Evaluating the Volatility of Customers Demand in Danes Bakeshop for the Year 2017

LUCIDO, Clarence John B.

MENDOZA, Ian Emmanuel M.

SUPAN, Dave T.

ABAD, Trisha S.

BAKIDAN, Edralyn L.

PRE, Patrizia Joanne P.

RAMOS, Sheralta Diane Bel

Submitted to the Department of Industrial Engineering

School of Engineering and Architecture
Saint Louis University
In partial fulfilment of the requirements for
Production Systems

February 11, 2018

 SAINT LOUIS UNIVERSITY

School of Engineering and Architecture

Department of Industrial Engineering

Baguio City

Evaluating the Volatility of Customers Demand in Danes Bakeshop for the Year 2017

PRODUCTION SYSTEMS

Submitted by: Submitted to:

LUCIDO, Clarence John B. Engr. Geraldine Nerona

MENDOZA, Ian Emmanuel M.

SUPAN, Dave T.

ABAD, Trisha S.

BAKIDAN, Edralyn L. Date Submitted:

PRE, Patrizia Joanne P. February 11, 2018

RAMOS, Sheralta Diane Bel

 CHAPTER I

This chapter presents an overview of this study which includes the background, statement

of the problem, objectives, and scope and limitations. This chapter served as the basis for the

direction of the study.

Background of the Study

Forecasting is the use of historic data to determine the direction of future trends. It is a

planning tool that helps management in its attempts to cope with the uncertainty of the future,

relying mainly on data from the past and present and analysis of trends.

Forecasting is often confused with planning. Planning concerns what the world should

look like, while forecasting is about what it will look like. Planners can use forecasting methods

to predict the outcomes for alternative plans. If the forecasted outcomes are not satisfactory,

there can be a revision of plans, and obtain new forecasts, repeating the process until the

forecasted outcomes is satisfactory. There can be an implementation and monitoring of the actual

outcomes in order to use in planning for the next period. This process might seem obvious,

however, in practice; many organizations revise their forecasts, not their plans. They believe that

changing the forecasts will change behaviour (Armstrong, 2001).

Forecasting is very important in many aspects. Every individual tries to predict success in

marriages, occupations, and investments. Organizations invest enormous amounts based on

forecasts for new products, factories, retail outlets, and contracts with executives. Government

agencies need forecasts of the economy, environmental impacts, new sports stadiums, and effects

of proposed social programs; however a poor forecasting can lead to disastrous decisions.

(Armstrong, 2001).
 It is often important to forecast the reactions of suppliers, distributors, and government in

order to develop a successful marketing strategy. On occasion, one might also need to forecast

the actions of other interest groups, such as “concerned minorities.” A range of techniques

similar to those for forecasting competitors’ actions appears useful, but little research

investigates the relative accuracy of these techniques. As with forecasting competitors’ actions,

different techniques may suit different situations (J.Scott Armstrong, 1988).

In relation, sale forecasting is important to businesses such as bakeshop in order to improve

several areas of operation in the retail bakery. By the use of the sales forecasting, bakeries can

predict cash flow, monitor prices and control operating cost in order to provide a base planning

and execution. Other than that, sales forecasting in bakeries will also help with the human

resource planning by allowing the avoidance of unexpected expense such as surprise layoffs or

needing new hires in order to meet the unseen business demands (bakemag.com 2015).

Filipinos are known as bread lovers. Bread has become a typical breakfast as a

replacement for rice. Some of the bestselling breads include pandesal, cinnamon, spanish bread,

ensaymada and many others.

Baguio City's corners are almost full of bakeries and bakeshops. Some of the famous

bakeries include Victoria's bakeshop, Danes bakeshop, French Line, Julie's bakeshop, Swiss

Baker, and Tea house.

The researchers were permitted by the store manager, Ma’am Donna Dane Aldanao to

conduct a study on their bakeshop also to get the historical data that are needed. During our

interview she mentioned some facts about the bakery.

 Dane’s Bakeshop was founded by Mr. Ramon F. Aldana at the year of 1995 together with

his wife Dolores Aldana being the corporate director. It’s main factory is located at Loakan. This

bakeshop is a sole proprietorship on 1995 -2007 under Mr. Aldana, and then grew into a

corporation from 2008 until present year.

