Kristen’s Cookie Company Risks

Key Risks

There are a number of risks which the business would face.

• Demand: It is important that Kristen’s Cookie Company is able to manage demand effectively. They have the capacity to produce 6 dozen cookies per hour with their current resources. Hence, if there is a demand surplus, orders will have to be prioritized or once the limit of 6 is reached, no further orders should be taken. If, however, there is a depressed demand, marketing efforts in the form of campaigns, advertisements etc. should be undertaken to increase the number of orders.
• Capacity Constraints: The bottleneck in the process is the baking. The cookies take 10 minutes to bake and the oven has a capacity to bake 1 dozen. Hence, in order to reduce the bottleneck, another oven can be purchased, increasing the process capacity to 12 dozens/hour. This lets the company process a 3-dozen cookie order in 36 minutes, down from 47 minutes when they were using just 1 oven (refer to the Gantt charts). Additionally, no cookie would be out of the oven for over 16 minutes. The decision on whether to invest in the additional oven would depend on the demand.  
• Operational processes: Instead of accepting the payment after packing, this process can be completed while the cookies are in their last minute of cooling. This way, we can reduce 1 minute from the operational time. Another way to reduce process time is to introduce online payment methods such as Paypal. In due time, they could opt to build an app which would accept orders and process payments. This would help reduce process times by 2 minutes.
• Electricity and utilities: Currently, the landlord is paying for the electricity. It is unclear if the landlord is aware of the cookie business operations. If he/she does not approve, then the future of the business is at risk as K and her roommate will have to relocate their operations. Also, he/she would in all possibility ask the girls to pay for electricity as well. This would increase the costs of production which would alter the current cost structure, impacting the pricing strategy currently in place.  
• Legal: The business is operating on campus. Kristen and her roommate must ensure they are compliant with all the regulations mentioned in their university’s policies. Since this is a revenue generating activity, conducted on university premises, it is technically utilizing the university’s resources. Additionally, they have to consider rules regarding the taxes on their revenues.
• Food license: Since Kristen and her roommate are making food products, they would have to procure the necessary licenses and pass the mandatory health department requirements for hygiene.