demand – The OM Blog by Heizer, Render, & Munson

Guest Post: Rita’s Italian Ice and Seasonality

Prof. Howard Weiss shares his interest in Italian ice with us today, March 20th, the first day of Spring.

Rita’s Ice represents an example of seasonal operations, illustrating both the challenges and opportunities due to demand variability. Founded in 1984 in a Philadelphia suburb, the company has expanded to nearly 600 franchises across 463 cities in 30 states, becoming the largest Italian ice franchise in the U.S. Despite this growth, Rita’s core product offerings—Italian ice and frozen custard—remain strongly associated with warm-weather consumption.

Most Rita’s locations operate as walk-up or drive-through outlets, opening by March 1 and closing no earlier than the third Sunday in September. This operational model results in an important inefficiency: franchisees incur fixed costs, particularly rent, for all 12 months while generating revenue for only about seven. Supplement 7 of your Heizer/Render/Munson textbook suggests developing complementary products with countercyclical demand– such as jet skis and snowmobiles– thereby using the same resources all year long.

However, Rita’s appears to be considering an alternative approach—extending operations year-round. This shift reflects evolving consumer behavior, as frozen desserts such as ice cream increasingly exhibit steady demand even in colder months, particularly in warmer climates or high-traffic retail environments like shopping malls. By remaining open throughout the year, Rita’s could better leverage its fixed assets and enhance brand visibility. But this strategy would require careful demand forecasting and possibly localized adaptation, as consumer preferences in colder regions may still exhibit too much seasonal sensitivity to make it worthwhile to open all year.

From a production standpoint, Rita’s must also manage perishability constraints. Cream, a primary ingredient in frozen custard, necessitates reliance on local distributors to ensure freshness. Additionally, custard is discarded after 36 hours, underscoring the importance of accurate short-term demand forecasting and inventory control. Rita’s maintains a consistent gelato formula across franchises, it offers over 60 flavors, rotating them based on popularity data. This approach balances operational consistency with responsiveness to consumer preferences.

Finally, beginning in 1984, Rita’s has marked the beginning of Spring by offering free Italian Ice. This longstanding tradition on the first day of spring—March 20 this year—serves as an effective promotional tool. The initiative not only marks the seasonal reopening of many locations but also reinforces brand loyalty and drives customer engagement.

Classroom Discussion Questions:

Name two products or services with complementary seasonal demands.
How would you determine if the demand for ice cream is high enough in the winter to warrant staying open all year?

Guest Post: Martin Guitars and Operations

Prof. Howard Weiss, retired from Temple U., illustrates his wide range of interests.

Martin is a guitar manufacturer that began operations in 1833. Martin specializes in acoustic guitars which account for about half as many guitars as electric guitars in the global guitar market. It is one of the most popular brands along with Fender, Gibson, Yamaha, Ibanez and Taylor.

Location: Martin began its operation in Manhattan. In 1839 Martin opened a plant in Nazareth PA, 90 miles due west of its NYC plant. In 1989 Martin opened a plant in Sonora, Mexico in order to make guitars that were more affordable. It is worth noting that two of Martin’s competitors, Fender and Taylor guitars also have plants in Mexico. These guitars are commonly referred to as MIM (Made in Mexico). See Ch.8.

Capacity: Martin has made over 3 million guitars since its inception, including one million since 2016. It currently produces a total of 500 guitars per day, 6 days per week, at the two plants. (See Supp. 7)

Forecasting: Clearly demand has been increasing. Martin’s forecasting needs to consider historical and causal analysis (see Ch. 4) since certain events can spike or drop the sales. For example, sales increased more than usual during the folk music craze and also when MTV was running its Unplugged series (featuring acoustic guitars). At first, COVID caused a decline in sales due to cancelled concerts and closed stores. But then there was an increase in demand, especially for beginner guitars since people were looking for activities while at home and could order guitars online.

Supply Chain: The supply chain (Ch. 11) begins in the forest and at the lumber facilities both in the U.S. and India.

