) thrice a week.

These ‘base’ that she makes are vanilla and chocolate flavor. She makes 10 cakes ‘bases’ each time. So, it will be 30 cake’s bakes for the whole week.

She said from that 30 cakes’ bases, 20 of them are for sale and the other 10 are safety stock in case when she receives any order within that particular week.

Comment on inventory management:

Lyn Bakery is situated in low public area. So, her customer demands are very small. Her cakes demand based on regular customers and walk-in customers which are not very much. She will throw away cakes and buns after four days.

These may lead to wastage as the cakes will expired in three to four days and she will keep on making her cakes’ bases thrice a week. Maybe she can learn to calculate her EOQ, so she won’t suffer much earning cost.

But somehow, the way she is being concern and particular on the hygienist of her products, we will give a bow to her – salute.

RESULT FROM THE INTERVIEW: CAPACITY AND FACILITIES

CAPACITY

Capacity is the maximum capability to produce.Capacity planning takes a several levels of detail.Lyn Bakery and Café also have their own long term capacity planning where it is strategic decision that establishes a firm’s overall level of resources.Capacity decision affect product lead times,customer responsiveness,operating costs and a firm ability to compete.Puan Roslina Ahmad said, plan and think when to increase their capacity,and how much to increase it, are critical decision.

Puan Roslina Ahmad use the Average Capacity Strategy.This capacity is expanded to coincide with average expected demand.For example,Puan Roslina have a planning for some special day for example mother’s day,father’s day,teacher’s day,Hari Raya and so on. With this planning Puan Roslina can moderate strategy in which managers are certain they will be able to sell at least some portion of expanded output.and endure some periods of unmet demand.Aprroximately half of the time capacity leads demand and half of the time capacity lags demand.

FACILITIES

Lyn Bakery and Café also particular with facility layout where it refers the arrangement of activities, process, workstation, storage and common areas within an existing or proposed facility.What can we see is Lyn Bakery and Café have a smooth flow of work,have a good material and very concern about Halal product,people,which Puan Roslina have a dedicate workers and some information through the system.What we can see also,Lyn Bakery and Café have a effective layouts where Puan Roslina did:

1.Minimize movement and material handling cost

Puan Roslina very particular about this,she said to handling material cost..she will minimize something that is not very important and more focusing with something that really important,for example,minimize on renovation shop,so the money can focus to handling material cost that always changes.

2. Utilize Labor Efficiency

Lyn Bakery and Café have only 2 workers that are very professional with cake and bakery. They also have a certificate in bakery courses.

3.Facilitate communication and interaction between workers,between workers and their supervisor and between workers and customers.

Puan Roslina said that communication are very important between them,because it can avoid from miscommunication between them.and can increase confident level between them and their customer.

4.Promote product and service quality

Puan Roslina promote their product with trust of quality product.She believe,when the product are very quality and tasty,it can make customer satisfied.While service quality,Puan Roslina make sure the timing for serve the food not too long,around 5 to 10 minutes.

PROCESS LAYOUTS

The process layout also known as functional layouts, but little bit disspointed Puan Roslina does not give us to know their process in the kitchen. We also can’t see how they make the bun, cake and so on.

Just we know is when the process of orders and food are being serve are not take too long. It take just 5 to 10 minutes.But if customer want order the cake, it take 2 days working days to finished and prepared the cake based on customer order.

PRODUCT LAYOUTS

Is also known as arrange activites in a line according to the sequence of operations for a particular product or sevice.Each product has its own line specifically designed to meet its requirements.The flow of work is orderly and efficient,moving from one workstation to another down the assembly line until a finished product comes off the end of the line.

The advantage of the product layout is its efficiency and ease of use. The disadvantage it its inflexibility.The product or service is a standard one made for a general market,not for a particular customer.Because of the high level of demand,product layouts are more automated than process layouts and the role of the workers is different.

DESIGNING SERVICE LAYOUTS

Service layouts are designed in much the same way as process layouts in manufacturing firms,but the objectives may differ.In Lyn Bakery and Café,Puan Roslina use the freeflow layouts for chair and table where customer will waiting for food.It encourage browsing,increase impulse purchasing and are flexible and visually appealing.Lyn Bakery and Café also use Grid Layout to present their bun,cookies and so on.The Grid Layout will encourage customer familiarity, low cost, easy to clean,secure and good for repeat customers.Service layout also concerned with the allocation of space to departments,the location of special displays,the efficiency of checkout procedures and protection from pilferage

DESIGNING PRODUCTS LAYOUTS

A product layout arranges machines or workers in a line according to the operations that need to be performed to assemble a particular product. From this description,it would seem the layout could be determined simply following the order of assembly as contained in the bill of material for the product.

Product layout or assembly line are used for high volume production.To attain the required output rate as efficiently as possible,jobs are broken down into their smallest indivisible portions called work elements.Lyn Bakery and Café sometimes use the work elements,which is so small,that they cannot be performed by more than one worker or at more than one workstation.For example preparing designing of cake which is must have their own creativity.But it is common for one worker to perform several work elements as the product passes through her workstation.