Optimal Supply Chain Strategy for Cupcake Manufacturing

MGT2320 W19
Capstone Assignment
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Table of Contents
1. Introduction....................................................................................................................3
2. Supply chain details.......................................................................................................3
3. Location strategy...........................................................................................................3
4. Layout strategy..............................................................................................................3
5. Process strategy............................................................................................................3
6. TQM Tools.....................................................................................................................3
7. Appendices....................................................................................................................4
7.1. Cause and Effect diagram (a. k. a. Fishbone)........................................................4
7.2. SPC Charting..........................................................................................................5
7.3. ABC Analysis..........................................................................................................6
7.4. EOQ Calculations....................................................................................................7
7.5. MRP diagrams and calculations.............................................................................8
7.6. Staffing..................................................................................................................11

1. Introduction
The fundamental goal of supply chains is to efficiently deliver a product to a consumer.
In bakery goods like cupcakes, the supply chain starts with procuring raw ingredients
and ends with the delivery of baked cupcakes to the end consumer. There are various
activities at each stage which require careful planning and inventory optimization for
efficiently organizing the overall supply chain while maintaining desired quality. Short
shelf-life of ingredients and changing consumer tastes are major factor that encourage
inventory optimization. The project is aimed at finding optimal supply chain strategy with
objectives to increase efficiency, maintain quality, improve order processing, increase
customer service and reducing cost.
2. Supply chain details
The bakery will purchase various ingredients either directly from farmers or agricultural
cooperatives. Basic ingredients like flours, sugar, eggs, fruits, cream milk are widely
available, so these can be purchased from whichever supplier offers the lowest prices.
However, some special ingredients, such as vanilla bean paste and flavoured jelly
crystals might be exclusively available with limited number of suppliers. In this case, the
bakery needs to find affordable supplier which provide enough flexibility, least delivery
lead and better price.
After procuring raw materials, during the manufacturing stage of the supply chain, the
bakery converts ingredients into cupcakes. The specific manufacturing process is
adopted by the company to produce a batch of 12 units “Crazy Good Custard Filled
Cupcakes”. Then, it is packaged according to type and demand of customers The
following diagram presents a typical supply chain network of cupcake manufacturing by
the bakery.

Figure 1: Supply chain network of cupcakes manufacturing
The bakery may want to be a wholesale bakery that sells to retail stores or may open its
own retail location, or both. The bakery should also use website as an extension of the
retail location to expand the availability of products to wider consumer base. As
depicted in the above diagram, the bakery has three types of customers which may
have varying demands. The bakery will supply both directly to consumers and through
wholesaler and retail stores for delivering to end consumer.
3. Location strategy
There are many affordable commercial spaces available, if the bakery wants only to
manufacture cupcakes for delivery to wholesalers and retailers. However, as the
company plans to sell them also to end consumer, it will need a formal space in a
catchy location with space for a kitchen as well as public consumption. Though
population density will be the key criteria to select a location, it should also be noted that