Operations Management

Background of the Case

Orient-The Original Buko Pie Bakeshop is located along the National Highway in Brgy. Anos, Los Baños, Laguna. In its almost 60 years of business operations it has added a variety of pasalubong goodies to serve its local and nationwide clientele. It has been 16 years since the bakeshop has incorporated banana bread into its array of fresh, homemade pasalubong products. This new food item accounts for 13% of the bakeshop revenues and continues to enjoy a 5-6% increase in demand per year. Present average daily demand is at 270-300 boxes for the small, 350-gram pasalubong item. Recently, the large-sized version of banana bread (each weighing about 700 grams) was added to the product line.

Case Problem

What should be done by the Orient Bakeshop to answer the growing demand of banana bread restricted by the capacity constraints given in the production sites?

Point of View

The viewpoint of the production manager would be considered since he is the one responsible to make the decision. In this case, Ian Lee, Mrs Virginia Castilla’s son is the person responsible to make the decision since he is the one assigned to identify the best operations strategy for the banana bread product. In this scenario, we assumed that Ian Lee would happen to be the production manager of Orient Bakeshop and his decision would be the one to be reported to Mrs. Virginia Castilla.

Alternative Solutions to the Problem

Alternative 1: Outsource Production

Outsource banana bread production from the family members: MrsCastilla’s daughter, daughter-in-law and her niece; delivery is upon a day-to-day basis, payment is on COD (cash on delivery).

Advantages:

a. There would be an average production of 40 large banana bread loaves and 60 small banana bread loaves per day.

b. All production costs are shouldered by the three family members.

Disadvantages:

a. This production system has been causing angst and strain within the family in terms of inaccurate...