Can You Have Your Cake and Eat It Too

As I’m lounging on the sofa in the family room watching my husband decorate the cakes that he baked for both our moms on Mother’s Day, thoughts about how he plans the whole process are running through my head. While my husband wasn’t enthused about the interruption, I was busy asking him multiple questions regarding how to forecast future demand, how to manage quality and quantity, and finally what inventory method is used by businesses that produce wedding cakes.

Forecasting is a critical aspect of the business to effectively manage overhead costs, ingredient inventories and most importantly, volume projections to meet demand while maintaining a profitable business. To achieve desired profitability, the business should deliver a wide variety of designs at competitive prices.

In class, I had learned about five quantitative forecasting methods. The simplest method to forecast how many wedding cakes will be produced next month is looking back at the last month’s production quantity. Another forecasting model is using the moving averages forecast method. This method uses an average of the most recent periods of data to predict of how many wedding cakes need to be produced next period. For example, the bakery may use a 3-month moving average by adding the last 3-month production of wedding cakes and dividing by 3 months. However, to use this method, we would assume that the market for wedding cake demands is quite stable.

Next important aspect for a Wedding Cake business is how to efficiently manage the quantity and quality of the cakes. Higher quality of ingredients used during production will lead to a better reputation for the business and create higher customer satisfaction, leading to repeat customers. Moreover, business would save ingredient costs by purchasing larger volumes.

This reminded me of what I had recently learned in my class about product focus. Some bakery businesses focus on producing high volumes and low variety. For example, one business can focus on a niche market and produce only wedding cakes that will deliver a high volume but limited designs. But such a business will need to be highly completive in the market in order to be successful. On the other hand, another bakery might produce low volume of cakes, but cater to a much broader customer base such as birthdays, graduations, anniversaries, Bar Mitzvahs, etc.

Managing inventory of raw ingredients as well as finished goods is another critical aspect that has to be closely managed. The perishable nature of the products makes it very important to effectively manage inventory of seasonal products, while maintaining stocks for rush orders. Also, inventory management is crucial in maintaining business profitability by reducing waste of both raw ingredients and expired finished products.

Although I learned a great deal regarding the wedding cake industry from my husband, I”m still left with a few questions: What is the best way to forecast wedding cakes? What process strategies should be used by bakeries? Would it be more profitable to use process focus or mass customization strategy?

Infer: Better Math Can Produce More Sales

Infer is a company that develops technology that allows company’s sales-tracking system to rank customer leads based on how likely they are going to purchase something. The company has raised 10 million over the last two years while working on this technology. Infer is rather simple as its software starts with basic information. For example, if a customer decides to enter their name, address and company when signing up for a product. The Infer system will then start doing research behind the person that signed up for the product.

The CEO, Vik Singh is young as he is only 28 years old, but he believes that his mathematical formulas will increase sales. Vik Singh and his 10-employee team are in the midst of improving sales by using better math.

Vik doesn’t seem to be short on confidence as he feels that this new  innovation is sure to help increase sales. The problem is the fact that he is  very young and there may not be that many people that believe in his new ideas. He may not be the best person to trust for sales, but he certainly has the right engineering track record. He worked with Google fine tuning search systems before moving to Microsoft. At Microsoft, he developed technology with Jim Gray, who of the greatest computer scientists of the last half century. He finished working with Microsoft and built a new Yahoo search system.

Vik Singh has worked with some of the biggest technology gurus in the world. Vik Singh says, ” The way the typical company manages data is piss-poor in comparison and there is more science at Facebook (FB) behind seeing which of your friends are getting drunk across the street from you.” This seems to be a common theme with all the new web-savvy engineers that are trying to make new rules for business applications. Vik Singh wants to treat sales deals like a puzzle. If Infer can makes their sales deal like a puzzle then it can be solved with an algorithm rather than a dinner between people who have ideas.

Infer has worked with Box and other customers to verify their research. It works with historic sales and compares outcomes with their own predictions. Singh continues to tell everyone that the experiments come out nearly perfect, but he has not released any proof of this for businesses to see. In my opinion, there are a lot of other things that factor in when dealing with sales. There needs to be more facts when trying to rely on just math to increase sales. From a management point of view, I don’t know if Vik is taking things a little too far with all these math equations, but he does have the technology background to speak for him. Then again who has time for someone that is only 28 years old and is trying to change the way selling works?


Getting Better with Age?


While on a trip to Willamette Valley Vineyards in France, I tasted a wine that was aged for ten years, and I found that aged wines have a unique taste than newly produce wine. However, while consuming the wine, my mind started wondering how the end- to -end process flow works, what are the critical process controls, what are the priorities of operation managers, and finally how to manage the inventory.

First, I would like to share how the process flow works. Below is the end-to-end diagram that explains that process.

Many steps need to be completed in order to have an aged bottle of wine. My mind was wondering about all the steps because what I had recently learned in the class about network diagrams. For example, the vineyard, crusher, fermentation, and aging need to be completed first in order to have bottling and packaging operation. To find the critical path analysis, it is important to know how long it will take to complete each activity. In addition, it depends about the variety of grape, what kind of wine we need to produce and how long it needs to be aged before the final activity occurs. For example, with most Merlots, it could be aged between 2-12 years.

There are important critical process controls in the operational flow for achieving high quality of wine. Factors, such as crap quality, sorting, fermentation, aging, and filtration process all quality of wine. All these processes are controlled carefully as any deviation can lower the quality of the final product.

In addition, critical areas to focus on the superior customer response time or service are distributor, retail, and tasting rooms as direct sale. These were chosen because wine industries can receive instant feedback from the customers in order to provide exceptional customer service. By getting the customer feedback, wine businesses will be able to respond and react fast enough to correct or solve the issue. Also implementing an information system to streamline and automate data flow for business processes will improve performance and gain access to real time data.

Operation Management is another integral role in the process. Close attention to the areas of labor, equipment, raw material, and inventory must be paid to insure the success of the production operations. Focus on achieving the highest efficiency in production operation is very critical to wineries because of the highly competitive nature of the industry. Inventory control system is another area that requires a lot of attention because a huge stock of inventory needs to be held for aging. The quality of these inventories need to be closely monitored and highly managed in order to generate desired revenue and profit.

What kind of inventory method wineries are using? Is it worth paying more money for aged wine? Is wine getting better with age?