Issues that Gillian Faces
Faced with a decline in returns from their farms, owners of Holly Farm decided to diversify their business. Gillian and Fred decided to include two additional complimentary businesses: paying visitors and ice-cream manufacturing factory. The main objectives are to increase visitors to the farm, utilize resources of the farm and increase the farm’s profitability.
The major issue that Gillian faces is to ensure that the complementary businesses increase the profitability of the farm. Gillian and Fred invested a lot of money in the business. The source of capital for this expansion came from saving. For the projects to be said to be successful, they should be able to ensure good returns on investments so as to break even in a considerable duration of time (Tomas, 2002, p. 67). Opening the farm to paying visitors was an ambitious project; however the projects cost Gillian and Fred considerable amount of money in constructing car and coach parks, viewing areas, special trailers and other essential facilities. On ice-creams manufacturing, they invested in construction of an ice-cream factory, storage facilities, and farm shop. For the projects to be able to ensure returns on investment, the farm has to ensure consistent visits to the farms. The more visits, the farm has means that the farm will be able to earn more from visit charges and sales from the farm shop. For the first few years of the project, Gillian is able to ensure consistent growth in the number of visitors to the farm, but the growth in visits leveled. Gillian proposes to increase the number of visits to the farm.
Gillian is faced is with a challenge of capacity of the farm to support additional visitors. The farm receives visitors in either cars or coaches. Increase in the number of visitors to the farm will translate to an increase in earnings through entry charges and sales from the farm shop. However, the number of visitors to the farm is constrained by the capacity of the car and coaches park. The car park has a capacity of forty, which means that the farm cannot receive more than forty cars in a day. On the other hand, the number of coaches is limited to six by the capacity of Coaches Park.
Farm visit in the farm is seasonal. The farm visits operate from April to October while visits are made from Friday through to Monday. As a seasonal business, Gillian is concerned about the off-season where will be no business. In addition, Gillian is concerned about the areas that she should give priority to. She is in a dilemma on whether to increase the number of coach visits or family cars. She is also concerned about whether to sell the products from ice-cream factories through the farm shop or retail shops. Managing the worker on the farm is another issue. The workers share responsibility between working on regular farm work and receiving visitors.
Evaluation of the proposal to increase number of farm visitors by 50 percent
Gillian proposes to increase the number of visitors to the farms by fifty percent with an aim of meeting the farm’s income targets. Increase in the number of visitors to the farm will translate to increase in returns through entry charges and sales from farm shops. Although increasing the number of visitors would lead to more income, there are challenges to the move. Gillian is not able to make up her mind on whether to encourage coaches or family cars. In addition, the capacity of the farm should be considered before increasing the number of visitors.
Sales Forecast
The forecast table show predicted increase in number of visitors and sales. From 1998 figures, increase in the number of visitors led to increasing in the number of sales from farm shop. As the sales in farm shops increase, sales through retail shops dropped proportionally. Since the prices in the farm shop are higher than the prices offered to retail shops, increasing the number of sales in farm shop will increase returns.
Forecast sales: farm shop=1.5* sales for 1998
1.5*27 =40.5 Units
Gillian intends to increase sales through farm shops and reduce sales through retail shops. As forecast table indicates, Gillian intends to increase sales through farm shop by 13 units and reduce sales through retail shop by 10 units. This forecast is only possible by increasing the number of visitors to the farm by 50%. The sales forecast can also be met by increasing the units of ice cream bought by each visitor.
Capacity constraints
At full capacity, the farm allows six coaches and forty cars. The coaches can carry a maximum of forty people which translates to 240 visitors at full capacity. On the other hand, family cars carry an average of four persons; at full capacity, visitors that come in family cars may reach 160. At full capacity, the car and coaches parks can allow 400 visitors. As per 1998 figures, the average number of visitors per day, when the visitors were allowed, was 77 visitors. This shows that the farm was operating below its capacity. Assuming that with advertisement the farm would receive an average of 4 coaches carrying 32 visitors, the number of visitors coming by coaches would be 128 visitors. On the other hand if we assume car park can be used at 70 percent, the number of visitors that come by family cars would be 112 visitors. As fifty percent of visitors buy a packet of ice cream, the increase will lead to 48 percent increase in sales through the farm shop.
