Introduction

We decided to initiate a Bakery with the name and style of LadyDi’s First Class Bakery, our bakery will provide freshly prepared bakery and pastry products at all times during business operations. Six to eight moderate batches of bakery and pastry products will be prepared during the day to assure fresh baked goods are always available. We strive to be a leader using the latest technology and engineering to carry us into other areas such as new products or new automated equipment. We are committed to a safe work environment for all those employed. We believe growth is necessary to provide opportunities on an ever-increasing scale for our people.  Therefore, we are dedicated to profitable growth, growth as a company, and growth as individuals.

Mission

Our Mission statement is to provide a product of the greatest possible value to our customers, thereby gaining and holding their respect and loyalty while achieving sufficient profit to finance our company and its growth.

Values

Our first responsibility is to satisfy our customers with quality of services and products, without which there would be no company. We will cater to our customers in a professional manner by offering quality merchandise, competitively priced and delivered with courtesy and professionalism. We feel a deep responsibility to our employees.

Outlook and Inner Environment

Improving our order processing definitely has to be one of the major challenges. Our bakery will be able to do this process by having orders much quicker, and through a variety of methods via telephone, fax, E-Mail or text. If we are able as a bakery to serve our customers through a variety of means, they will be happier and will return.

Actually, the factors include the variable costs and fixed costs are much higher which even restrain the marginal cost of the product and the selling price to cover the expenses are low.

However, the selling prices may not be increased due to market competition currently we have to expand the services and quality to capture the customers because the market is highly competitive of bakery meanwhile.

There is also possibility that the efficiency of 100 labors to produce 6000 units are not enough, they need to be more train and effective to produce more quantity of manufacturing.

Swami Nathan and Tayur (2003) agree, stating that in the electronic environment, customer expectations in terms of quick and timely delivery have also increased. This point is reaffirmed by Auramo et al. (2002) who propose that more sophisticated customer demands have added complexity to SCM. The point is again highlighted by Johnson and Whang (2002) who say that “modern manufacturing requires flexibility due to stiff competition, fast changing customer preferences, shortening product lifecycle and product variety proliferation”. We must improve speed and accuracy of order processing thoroughly.

Financial Performance

Currently uses 100 workers to produce 6,000 units of output per month (working 20 days month). The daily wage (per worker) is $70, and the price of the firm’s output is $32. The cost of other variable inputs is $2,000 per day.

Profitability

Revenue          (6000 @ 32)                            $192,000

Direct Labor (100 x 20 = 2000 @ 70)            ($140,000)

Other overheads (2000 x 20)                          ($40,000)

Contribution Margin…                                   $12,000                                              

But currently the overall costs of the corporation is high than the revenues which incurring losses. These are the contribution margin actually not the profitability. To know the accurate profit of the firm we need to know the fix costs which reveals already higher than the contribution margin. However, this analysis does not reflect any sense of future, this investment should be diverted towards somewhere else alternate investment solutions.

Break Even Analysis

                        40000 / (32-30) = 20,000 Units

This result reflects that the organization needs to produce at least twenty thousand pieces of products and sale those in a month with the same resources to achieve the break even.  

I recommend to deeply analyses all the factors of production that which one needs to be more effective. As far as I realized, the labor of production is not skilled for such production and needs to be more efficient to produce more quantity of production with the same resources. The credibility of the labor should be more efficient. Meanwhile, a single labor is producing 3 products in an hour. This should be more in a single hour. Either providence of training and development or proper education of the work should be occurred which may help employees to learn with new dimension and produce more quantity in a single hour.

The marginal cost of the last piece of product is $30 whereas the cheapest and lowest marginal cost would take long term period to revive the profitability. Such a long-term recovery of costs may be harmful and very slow processed that the organization has to be collapsed. That is why, this is the best to solution to now close the operations and diver the investment on some other manufacturing product instead of month by month enduring of losses.

