Answering the questions on the text: “Hard Rock Cafe – Forecasting”
1. Describe three different forecasting applications at Hard Rock. Name three other areas in which you think Hard Rock could use forecasting models.
Hard rock café divide the forecast in long term methods where the expectations are to establish a better capacity plan and short term methods where they look for good contracts with suppliers for leather goods (clothes etc.) and definately to be more negotiable with the suppliers of food products. Also hard rock café pays attention to potencial revenues using pricing and costing information of every café. Short term of sales forecasts are calculated each month by every established site.
Forecasting models could be useful in other areas like:
1. New food product and its impact. Will they be accepted by the consumers? (Long term,Strategic) 2. Human Resource forecasting. Are they good enough on what they are doing or could it be more efficient in another way? (Medium term,Operating) 3. Forecasting economic information like economic crisis or growth. 4. Opening new establishments. Is the market big enough? (Long term, Strategic)
2. What is the role of the POS system in forecasting at Hard Rock?
The Point Of Sale system collects diary data of almost every consumer in every single café. That means huge information if we check out the number of visitors in almost every Hard rock Café. Furthermore this huge information means even more benefits if the managers are able to use them in a proper way.These transactions in a combination with other data like prior years sales, local events, tourist informations may help the head managers of hard rock to realize the benefits of every café. ,
This POS system has to be accurated or elsewhere its needed to identify and examine the errors when they occur. Otherwise if the POS system doesn’t work efficient, the company will have issues like orders-back instead of benefits. Plus the people who analyze the POS results need to have the knowledge to use them otherwise even the best POS system couldn’t be useful by itself.
3. Justify the use of the weighting system used for evaluating managers for annual bonuses.
Using that method the Hard rock café expects from the local managers to maximize their present and future results. That means annual bonuses for these local Managers and even more benefits for the whole company. The basic concept of the annual bonus consider the economical data of the last 3 years: Year before: 40%
2 years before: 40%
3 Years before: 20%
The trick is that local managers has to be continuous efficient which means to have always better results so they can get the bonuses. If something goes wrong like negative results or just less sales than the other year, they will be revised by the headquarter and may will not get the entire bonus.
4. Name several variables besides those mentioned in the case that could be used as good predictors of daily sales in each cafe.
Variables mentioned in the case:
– prior years sales for that day
40/40/20 -> weight of data information (last year: 40 %, two years ago: 40 %, three years ago: 20 %) – adding information from local Chamber of Commerce or Tourist Board on upcoming events (sport events, major conventions, concerts)
Other usefull variables: – predicted weather conditions for that day
(if the weather is nice, probably there will be more visitors which increases the sales)
– vacation/holiday time around the shop and in other regions if it´s predicted that they will transit the shop (but carefull, maybe a lot of local people are moving out for vacation, so there will be less sales)
– groceries costs including food and beverages/costs of living (maybe some people will stay at home, it the price for living costs are rising)
– special offers from other burger restaurants
(sales will decrease if there is more competition)
– dates when people get their salaries or bonuses are payed like at Christmas (if people have more money to spend, they will indulge in something)