Milking parlor, one of the main sources of attraction, operates only from 4PM to 7PM leading to long waiting. With each visitor taking 10 minutes, the milking parlor can serve 12 visitors in ten minutes. In one hour the farm can serve 72 visitors.
Total milking Parlour capacity= 72*3 =216
Despite the milking parlor having a capacity of 216 visitors a day, the fact that milking as late as 4PM many visitors will be in hurry to leave.
The ice-cream factory is constrained by its capacity. The factory has a capacity of only 350 one-liter boxes per day. The freezing facility for finished products also has a maximum capacity of 10000 liters and operation capacity of 7000 liters. Apart from this, the finished products have a shelf life of twelve-week forcing the products not to be kept in the factory for more than six weeks. As Gillian plans to increase the number of visitors to the farm, she has to take into consideration of limited capacity of farm’s facilities.
Increasing the number of visitors is a good idea but it is constrained by the capacity of the farm. Most visitors to the farm usually arrive from 12.30 PM. Increasing the number of visitors will lead to pressure on picnic facilities, special farm trailers, milking parlors and even farm shops. Although visitors have been willing to wait till 4 PM in order to watch the milking, increase in the number of visitors may create anxiety among the visitor. In addition to this, the farmworkers may be overwhelmed by increased number of visitors. To overcome this challenge, Gillian should look into ways of spreading the visitors by encouraging early visits. Milking parlor is the main source of attraction. By ensuring that milking is done a bit earlier will attract more visitors to the farm.
By increasing the number of visitors by coaches, Gillian will be able to increase the average number of visitors to the farm than when she increases the number of visitors who use family cars. Visitors who use family cars are easier to maintain than those that come by coaches. If more effort is made to promote visits by coaches, Gillian will be able to benefit from increased number of visitors and bulk sales. Although a commission will be given, it would be advisable for Gillian to focus on increasing the number of visitors that come by coaches.
Between School parties and family cars, Gillian should consider increasing visitors in family cars. Although school parties would allow many visitors to arrive at a particular time, it is not a consistent source. School parties will call for special arrangements which would disrupt the normal operations of the farm. In addition, ensuring regular visits from students is not easy while buying capacity of the students is limited. On the other hand, increasing visitors in family cars will ensure consistency throughout the year.
Capacity constraints
Increasing the number of visits will bring about various advantages to Holly Farm. By increasing the number of visits to the farm, Gillian will be able to increase the returns from entry fees as well as increase sales in farm shops. The capacity of the farm’s facilities to meets the increased demand will be the major challenge. To overcome these challenges, Gillian should look into ways of motivating visitors to visit the farm in early hours or create special visits for schools during the day. In addition, the farm should consider increasing the number of workers and capacity of its ice-cream factory.
Factors to consider when increasing the number of flavors
Gillian proposes to increase the number of flavors from four to ten. Gillian intends to bring in more flavors in order to counter aggressive competition from other products. To do this, Gillian should consider various factors. Customer tastes, other flavors in the market and eth capacity of the farm to offer the flavors are some of the factors to be considered.
Increasing the number of flavors has various advantages. With more flavors, customers will have variety to choose from (Tomas, 2002, p. 82). As varieties of flavors are able to meet various customer tastes, there is likelihood of increasing sales. Many flavors will also help the firm to expand its market. The farm can create a flavor that is favorable to people of different ages. For example, there could be a flavor for children, adolescents and other groups of people. In addition, additional flavors can help to counter competition from other suppliers.
Although increasing the number of flavors can lead to various advantages, various challenges have to be overcome. The ice cream factory at Holly Farm has a relatively low capacity. Increasing the number of flavors to ten implies that production of ice cream with the different flavors has to be carried out separately. One of the challenges will be to schedule the flavors. Width a capacity of 350 boxes per day, creating the ten flavors may not be feasible. Since different flavors have different demands, the farm will be challenged in its ability to meet different demands from different people. In addition, with many flavors it will be difficult to create a taste that is associated with the farm’s ice-creams.
Although increasing the number of flavors would increase the variety and serve a wider range of customer tastes, it is not advisable for Gillian to increase the flavors. The capacity of the farm’s ice-cream factory will not be able to meet the flavors in a feasible way.
Reference
Tomas, R. 2002. “Essentials of capacity management”. John Wiley and Sons, New York.