CASE 2 REPORT

(PRODUCTION &
OPERATIONS MANAGMENT)
(MBA G519)
Forecasting Demand for Food at Apollo Hospitals

SUBMITTED TO

DR. RAJESH MATAI

SUBMITTED BY: GROUP 6

ARAVIND. R 2019H1490822P

MEGHA GANDHI 2019H1490834P

NANDIGAM SANDEEP KUMAR 2019H1490854P

RADHIKA GUPTA 2019H1490844P

TATHAGATA. B 2019H1490833P

Department of Management

BITS Pilani, Pilani Campus

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 Introduction

Apollo hospital is one of the largest hospitals in India, which operates around 70
hospitals across the country currently. Apollo hospital Bangalore is currently facing
problem of food & beverage wastage and extra cost implemented on it. It has been
analyzed that the food bill of hospital is accounted for 4% of the overall cost of the
hospital. It has been estimated that food demand would be dependent on number of in-
patients currently being treated in the hospital along with the hospital staff and the
caretakers and the attendants of the patients. However, the food distributed among
patients is dependent on their respective food diets and restrictions from the dieticians.
Consequently, it has been estimated that the patients would be likely to order same food
for their complete hospital stay as this was generally observed. The food and beverages
cost of the hospital has been increasing. Food cost includes raw material, such as milk,
fruits, vegetables and non-veg items together termed as grocery items. Moreover, the
leftovers are also considered as hospital is preparing 10% extra food so that there would
be no problem and deficiency of the respective food as it being a hospital. The food is
distributed thrice in a day which includes breakfast, lunch and dinner. The company
wants to develop a forecasting model which would help the hospital to decrease its food
cost and wastages such as pre-food and post-food wastages and also losses due to excess
procurement. Moreover, the company is in need for a model which would also be
helpful in future when the hospital would be expanded. Dr. Rao has taken the help of
two IIM Bangalore students, Sujoy & Alok on the advice of his friend Prof. Dinesh
Kumar. The students have formulated a model catering to all the needs and challenges
faced by the hospital and now the model needs to be tested and practical implementation
needs to be done in order to further make the model viable for the hospitals.

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 (1) Apollo serves 120 food items from its kitchen. Do you think that Apollo should develop
forecasting models for all 120 items?
No. From the data we see that some food items follow the same trend. Example sambar and chutney
being complementary dishes chutney and sambar. Also some items have low consumption and some
have high consumption (eg Idli). So the data for all 120 items must be recorded and forcasting must
be done for high value and high consumption item.

Apollo should develop forecasting models as they 4% of their total cost has been lost in wastage of
food material. Also, on a daily basis they have been preparing 20% excess food than needed. On few
days the wastage has been more than 50-60%. These figures suggest that Apollo is facing heavy loss
because of lack of accurate forecasting. Forecasting of critical items will help save time, money and
help the system become lean.

(2) Explore the data provided in the supplement document. What inferences can be obtained
from the data?

Comparing the mean, median and mode for all food items we find that chutney and sambar have the
same values for above parameter. This is because they are complementary dishes.

If we compare the difference between maximum food prepared and minimum food that needs to be
prepared, we see Dosa to have 121% least in case of chutney and sambar (11% in each case). This
implies that maximum wastage is in Dosa followed by Idli, North Indian B/f, omelette, continental
B/f and chutney and sambar. Hence Dosa and Idli are food items that have maximum scope of
improvement.

Also from the plot of consumption VS Occupant we see that till 190 units data is homogenous and
after that data becomes heteroscedastic.

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 Consumption vs Occupants
165
145
125
105
85
65
45
25
5
-15 150 170 190 210 230 250 270

Idly Dosa Chutney Sambar Continental B/F North Indian B/F Omellette

(3) Develop an appropriate forecasting model for each of the chosen food item.

Three forecasting models have been developed using

a) 3 Period Moving Average Method

b) 5 Period Moving Average Method

c) Exponential Smoothening

This can be found in attached excel file.

(4) Discuss the results of the models developed in question 4 and its appropriateness for use by
Apollo Hospitals.

To compare the appropriateness of the three models designed for forecasting errors have been
computed.

Errors calculated are: -

a) Root Mean Square Error- RMSE

b) Mean Absolute Error - MAE

c) Mean Absolute Percentage Error - MAPE

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 Results of Models Developed :-

3-PERIOD MOVING AVERAGE

DOSA CHUTNEY CONTINENTAL IDLY SAMBAR NorthIndBF OMLETTE
RMSE 13.51054 12.84624 7 8.080449 13 2 6
MAE 10.27083 10.4881 5 6.559524 11 2 5
MAP 0.15% 0.01% 2.20% 0.01% 0.72% 20.96% 16.34%

5-PERIOD MOVING AVERAGE

DOSA CHUTNEY CONTINENTAL IDLY SAMBAR NorthIndBF OMLETTE
RMSE 13 12 6 8 12 2 6
MAE 10 10 5 6 10 2 5
MAP 14.78% 0.85% 2.39% 1.63% 0.71% 22.43% 15.99%
EXPONENTIAL SMOOTHENING
DOSA CHUTNEY CONTINENTAL IDLY SAMBAR NorthIndBF OMLETTE
RMSE 0 0 0 1 0 0 0
MAE 0 0 0 0 0 0 0
MAP -0.15% 0.03% 0.00% -0.10% 0.03% -0.53% 0.00%

Form the above table we can confidently conclude that Exponential smoothening (with smoothening
factor as 1 provides the least errors and is the most appropriate model for Apollo to adopt for
forecasting.

Conclusion

1. Apollo is dire need to shift to improve forecasting to reduce food wastage.

2. Data recording must be changed from paper pen mode to direct digital format (example – kindle).

3. Following the list (in descending order) of food wastage Dosa followed by Idli, North Indian B/f,
omelet, continental B/f and chutney and sambar.

4. Forecasting model that can be adopted is Exponential Smoothening as it provides the least error.

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