Posted on by Gabor Roman

M1S3 – DUCK beer

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Author

László Ketskeméty

Mini Project ID

BMEMPBEER1

Description

How to refine the six questions in the light of the problems defined below?

  1. What improvements need to be made to bring the total revenue to at least EUR 120000?

To the best of our knowledge, this question is difficult to answer because it is too general. To produce a new product, a new plant hall must be built, with a suitable production line, to be operated by workers, which is costly and will only be able to pay off in the end.

  1. What production plan should be chosen for the introduction of a new product, assuming that the brewery’s loss due to each unit of revenue loss is EUR 1 and each additional tonne of malt used generates a loss of EUR 30 for the brewery?

The question makes it possible to set up a concrete and appropriate mathematical model. With the help of the restrictive conditions for the raw materials, the production recipe of the three products and the market prices, a linear programming task can be formulated with which the possible total revenue and profit can be maximized.

  1. What permits are required to obtain from the authorities in order to start series production of the liqueur? Does the product comply with all health, consumer protection, and patent regulations?

These issues arise with the introduction of any new product. In the case of the previous two products these also had to be answered, it can be done routinely. The finished product must be approved, the needed measurements must be ordered in various certified laboratories for standardization and approval. All this takes time, so immediate introduction of the product is not possible, this may delay the introduction by at least 1 year.

  1. Malt is available in limited quantities; the stock available cannot be increased indefinitely. Since the production of the new product also requires the use of malt for brewing, to what extent does this limit brewing capacity? How much extra malt would you need to get to maximize your total income?

This question is too complex and difficult to answer. The fact of the limitation can be taken into account in the mathematical model to be set up, but the development of malt procurement depends on market conditions and agricultural conditions, so it is difficult, almost impossible to say for sure. The purchase price of malt depends on many things. Although the brewery has a long-term contract with a nearby producer for a certain amount of malt, purchases beyond this are already very uncertain. The malt stock cannot be increased indefinitely. This has market constraints on the one hand and warehousing contains on the other. Nor can the volume of products be increased indefinitely due to market capacity and limited production capacity.

  1. What promotional strategy should be used to launch the new product on the market and at what cost?

Market dissemination can only be imagined gradually. The number of advertising opportunities is large: you can try flyers, tasting campaigns in shops, posters and media advertisements. The cost of each form of advertising varies greatly. A mixed promotion strategy seems to be the most effective, but the choice of ratio between components depends on the amount of the finance available. It is advisable to issue a public tender for the promotional project, for which the bids of the largest advertising companies should be invited.

  1. What should the new product look like? What brand is being launched? In what unpacking and dimensions should it be marketed?

The brand should be the brand introduced for beers, as it took a lot of energy to adopt the duck label. Consumers like it, it is recognizable from afar, and it suggests good quality. The packaging should be outsourced to a product design studio. The beers are marketed in typical bottles of the same shape. The bottle of the liqueur should, on the one hand, refer back to the characteristic shape of the glass of beers, but at the same time indicate that it contains a concentrated drink. You will also need to plan a gift box unpacking with gift cups. This requires special design expertise. The proportion of the contents should be explored using market research methods. The product will have to be placed in different sizes in different stores, and it will be possible to estimate the optimal size ratios from the weight loss rate. As a starting point, it is recommended that the same amount of 2 dl, 5 dl, and 7 dl sets be produced for the experiment and the purchase speed will be determine the ratios of the capacities.

Sector

VET

Data

N/A

Model

Linear programming, conjoint analysis

Calculation

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Solution

The committee refined the management questions so that it could be answered clearly after theirs investigation.

  1. By building a given liqueur production capacity, assuming a given market price, in how many years can a total revenue of EUR 120000 be achieved?
  2. The use of malt stock for liqueur production trivially reduces brewing capacity. Is the question worth asking in what proportion is it worthwhile to distribute the quantity of malt among the three products in order to obtain maximum profits?

Distribution must also take into account market constraints, i.e. realizable selling prices. The selling price is seasonal, beer is sold in summer, and liqueur is sold in the winter semester. It is therefore worth making a separate calculation for the summer and winter semesters. The question can be answered by solving two different linear programming problems.

  1. Obtaining permits is a very complex task. Consider outsourcing the task of this issue from the brewery to a law firm. It is advisable to carry out the contract within the framework of a public procurement procedure.
  2. The issue will be clarified after appropriate market research. A possible increase in the quantity reserved in the contract should be negotiated with the malt grower.

New producers must be sought from whom malt can be obtained in the best possible way. Once you know how much malt is available and at what cost, this data can be taken into account in the mathematical model.

  1. This issue should also be outsourced to an advertising agency selected through a call for tenders. They then choose the most optimal promotional techniques within their own remit.

6. The final version of the packaging form of the new product will have to be developed by a special statistical method, conjoint analysis. Several variants need to be ordered from the design studio, which needs to be tested with consumers. Consumers give scores to questions about the appearance of the product, which can be analysed with conjoint analysis, revealing consumer expectations. The final decision will then have to be made.

Presentation

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Review M1S3 – DUCK beer.