Case Study: Forecasting The case, Sprouts Green House Supply, looks at the relevance and use of forecasting to manage growth. As you read through the case, think about how time series data can be used to develop and implement various forecasting models to facilitate planning and decision making. Sprouts Green House Supply Sprouts Green House Supply is a supplier of greenhouse and garden supplies across Canada. They are proud of the fact that all the products they distribute are made in Canada. Sprouts is a full-service provider of growing supplies such as pots, trays, soil, fertilizer, growing mediums etc. The operations manager of Sprouts is Blair Anderson. Blair has come up through the ranks at Sprouts and has recently been promoted to the position of national operations manager. Blair knew the business inside and out. Their market share and customer base has been steadily growing over the past 5 years. The business shipped supplies Canada wide from one distribution centres (DC's) located in Manitoba. Annual sales were currently $25 million. Legal Cannabis Comes to Canada October 17,2018 marked the date when adults who are 18 years of age or older are legally able to possess up to 30 grams of legal cannabis. This legislation not only began a new era of liberty and choice for Canadian citizens, it also opened the door for an increasing number of licenced legal cultivators, processors and sellers of cannabis. Legal cannabis spending in Canada is set to grow at a Compound Annual Growth Rate (CAGR) of 44.4 percent from $569 million in 2018 , the first year of adult-use sales, to nearly $5.2 billion by 2024 . Health Canada estimates overall usage at roughly 926 tonnes annually, or 77.2 tonnes monthly. That implies just 10 per cent of current cannabis usage was legal. To state this differently, 90 per cent of present cannabis usage comes from unlicensed growers. Sprouts Green House Stippy: Opportunity What had Blair's attention was the newly opened market for cannabis production in Canada. Blair knew there was an opportunity to expand the business by supplying legal cannabis producers. The number of licences issued to producers would increase significantly as legal production/supply of cannabis to the Canadian market was well below demand. Blair had conducted research. One report indicated Legal cannabis spending in Canada is set to grow at a Sprouts Green House Supply: Opportunity What had Blair's attention was the newly opened market for cannabis production in Canada. Blair knew there was an opportunity to expand the business by supplying legal cannabis producers. The number of licences issued to producers would increase significantly as legal production/supply of cannabis to the Canadian market was well below demand. Blair had conducted research. One report indicated Legal cannabis spending in Canada is set to grow at a Compound Annual Growth Rate (CAGR) of 44.4 percent. Blair wanted Sprouts Green House Supply to reap the benefits of a rapidly expanding need for growing supplies. However, there were two things to consider. Firstly, was the uncertainty around how fast licences would be issued to cannabis producers. There was a lot of speculation around how many new growers/producers would be added to the industry each year. It seemed each time Blair investigated how many potential producers would be granted licences, the resulting numbers conflicted. There was no consensus around this data. Secondly, any potential growth needed to be manageable. Blair did not want to expand the operation based on guesswork or pure speculation. Trying to determine new business for Sprouts, based on the data available on the future addition of legal cannabis producers in the industry, was risky. The legal cannabis market in Canada was in its infancy. The rate of future growth in the industry, uncertain. Sprouts has successiully been abie to manage business growth. For the past five years they have executed operational strategies and tactics to effectively manage increased demand. Blair knew there was the potential for significant growth in Sprouts distribution network. The business potential of having a substantial number of legal cannabis producers added to the market was attractive. However, there was also great risk involved in expanding Sprouts operation to meet the new frontier of demand, as the number of future growers was uncertain. Blair decided a more conservative and thoughtful business plan should be developed to position Sprouts for the future. An environmental scan was conducted using both quantitative and qualitative techniques to help determine the future levels of legal cannabis production in Canada. Blair decided to develop forecasting models to enable Sprouts to plan into the future. The goal was to implement a business strategy and tactics which would enable Sprouts Green House Supply to manage growth. This included planning for future infrastructure and resources needed to enable Sprouts to supply the increasing number of legal cannabis producers in Canada. Future Growth Issues Blair understood there were two main components to Sprouts success and their ability to expand and grow to meet future demand. The first was a need to determine when Sprouts would outgrow the existing distribution centre. The need to either build or acquire additional space was a concern. As the business grew, so too did their requirements for adequate distribution centre floor space. The second issue to be considered was stafting. As the business expanded, so too did the need for staff to manage and work in the distribution centre. Employees required significant training and development. The distribution centre was very high tech. Employees were classified as technicians and required. ized training and development upon being hired. Blair decided to use operational data from the past five years to plan for the future. Forecasts needed to be developed so that a business plan could be initiated which would successfully needed to be developed so that a business plan could be initiated which positon Sprouts in the future. The following data was amassed to enable forecasts to be made. The results of the forecasts will allow Sprouts to be strategically positioned to meet future Sprouts has successiully been abie to manage business growth. For the past five years they have executed operational strategies and tactics to effectively manage increased demand. Blair knew there was the potential for significant growth in Sprouts distribution network. The business potential of having a substantial number of legal cannabis producers added to the market was attractive. However, there was also great risk involved in expanding Sprouts operation to meet the new frontier of demand, as the number of future growers was uncertain. Blair decided a more conservative and thoughtful business plan should be developed to position Sprouts for the future. An environmental scan was conducted using both quantitative and qualitative techniques to help determine the future levels of legal cannabis production in Canada. Blair decided to develop forecasting models to enable Sprouts to plan into the future. The goal was to implement a business strategy and tactics which would enable Sprouts Green House Supply to manage growth. This included planning for future infrastructure and resources needed to enable Sprouts to supply the increasing number of legal cannabis producers in Canada. Future Growth Issues Blair understood there were two main components to Sprouts success and their ability to expand and grow to meet future demand. The first was a need to determine when Sprouts would outgrow the existing distribution centre. The need to either build or acquire additional space was a concern. As the business grew, so too did their requirements for adequate distribution centre floor space. The second issue to be considered was stafting. As the business expanded, so too did the need for staff to manage and work in the distribution centre. Employees required significant training and development. The distribution centre was very high tech. Employees were classified as technicians and required. ized training and development upon being hired. Blair decided to use operational data from the past five years to plan for the future. Forecasts needed to be developed so that a business plan could be initiated which would successfully needed to be developed so that a business plan could be initiated which positon Sprouts in the future. The following data was amassed to enable forecasts to be made. The results of the forecasts will allow Sprouts to be strategically positioned to meet future The following represents the floor space Sprouts Green House Supply has utilized over the past five years. (Table 1). Blair believed that there was a correlation between the number of customers Sprouts has and bow many employees they require. The following represents the data for Sprouts for the past five years. (Table 2 ). based on time series/trend data up to year 10 . Discuss the approach you take to solve the problem and provide your work in an appendix. Be sure to state any assumptions that you may make. What is your preferred solution? Give at least two pros and two cons to your preferred solution