Layout: Martin uses process layout–see Ch.7. Most of the work is done by hand but there are robots in the factory.

Safety: With all of the woodwork that is being performed the major safety concern is that of sawdust.

Quality Control: The incoming wood is inspected by humans because machines cannot pick up defects in the wood. Each guitar is checked for tone. The guitar gets put in a case, but then sits for 4 days and then undergoes rigorous testing to make certain the guitar parts, e.g. neck, bridge, tuning pegs, still work. (See Ch. 6).

Classroom Discussion Questions

How could Martin use the Quality Control techniques discussed in Ch. 6 of your text book?
What are some possible reasons Martin relocated from Manhattan to Nazareth, PA?

Guest Post: Seasonal Employees

Professor Howard Weiss shares his insights with our readers monthly. This topic is especially timely.

Chapter 13 in your Heizer/Render/Munson text, Aggregate Planning, discusses temporary workers as one strategy to use to adjust for changes in demand. This is a useful strategy when the size of the labor force is large. Thus, using seasonal workers is the appropriate strategy for UPS to follow– and it does. This year, beginning now in October and ending in January, UPS plans to hire over 100,000 employees to meet the December holiday demand when the volume of packages doubles. One benefit to the seasonal workers who are hired is that 35% of them will later be hired into full time positions as package handlers, delivery drivers, tractor-trailer drivers, and driver helpers.

Many other organizations also require seasonal workers. Retail stores clearly have the same seasonality as UPS. Spirit Halloween is a company that sells Halloween costumes, decorations, props, and animatronics and has over 1,400 stores open in September and October in all 50 states and in 9 provinces in Canada. Summer is a season rife with seasonal jobs. Philadelphia and many other cities hire seasonal workers for the summer for parks and recreation. Summer camps do the same, as do zoos. Barnes & Noble hires seasonal workers for the beginnings of semesters at universities. H&R Block hires seasonal workers in the winter for tax preparation. Seasonal fruit pickers are hired during harvest times. Landscapers hire workers seasonally.

Your textbook notes the downside of hiring seasonal employees is that “new employees need to be trained, and productivity drops temporarily.” In addition, the training may not be as complete as training for full time employees. The book further states that “layoffs or terminations lower the morale of all workers and also lead to lower productivity.” In addition, seasonal workers may be less committed and less loyal than full time employees.

Of course, there are several advantages to using seasonal workers, the most obvious of which is the flexibility it affords to handle increased seasonal demands and keep wages and benefits costs as low as possible since the seasonal employees are not full-time employees. In addition, if there is an issue with a seasonal employee, it is easier to dismiss the employee. Or on the optimistic side, if a seasonal worker is excellent he or she can be hired full time, as is the case with UPS.

Classroom discussion questions:
1. How else can seasonality of demand be approached?
2. What products/services not mentioned above require seasonal employees?

OM in the News: Airlines and a Slew of Operations Issues

“Airlines have found that they can’t sustain the higher levels of flying they had hoped to offer to capitalize on rising demand,” writes The Wall Street Journal (July 22, 2022). Staffing shortfalls, training logjams and constraints at overwhelmed European airports in particular are stifling their resurgence and forcing them into more restraint. Airlines are reining in their schedules for at least the rest of this year—not because they can’t fill their planes, but to avoid costly OM stumbles.

American’s travel has surpassed 2019 levels and remains strong. But its third-quarter flying capacity will be 8% to 10% lower than in 2019 as the airline pulls back capacity to build additional buffer into its schedule. The weather in June was challenging, with significant issues on 27 days that overwhelmed the airline. It canceled over 5% of flights that month.

United and Delta have also said they would cap growth in the coming months to run more reliably. Those pullbacks and efforts to avoid delays and cancellations add to the cost pressures. Delta expects to pay $700 million in overtime and premium pay to help avert disruption, and United will stay overstaffed while it gives priority to reliability over growth. “There is weather, and people do call in sick, and and stuff happens. And the system just doesn’t have any buffer to deal with that,” United’s CEO said.

