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    Operations Mgmt. for Managers (Forecasting)

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    Please read the case about Hard Rock Cafe forecasting (see attachment). Discuss the following issues:

    1. Describe three different forecasting applications used at Hard Rock. What are some other areas in which you think Hard Rock could use forecasting models?

    2. What is the role of the POS system in forecasting at Hard Rock?

    3. Name several variables that would be good predictors of daily sales. How could this information be gathered and used at each cafe?

    CASE: Forecasting at Hard Rock Cafe

    With the growth of Hard Rock Cafe, from one pub in London in 1971 to more than 110 restaurants in more then 40 countries today, came a corporate-wide demand for better forecasting. Hard Rock uses long-range forecasting in setting a capacity plan and intermediate-term forecasting for locking in contracts for leather goods (used in jackets) and for such food items as beef, chicken, and pork. Its short-term sales forecasts are conducted each month, by cafe, and then aggregated for a headquarters view.

    The heart of the sales forecasting system is the point-of-sale system (POS), which, in effect, captures transaction data on nearly every person who walks through a cafe's door. The sale of each entrée represents one customer; the entrée sales data are transmitted daily to the Orlando corporate headquarters' database. There, the financial team, headed by Todd Lindsey, begins the forecast process. Lindsey forecasts monthly guest counts, retail sales, banquet sales, and concert sales (if applicable) at each cafe. The general managers of individual cafes tap into the same database to prepare a daily forecast for their sites. A cafe manager pulls up prior years' sales for that day, adding information from the local Chamber of Commerce or Tourist Board on upcoming events such as a major convention, sporting event, or concert in the city where the cafe is located. The daily forecast is further broken into hourly sales, which drives employee scheduling. An hourly forecast of $5,500 in sales translates into 19 workstations, which are further broken down into a specific number of wait staff, hosts, bartenders, and kitchen staff. Computerized scheduling software plugs in people based on their availability. Variances between forecast and actual sales are then examined to see why errors occurred.

    Hard Rock doesn't limit its use of forecasting tools to sales. To evaluate managers and set bonuses, a 3-year weighted moving average is applied to cafe sales. If cafe general managers exceed their targets, a bonus is computed. Todd Lindsey, at corporate headquarters, applies weights of 40% to the most recent year's sales, 40% to the year before, and 20% to sales 2 years ago in reaching his moving average.

    An even more sophisticated application of statistics is found in Hard Rock's menu planning. Using multiple regression, managers can compute the impact on demand of other menu items if the price of one item is changed. For example, if the price of a cheeseburger increases from $6.99 to $7.99, Hard Rock can predict the effect this will have on sales of chicken sandwiches, pork sandwiches, and salads. Managers do the same analysis on menu placement, with the center section driving higher sales volumes. When an item such as a hamburger is moved off the center to one of the side flaps, the corresponding effects on related items, say french fries, is determined.

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    Solution Preview

    Please find guidelines and ideas for Forecasting at Hard Rock Cafe in the attached file.


    Forecasting at Hard Rock Cafe

    Hard Rock is a cafe chain that optimizes effective forecasting techniques within the organization those have assisted to increase different sales such as retail sales, cafe sales, banquet sales, concert sales etc. (Heizer & Render, 2009) In this case study, forecasting application used at Hard Rock, role of Point-of-Sale (POS) system and different variables will be described that has increased the efficacy of sales forecasting in Hard Rock Cafe on the basis of given case.
    Forecasting Applications used at Hard Rock
    Different forecasting applications are used at Hard Rock. These forecasting applications are as follow:
    Monthly guest count: The long-range, intermediate-term and short-term sales forecasting is applied in the area of monthly guest count at Hard Rock Cafe. The proper forecasting assists to increase the rate of guests on cafe door by analyzing their requirements and to manage them properly (Heizer & Render, 2009). To forecast monthly guest count, the cafe manager of Hard Rock optimizes data of prior year sales and also adds information from the local chamber of commerce, tourist board and upcoming events (Armstrong, 2001). By adding new information in previous year sales, monthly guest counts are forecasted effectively by cafe manager.
    Cafe sales: The other forecasting application used as Hard Rock is cafe sales that help to increase the sales in an effective manner. It is because; it helps to obtain the data about the peak time of café sales and other aspects related to it that is managed properly. The proper partition of monthly sales forecasting into daily sales ...

    Solution Summary

    The solution discusses operations management for managers (forecasting).