Artisan Alley Donuts: The Perfect Recipe for Daily Production

In September 2023, Sarah Bell, the president and chief executive officer of Artisan Alley Donuts (Artisan Alley), was facing various operational challenges as she navigated the complexities of scaling up her business. Artisan Alley is an artisanal donut bakery in Calgary, Alberta, Canada. Bell’s decision to increase donut production by 15 per cent (from 624 to 720 daily products) inadvertently led to late deliveries and inadequate inventory by opening time for the company’s two stores. With the limited shelf life of donuts (just one day), unsold items are discarded. This product waste increases the cost of goods sold. Recognizing the need to optimize production for profitability, Bell had several levers at her disposal. She could decouple processes, adjust the task schedule of bakers, incorporate work-in-process buffer inventory, or consider reducing batch sizes. Artisan Alley is also consistently selling out of donuts before closing time, so Bell is contemplating increasing production even further. She is wondering if a newsvendor model analysis might offer insights and solutions to address this challenge. Bell has only one day to determine the ideal production volume for next week.

This case is suitable for undergraduate- or graduat-level courses in operations management or entrepreneurship. It can be used to introduce the topics of sales and operations plans, production management, inventory management, resource management, and scheduling. Through this case, students will gain practical experience in applying the newsvendor model to determine the optimal production quantity for profitability, taking into consideration the business’s capacity constraints. This case also offers an opportunity for co-teaching with a faculty member from management science, project management, or marketing. The case asks students to examine the company’s production process and provide recommendations for profitable growth. After working through the case and assignment questions, students will be able to accomplish the following objectives:<br><br><ul><li>Analyze daily sales to identify missed opportunities and apply a newsvendor model analysis to optimize profitability and production targets.</li><li>Determine the theoretical versus effective capacity of the production process and pinpoint bottlenecks and capacity constrained resources.</li><li>Understand how work-in-process inventory affects production, and learn how the strategic use of buffer inventory can smoothen variability.</li><li>Optimize resources through job sharing and scheduling.</li><li>Understand how management decisions and batch sizes affect throughput of a production system.</li><li>Evaluate the financial impact of proposed decisions and assess the impact of these opportunities and challenges for the company’s growth.</li></ul>

• capacity and utilization
• utilization
• scheduling
• bottlenecks
• optimization
• job sharing
• throughput