Carriers needed to bring on thousands of workers to replenish their ranks after offering buyouts and early retirement packages to slash costs in 2020. While their staffing levels are once again nearing prepandemic levels after a recent hiring spree, airlines have are finding that is no longer enough as they work through big backlogs of training requirements and adjust to a workforce comprised of less experienced employees to get back up to full force.

Air-traffic control is also short staffed, leading to problems in highly trafficked corridors such as Florida and New York. And acute staffing shortages at major European hub airports have been a big source of the summer’s chaos. London’s Heathrow Airport is capping the number of departing passengers and asked airlines to stop selling new tickets from the airport for the summer season.

Classroom discussion questions:

Outline the operations issues that airlines are currently facing.
In Supp. 7 (Capacity and Constraint Management in your Heizer/Render/Munson text), we we discuss ways to manage capacity and demand. Which can be employed here?

OM in the News: The Wasted Vaccines

As demand for COVID-19 vaccines collapses in many areas of the U.S., states are scrambling to use stockpiles of doses before they expire and have to be added to the millions that have already gone to waste. “It’s sad to say I’m in the process of throwing 30 million doses in the garbage because nobody wants them. We have a big demand problem,” says Moderna’s CEO in the Washington Examiner (May 26, 2022)

Germany may discard 3 million COVID-19 vials

Nearly 1.5 million doses in Michigan, 1.45 million in North Carolina, 1 million in Illinois, and almost 725,000 doses in Washington couldn’t be used. The national rate of wasted doses is about 9.5% of the more than 687 million doses that have been delivered. That equates to about 65 million doses.

The problem is not unique to the U.S. More than a million doses of the Russian Sputnik vaccine expired this week in Guatemala, because nobody wanted to take the shot. The pandemic has killed nearly 6 million people and shattered economies across the globe, and every dose that goes to waste feels like a potentially missed opportunity in preventing serious disease.

It also comes only about a year after people desperate to get the vaccine attempted to jump in line to get ahead of those deemed higher priority. Hospital board members donors around the U.S. got early access or offers for vaccinations, raising complaints about favoritism and inequity at a time when the developing world had virtually no doses.

And many poorer nations still have low vaccine rates, including 13 countries in Africa with less than 5% of their population fully vaccinated. They are plagued by unpredictable deliveries, weak health care systems, vaccine hesitancy and some supply issues. Redistributing states’ excess doses to other nations is not feasible because of the difficulty in transporting the shots, which must remain cold, in addition to not being cost effective because of the relatively small number concentrated at sites.

With demand so low, states will undoubtedly be confronted with more waste in the months ahead. Idaho, for example, has 230,000 doses on hand but is only averaging fewer than 2,000 doses administered a week. West Virginia has offered to transfer Pfizer adult doses to nearby states. States are ordering prudently, paralleling the drop in demand. The minimum order for Pfizer used to be nearly 1,200 doses but now it’s 100.

Classroom discussion questions:
1. Why does the EOQ inventory model described in Chapter 12 of your Heizer/Render/Munson text not work well for this item?

2. What forecasting models in Chapter 4 could be used to predict demand for the shots?

OM in the News: Awash in Hand Sanitizer

In Supplement 7, Capacity and Constraint Management, we ask “What are the strategies for when demand exceeds capacity? When capacity exceeds demand?” The past year saw the hand sanitizer industry whipsawed from desperate shortages to massive excesses.

Now Piggly Wiggly stores in Alabama and Georgia, are offering 4-for-1 specials on sanitizers after sales nearly halted. They tried selling the disinfectants for half-price and discounted them at 75% to no avail. Lucky Supermarket in Millbrae, Calif., is offering free bottles of hand sanitizer with any $10 purchase. Supermarkets are on a mission to get rid of hand sanitizers. Once nearly impossible to find, America is awash in it.

sanitizer

Consumers rushed to buy sanitizers when the pandemic took hold, writes The Wall Street Journal (May 21, 2021). The surging demand resulted in shortages and purchase limits at retailers. Hoping to fill their shelves, supermarkets bought inventory from overseas and turned to other businesses—including distilleries—that switched their production to make sanitizers for the first time. Manufacturers expanded capacity, at times overpaying for components like pumps.

