In 2016, New York City was introduced to Oat Milk. This environmentally friendly product has no added sugar, and less water. However, its popularity has grown so fast that New York City has run out. Oatly, the company that makes Oat Milk, can’t keep up with demand.
It’s the second most popular milk alternative in Europe. Similar shortages have occurred in Sweden and the U.K.
Video Spotlight: The Latest Trend: Oat Milk
This post is based on the New Yorker article, Hey, Where’s My Oat Milk?, by Antonia Hitchens, August 6 and 13, 2018; and the YouTube video, The Latest Trend: Oat Milk, by The Doctors, April 4, 2018. Image source: © SDM IMAGES / Alamy.
1. What operations management concepts should Oatly re-evaluate in regards to this shortage?
Guidance: Obviously, Oatly should look at their forecasting methods. The company was unprepared for the rapid increase in Oat Milk’s popularity. This would be a good place to talk about different types of forecasts. One of the problems is that this is a new product. As a result there is a lack of quantitative sales data.
Capacity planning would be another area of concern. Oatly might examine the capacity they have vs. what is needed to make Oat Milk. In most cases, capacity is difficult to add quickly. It is generally expensive as well. This makes the addition of capacity a very difficult decision for Oatly. Is this a fad, or is this just the start of Oat Milk’s popularity?
2. After reading the article, do you agree with the general manager’s claim that shortages “add to the charm” of their product?
Guidance: It is dangerous to stock out. As the article pointed out, many restaurants (Oatly’s customers) are searching for alternative suppliers. If they find one, they may not return for future sales. With this being a relatively new product, a shortage can leave Oatly vulnerable.
3. After reading the article, what would you recommend the restaurant and coffee house do, regarding the shortage?
Guidance: They don’t have a lot of choices. Obviously, they can push alternative products, or look for new suppliers. The articles mentions that several are trying this approach. However, they are running into problems with availability and price. It does create an opportunity for new suppliers to enter the market.