Abstract

The case is based on the inventory situation faced by Arome Bakery, one of the leading bakery chains in Hong Kong. Sarah Cheng, assistant operations manager, wants to increase the bakery’s competitiveness by improving its operation. A key goal is to reduce the number of unsold products that are returned to the central baking factory for disposal. Sarah is looking for a systematic method to determine the optimum order quantity, so as to minimize product wastage while balancing stock-out risk.

Learning Objectives

The key objective of this case is to provide students with an understanding of stock replenishment for perishable goods through an explanation of the newsvendor model. Other concepts, such as incentive program design and authority designation, are also touched upon.