Now, supermarkets are sitting on pallets of them. Covid-19 cases are declining. Health officials now say that the virus is airborne and that the disinfectants aren’t as effective as masks and distancing. Sales of hand sanitizers are down 80% from a year ago. Weekly sales hit as high as $52 million in July. Average unit prices are $2.10, about 40% lower than a year ago. Prices on the Liquidation.com marketplace have fallen to 2 to 3 cents on the dollar, a 90% decline in resale prices over 6 months

Among those struggling with the current glut: distilleries that jumped into the sanitizer business when brands couldn’t keep up with demand last year. Adirondack Distilling, which makes whiskey, vodka and gin, still has between 10,000 and 20,000 sanitizers that the company made in stock. In Oregon, Crater Lake Spirits is giving away leftover sanitizers after it produced roughly 60,000 gallons of disinfectants for hospitals and hotels last summer.

Classroom discussion questions:

What are the OM choices when demand exceeded capacity?
What are the options now that capacity exceeds demand for sanitizers?

Video Tip: Demand and Capacity Management in the Air Cargo Industry

The COVID-19 pandemic is a health and humanitarian crisis, and it is also an economic shock, reports Accenture (May 8, 2020). The aviation and air cargo sectors have mobilized in a big way to help supply personal protective equipment (PPE), hand sanitizer, ventilators and other desperately needed items for combating COVID-19. The crisis is shining a light on the importance of logistics and supply chain management for helping save lives, but also for bringing staples and food to populations sheltering in place. Air transport is being heavily relied on because many emergency supplies are located overseas, or across the country, and air is the fastest mode for getting them to where the outbreak is spreading.

This 12 minute video provides a fascinating glimpse how the world’s airlines have had to prepare for shocks in capacity and demand management, the topic of Supplement 7 in your Heizer/Render/Munson text.

OM in the News: Capacity Planning Issues at Disney

Disney makes billions of dollars by persuading people to watch its movies and TV shows, play with its toys and games, and visit its theme parks. Yet the entertainment titan did its best to discourage fans from visiting the new Star Wars area in Disneyland, California last quarter, pushing attendance at its domestic parks down 3%. (Disney had been expecting a surge in guests to visit the new attraction).

A second Star Wars themed land opened Aug. 29th at the Disney park here in Orlando. But this time, Disney hopes it learned from the May opening at its California version, reports the Orlando Sentinel (Aug. 30, 2019). There, guests had to be staying at one of the company’s hotels or sign up for online reservations that quickly filled up. Fans in California may also have stayed away because they thought Disneyland would be too crowded. Local hotels raised prices. (Both new lands are opening with only one of the two main rides finished, something that may have further discouraged guests).

Restrictions that limit access for many annual-pass holders are ending this week, allowing more guests to enter the Florida attraction without paying extra. That wasn’t the case in California, which opened at the start of the peak summer season when many annual-pass holders couldn’t use them. Fans in Florida were able to come inside the park as early as 4:45 a.m., 3 1/4 hours earlier than the regular opening time. Crowds were at capacity, with some Star War loyalists lined up at 3:30am, only to face lines that reached 5 hours for new rides. Discounted ticket prices were offered for guests to wait until noon to enter. Orlando-area hotels are also offering discounts timed to the Star wars opening.

Disney took a big bet on Star Wars this year, whose expansions cost $1 billion at each of the two parks. But for theme park devotees, Thursday was the equivalent of Black Friday shopping — a controlled chaos that was enjoyable nonetheless.“I’m still on the high,” said a New Jersey guest who hadn’t slept in 24 hours.

Classroom discussion questions:

What tactics discussed in Supplement 7 did Disney employ to impact capacity in California?
In Orlando?