Professional Documents
Culture Documents
Inventory Management
of Seasonal Milkshakes
November 24, 2014
Team Members:
Jordan Avery
Emily Bowen
Truitt Clark
Chris Hoag
Allison McCall
Kate Nickerson
Allison Oesterle
Faculty Advisor:
Shabbir Ahmed, Ph.D.
shabbir.ahmed@isye.gatech.edu
Client Advisor:
Meyer Skalak
Director of Procurement
meyer.skalak@chick-fil-a.com
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Disclaimer: This report has been created in the framework of a student design project. The Georgia Institute of Technology and Chick-fil-A do not officially sanction its content.
CLIENT BACKGROUND
Founded in 1946 in Hapeville, GA
9th largest fast food restaurant in
United States
Surpassed $5B in total sales in 2013
1800+ Stores
10 Distribution Centers
Sales (Billions $)
3.2
3.6
2009
2010
2011
Year
4.6
2012
2013
2
0
PROJECT OVERVIEW
METHODOLOGY
PROBLEM
Forecasting Tool
Inventory Plan
DELIVERABLE
MILKSHAKE OVERVIEW
YEAR-ROUND
MILKSHAKE
Icedream
Shake base
Syrup flavoring
4 flavors
PEACH
MILKSHAKE
PEPPERMINT
CHOCOLATE CHIP
MILKSHAKE
6 week LTO
Historical sales
data: 2010-2012
Validating 2013
data
2 unique
ingredients:
peppermint
syrup and
chocolate flakes
PROJECT SCOPE
Forecast demand
at Corporate
Source from
Suppliers
Ship to and
store at DCs
Operators
order from
DCs
Ship to
Operators
Assemble
shakes and
sell at Stores
Re-order inventory
from suppliers if
needed
PROBLEM DESCRIPTION
Static forecasting method
High forecast error
Does not account for causal
factors
Time consuming
Campaign
#1
-24%
#2
-1%
#3
14%
#4
19%
3%
Disposition Dollars
Breakdown
DC Disposal
38%
59%
Supplier Disposal
Transportation
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DATA COLLECTED
Sales Data
Inventory Management
Causal Factors
Lead times
Climate data
Service level
Economic factors
Ingredient conversions
Disposal cost
Holidays
Store invoices to DC
Transportation cost
Number of milkshakes
sold at every store
Promotional period
dates
INITIAL ANALYSIS
Varying seasonality and factors associated with the two milkshakes:
Total Cases Sold by Day of Promotion - Peppermint Syrup
600
120
500
Sold
Cases
Cases Sold
Sold
Cases
Cases Sold
100
400
300
80
60
200
40
100
20
0
1 6 1116212631364146515661667176 3 8 13192429343944495459646974 1 6 11162126313641465156
2011
2012
Day of Promotion
2013
1 5 9 13 17 21 25 29 33 37 41 45 49 2 6 10 14 18 22 26 30 34 38 42 46 50 1 5 9 13 17 21 25 29 33 37 41 45
2010
2011
2012
Day of Promotion
Forecast Overview
Forecast
Objectives
Forecast
Challenges
Skewed data
No zip code information to investigate demographic
factors
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
Day 1
2013:
November
1728 28
2013:
November
18December
December
NOVEMBER
DECEMBER
JANUARY
Day 1
Full Season
R2adj
0.8655
S-values
6.670
0.1449
Durbin-Watson
1.274
F-stat
266.4
Significant Predictors
Intercept
Promo Percent
Lag
Temperature
Economic (S&P 500 MA3)
Weekend
P-value
4.65 10-8
2.00 10-16
2.00 10-16
3.70 10-15
6.94 10-11
2.00 10-16
Forecast Equation:
X(t) = -60.52 20.34 *(Promo Percent) + 0.3949*(Lag) + 0.8903*(Temperature) + 0.0263*(Economy) + 10.65 *(Weekend)
*Example of output using data generated by team
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INVENTORY MANAGEMENT
Peppermint: Push
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INVENTORY MANAGEMENT
Pull
Current State: Push
Supplier
Peach: Push/Pull
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INVENTORY MANAGEMENT
Initial Push Order Quantity
1. ExpertFit forecasted data to find most
accurate distribution model and
parameters
2. Using Matlab, simulate 10 demand
scenarios for each DC
3. Establish reorder point for each
percentage of total forecast
4. Compute expected cost function
5. Determine optimal initial order quantity
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DELIVERABLE OVERVIEW
Find regression
model
Use regression
model to make
forecast
Output aggregated
weekly forecast into
individual DC tab
Inventory strategy
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VBA
Input
DC
Usage
Daily date
Item size
VBA
Input
DC
Day of promotion
Promotion %
Sales
Lag (1)
Temperature
Economy
Weekend
Input
High demand
Most probable
demand
Low demand
Week of promotion
Actual sales
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PROJECT VALUATION
ISyE Senior Design
Peach 2014
Forecast
PCC 2013
Forecast
Man Hours
20
SUMMARY
Problem:
Inaccurate forecasting tool leading to excess costs and lost man hours
Solution:
Interactive forecasting tool allowing
for updates throughout the season
Impact:
Reduced Disposition
Dollars
Questions?
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WORK CITED
Cartoon Christmas Tree Drawings. (n.d.). Retrieved November 19, 2014, from http://www.drawingstep.com/cartoon-christmas-tree.html
Chick-fil-A. (n.d.). Retrieved August 23, 2014, from http://logos.wikia.com/wiki/Chick-fil-A
Chick-fil-A is the Hot Topic. (2010, November 8). Retrieved November 19, 2014, from http://dunwoodyusa.blogspot.com/2010/11/chick-fil-is-hot-topic-freetickets.html
Chick-fil-A Truck At Airport West Distribution Center. (n.d.). Retrieved August 23, 2014, from http://upload.wikimedia.org/wikipedia/commons/b/bd/Chick-filA_truck_at_Airport_West_Distribution_Center.JPG
Cookies & Cream Milkshake. (n.d.). Retrieved November 19, 2014, from http://www.chick-fil-a.com/Food/Menu-Detail/Cookies-Cream-Milkshake
Industrial building 1 - Manufacturing/Refining - Vector Illustration/Drawing/Symbol (SVG) - IAN Image and Video Library - Free High Resolution and Vector
Environmental Science Images. (n.d.). Retrieved November 19, 2014, from http://ian.umces.edu/imagelibrary/displayimage-search-0-6689.html
Lucas, J. (2012, July 28). (Let's Talk About Chick-Fil-A. Retrieved November 19, 2014, from http://randomindependent.com/2012/07/28/lets-talk-about-chick-fila/
Peach (n.d.). Retrieved November 24, 2014, from http://bellvalefarms.com/images/slider/peach.png
Peach Milkshake (n.d.). Retrieved August 23, 2014, from http://www.chick-fil-a.com/ext/peach-shake/images/milkshake.png
Peppermint Chocolate Chip Milkshake. (n.d.). Retrieved August 23, 2014, from http://www.chick-fil-a.com/Food/Menu-Detail/Peppermint-Chocolate-ChipMilkshake
Peppermint Stick Candy. (n.d.). Retrieved November 19, 2014, from http://www.candyconceptsinc.com/Peppermint-Old-Fashioned-Stick-Candy--80ctBox_p_4577.html
Truck Icon. (n.d.). Retrieved November 19, 2014, from http://www.iconarchive.com/show/flatastic-2-icons-by-custom-icon-design/truck-icon.html
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