Toffee Inc.: Demand Planning for Chocolate Bars

Description

The inventory manager of sales and distribution for Toffee Inc., a confectionery company, had just concluded a meeting with all relevant personnel. The meeting had not been entirely positive. The words of the production manager still echoed in his ears: “If the ingredient inventory is not re-examined and re-worked to the firm’s advantage then [soon] the final products based on these ingredients will cease to yield the kind of profits that the firm expects.” The inventory manager needed to prepare a comprehensive forecasting and inventory management plan with a view to minimize the cost of managing the supply chain by judicious use of resources, better forecasting, and improvement in the ingredient inventory purchasing and management systems.

Learning Objective

The following techniques and concepts can be addressed using this case: ·Quantitative forecasting — especially the use of seasonal forecasting with seasonal factors and linear trend line. ·Inventory management, which includes the simple economic order quantity (EOQ) concept, in terms of deterministic and probabilistic approaches. ·Basic concepts of holding cost, ordering cost, lead time, service levels, safety stock, demand during the lead time, re-order point and most importantly, when and how much to order. ·EOQ with quantity/bulk discount — keeping in mind the cost of managing the inventory throughout the year.

Keywords

Forecasting India Inventory quantity discounts service levels