Dane’s bakeshop which is located at Kayang Street is the 6th and latest branch. It is

operating for 5 years from now. For this study, the researchers will use forecasting techniques to

analyze the behavior of customers.

Statement of the Problem

The demand forecasting is the scientific tool to predict the likely demand of a product in the

future. It is the starting point of fulfilling a customer order and based on the forecasted demand, a

firm commits its resources, capacities and capabilities for a period of time to create goods and

services that its customers value and are willing to pay for. The aim of this study is to analyze and

estimate the future customer demand in Dane’s Bakeshop. Specifically, this study aims to answer

the following questions:

1. What is the behavior of the customers of Danes Bakeshop based on the monthly and

weekly trends of the year 2017 with the use of forecasting techniques?

2. As shown by the customer’s behavior, how can the researchers be able to help the

problem of the management of Danes bakeshop such as unnecessary expenses on the operating

cost of the production?

Theoretical Framework

A small business must adjust constantly to a changing market. In order to make those

adjustments, its management needs to predict what may happen in the marketplace. Accuracy in

making forecasts can mean the difference between being ready and being left behind. Spending

time reviewing your forecasts before marketing and sales meetings will help you make sound

decisions (Johnston, 2000).

Accurate long-term forecasts enable a business to better manage financial and other

planning. Valid sales forecasts give the company a framework for setting realistic goals for its

sales teams. Accurate forecasts help managers foresee the need for more staff in time to recruit

and train them. Management can plan new facilities for production and storage when and where

they will do the most good. A forecast also gives the company time to arrange the financing

needed for expansion (Johnston, 2000).

This study aims to apply the concept of forecasting to come up with an effective and

feasible strategy to help the chosen establishment Dane’s Bakeshop, to estimate the demand of

product that they will sell.

INPUT PROCESS OUTPUT

 Interviewing the  Getting the monthly  Providing an effective
manager of Dane’s demand. strategy to Dane’s
Bakeshop.  Selecting a Forecasting Bakeshop.
 Asking for the technique
Demand statement  Analyzing the data
records. gathered
 Analyzing the demand  Graphing the trend of the
statement. gathered data.
 Identifying the peak
points.
Scope and Limitations

This study focuses on evaluating the volatility of demand particularly in Dane’s

Bakeshop and one instrument to come with a precise output is through sales forecasting, through

this method, the researchers will be able to improve several areas of operation in the retail

bakery. Using a sales forecast, the chosen establishment (Dane’s Bakeshop) will then be able to

predict cash flow, monitor prices and control operating costs with a higher degree of confidence

and accuracy. The time frame for a sales forecast varies from a week or month to a year or more.

The two major types of forecasts are qualitative and quantitative. A qualitative forecast uses

information from sales staff and other sources. A quantitative approach uses past data to predict

the future. In practice, management frequently combines these methods. Accurate sales forecasts

make valuable contributions to a business, but forecasts are not always accurate. The result of

this study will depend on the behavioural trend of the customers in buying the product in every

month of 2017. This study will be conducted from the month of February to May 2018.

Significance of the Study

The effort of the sales, marketing, finance and operations departments to match demand

and supply contributes to the appropriate use of resources in the fulfilment of customer demand

forecasts. Demand forecasts enable the manufacturing department to plan production to meet

customer requirements. The forecasts also support the purchasing department's efforts to

correlate deliveries of materials and supplies with production schedules. In turn, a forecast also

alerts finance to the level of investment in plant, equipment and inventory required to meet

demand as well as the budgets to be created to manage the business. The demand forecasts also
affect the personnel department's hiring and training decisions and the marketing department's

assignment of resources to particular product groups or marketing campaigns.

Danes bakeshop has been observed for the previous years, and most of their product’s expiry

is earlier than expected, which is 2 days after the printed expiry date, and this affects their profit.

The management wishes to take action to properly allocate the supplies in meeting the demands.

This study would be of value to their daily operations by:

 reducing expenses

 helping them develop and improve their strategic plans

 Helping them to estimate the demand of product that they will sell

Through the use of forecasting, the researchers would be able to determine the behaviour

of the customers of Danes bakeshop based on the monthly and weekly trends of the year 2017

with the use of forecasting techniques as well as to help and to be able to give solution to the

problem of the management of Danes bakeshop such as unnecessary expenses on the operating

cost of the production based on the customer’s behavior.