While inventory management has always been important, it has become more important over the past several decades. As the needs of this companies increase, we must in turn increase demands on our suppliers. In order for suppliers to have the goods our customers need; it is necessary for us to maintain excellent and accurate inventory management.  Our customers don’t care if we have to manually count our inventory or have access to an automated system like the ones that fulfillment centers provide, the only thing that is of concern to customers is the ability of our company to have supplies on hand to take care of their needs in a reasonable amount of time. We must now look at inventory management as part of our monthly plans.  The fact is that before we even have customers, we will need to plan for the maintenance of proper inventory levels. We will also need to maintain a system for increasing those levels as business dictates, and this requires the implementation of efficient and effective inventory management procedures. Without procedures in place to oversee inventory levels it will be quite easy to allow inventory levels to diminish to dangerous levels, levels that will prevent your company from meeting the supply and demand needs of your customers.  To keep track of Inventory we can here at LadyDi’s Gourmet bakery Use for example a simple Cycle Counting Program. Cycle counting manages the accuracy of inventory records by counting materials continuously throughout the year. Companies determine the frequency of material counts according to the cost of the material and the regularity of its use. They may decide to schedule a certain part or other item for frequent cycle counting when counts are often inaccurate. A cycle counting program compares the physical count of an item against the inventory records. Cycle counters investigate the cause of inaccuracies, identifying issues in the inventory management system. We will also utilize a Inventory Records Database

The inventory records database can provide information for tracking the accuracy of inventory. The records database provides information on part counts that a cycle counter or inventory manager can use to determine the accuracy of a business inventory. An inventory records database can generate cycle count reports, count lists and an inventory transaction history.

Beginning Inventory + Net Purchases – Ending Inventory = Cost of Goods SoldLIFO Ending Inventory Cost =1000 units X $8 each = $8,000. We must remember that the last units in are sold first; therefore, we leave the oldest units for ending inventory.

FIFO Ending Inventory Cost = 1000 units X $15 each = $15,000

Remember that the first units in (the oldest ones) are sold first; therefore, we leave the newest units for ending inventory. Average Cost Ending Inventory = [(1000 x 8) + (1000 x 10) + (1000 x 12) + (1000 x 15)]/4000 units = $11.25 per unit 1000 units X $11.25 each = $11,250

As you can see from the ratio results, inventory analysis can have a big effect on the bottom line.

Tax Policy

A new firm specializing in baked goods has a $78.3 million project in the oven that could give rise to 241 jobs in the Indianapolis area by 2018.
Dallas-based Specialty Bakery LLC plans to build a 227,000-square-foot production and distribution facility on 27 acres within the Purdue Research Park near Indianapolis International Airport. The startup would make frozen bread, dough and cookies, according to information filed with the Indianapolis Department of Metropolitan Development.
Specialty Bakery’s products would be sold to quick-service restaurants, in-store bakeries and food-service distributors. The company says it has secured a 15-year contract with a global quick-service restaurant, making it necessary to kick off development of its first facility.
The company plans to spend about $24.3 million to develop the plant, plus another $54 million for manufacturing, IT, and research and development equipment.
To help offset the costs, the company has requested tax breaks on the project.  A proposed 10-year tax abatement on the equipment would save the firm about $3.4 million, and a 10-year abatement on the real estate improvements would save about $2.5 million.
During the 10-year abatements, the firm still would pay an estimated $2.3 million in personal property taxes and $2.6 million in real property taxes.
City development staffers estimate that the facility would add $17 million in assessed value to property tax rolls, and that the purchase of the equipment would result in an increase to the tax base of about $21.6 million in assessed value in the first year of operation.
The 241 jobs created by the project would pay an average wage of $18 per hour.
The Indianapolis Metropolitan Development Commission will consider the tax break requests at its meeting scheduled for 1 p.m. Wednesday.
City development staffers have recommended that the commission approve the abatement requests. “In staff’s opinion, a project such as this would not be economically feasible without the tax abatement incentive,” according to a staff report to the commission

Quality Management

First customers see us trying hard and presenting great quality items and service, they will certainly spread the word about our bakery, which is essential to our growth. Growth does not come without issues. For example, with the introduction of new machines all employees must be trained on it use.  Employee education will be key in maintaining growth and development always. An employer must be loyal to their employees if employee loyalty is important to that employer. An open line of communication will be a tremendous asset as the business gets off the ground because it is obvious that cookies will be burnt or not up to standard and a solid recipe and an excellent baker can eliminate this problem.

Areas for Quality Measurement and Management

The Total Quality Management is the system which recognizes the productivity with the perspective of the standards. There are many quality standards and measurement tools which enhance production and surge the standards of the products of the firm.

We seek to hire the best people we can find, and create work environment where every employee is provided the opportunity to develop to their maximum potential. We will employ 10 competent employees with areas to sit and both indoors and outdoors.

The obvious production issue we will face as a business is Labor issues. These include increasing labor costs, finding experienced bakery employees, ongoing training of new staff, quality control difficulties, keeping prices competitive and product consistency. As with any business, we know that a company is only as good as its employees. Unfortunately, employees are subject to sickness, injury and many other issues that keep them away from their jobs. In addition, employees need to be motivated to produce desired results. Unmotivated employees lead to a decline in quality work, product consistency and productivity.

Challenges and Leadership

The big challenge for this bakery is to reduce costs and increase profits while addressing ever-present labor-related issues. There are many initiatives we as a bakery can implement that will address this challenge. For example, a larger mixer produces bigger batches with higher yields less frequently, which will reduce time-handling the product and labor costs.  We can also expand or install a bigger freezer, which allows bakeries to hold additional pre-baked products, meeting increased demand during peak sales periods. With our addition of one major piece of equipment, our bakery will improve our profits, reduce labor and increase product offerings. One such piece of equipment, such as the volumetric bakery depositor, provides the versatility, flexibility and automation to address increased capacity and a declining quality labor pool. This is because volumetric depositors may be fitted with a wide range of attachments and accessories, benefiting sweet goods and cake manufacturers who produce many products with one machine. The equipment manufacturer says there are countless benefits of a versatile depositing and finishing system, including: Increased productivity due to high-speed production capabilities and precise portion-control: Increased profitability through ingredient savings: Better quality control and product consistency: Reduction in labor costs : Minimum training required for new bakery employees: Increase in efficiency by producing larger batches in less time: Reduce production frequency and draw unbaked goods from freezer as needed and: Increase in sales through additional orders due to a wider range of products.  It is no longer sufficient just to deliver a tangible product, customers mandate cost effective delivery of the products.

Policy for Quality Management

One such piece of equipment, such as the volumetric bakery depositor, provides the versatility, flexibility and automation to address increased capacity and a declining quality labor pool. This is because volumetric depositors may be fitted with a wide range of attachments and accessories, benefiting sweet goods and cake manufacturers who produce many products with one machine. The equipment manufacturer says there are countless benefits of a versatile depositing and finishing system, including Increase in sales through additional orders due to a wider range of products.

References

Handfield, R. B., Nichols, E. L., (1998) Introduction to Supply Chain Management, Englewood Cliffs, Prentice Hall.

Swaminathan, J. M., Tayur, S. R., (2003) “Models for Supply Chains in E-Business”, Management Science, 49(10): 1387-1406.

Johnson, E., Whang, S., (2002) “E-Business and Supply Chain Management: An Overview and Framework”, International Journal of Physical Distribution and Logistics Management, 11(4): 413-422.

Auramo, J., Aminoff, A., Punakivi, M., (2002) “Research Agenda for E-business Logistics, Based on Professional Opinions”, International Journal of Physical Distribution, Logistics Management, 32(7): 513 – 531.