Transcript BIG MAC ATTACK: Eating at McDonald’s

Anadolu Efes Case
Optimization of Location,
Distribution and Capacity Expansion
Decisions
Company Background
Anadolu Efes
 Leading beer producer and distributor in Turkey
 Emerging international presence in Eastern
Europe and Central Asia
• operates 9 breweries and 4 malteries in 5
countries
• annual beer production capacity: 1.4 billion
liters
• sells its products in over 30 countries
• domestic market - 77% of total sales volume
Organization
Anadolu Holding
Anadolu Efes
(Beverage Group)
Production Group:
Soft Drinks:
Brewery and Malteries
Coca-Cola
International Operations:
Sales and Distribution:
Efes Breweries International
Efes Marketing
Efes’ Domestic Beer Market Share
700
600
80
500
400
70
300
200
60
75
65
Market Share (%)
55
100
0
20
00
19
98
19
96
19
94
19
92
19
90
50
19
88
19
86
Sales Volume (million
liters)
 In 2000, Efes’ share in the Turkish beer market
reached a record high of 78%
Domestic Beer Market
Market Size
 730 million liters sales and around $294 million
sales value in 2001
 Turkey ranks as the tenth largest beer-consuming
nation in Europe
Potential for market growth
 Per capita beer consumption in Turkey increased
by more than 50% from 1995 to 2000
 Annual population growth of 1-2% over the years
increases the adult population each year
Beer Trivia
Who drinks the most beer?
Annual Beer Consumption
1.
2.
3.
4.
5.
USA 23.00 billion liters
China 20.73
Germany 10.46
Brazil 7.88
Japan 7.15
Beer Trivia
Who drinks the most beer?
Per Capita Beer Consumption
 Czech Republic has the largest per capita
beer consumption in the world: 156 liters
 Global average is around 25 liters
Global Beer Market
Market Size
 World beer consumption was around 126 billion
liters in 2000
 USA and China account for 36% of the global
beer market; emerging markets make up 45%
Growth Opportunities
 Consumption in emerging markets has been
growing
 Major US and Europe based brewers have been
focusing on Eastern Europe, China and the CIS
countries
Efes’ Strategic Goals
 Business diversification and international
presence
 Maintain domestic market share
Concerns:
1. Increasing competition due to new entries into
the domestic beer market
2. Anticipated increases in beer demand that will
surpass the available beer production capacity
Plans
1. Optimize malt and beer distribution network
to provide leverage against increasing
competition
2. Open new breweries and possibly expand the
capacity over the next several years to supply
for increased demand
Analysis
1. Improve the current distribution system
•
Analyze Efes’distribution strategy and
develop a malt and beer shipment plan that
minimizes total transportation costs
2. Determine when and where Efes should build
new breweries and possibly expand their
capacities
•
Optimize distribution, location, and capacity
expansion decisions over the next three years.
Beer Trivia
How long have we been drinking beer?
a) 1,000 years
b) 2,000 years
c) 7,000 years
d) 20,000 years
How long have we been drinking beer?
 The earliest recorded beer
recipe was found in clay
tablets written 7,000 years
ago.
 Beer originated in
Mesopotamia and then
found its way to Anatolia.
 Four thousand years ago
in Anatolia, Hittites, were
drinking beer in daily life
as well as in sacred rituals.
Beer Production
+
Hops
Barley Malt
+ H2O +
yeast
=
Beer Production Process
malting barley
•Mashing
•Boiling
•Fermentation
•Aging
brewing
distilling
bottling
Production and Distribution System
Distribution System - Current
Malt
Supply / Capacity
Current
Malt Transportation
Brewery
Supply / Capacity
Current
Beer Transportation
24 / 30
Afyon
0
Demand
Istanbul
103
Izmir
74
Antalya
50
Bursa
60
Kayseri
102
Export
13
Istanbul
50
24
202/ 220
2 / 68
Konya
Beer
0
0
0
Ankara
60
0
102
20 / 20
Import
200 / 200
0
13
Current Distribution System
 The current shipment plan enforces certain
restrictions due to established relations between
brewery-distributor pairs:
• Ankara brewery supplies all the beer demand
of Bursa distributor
• Istanbul brewery supplies all the beer demand
of Antalya distributor
 Total shipment costs can be reduced by optimizing
the shipment plan
Analysis
 Optimize the distribution system by formulating
and solving a linear programming model,
1) with existing relationship limitations,
2) by relaxing these limitations,
and summarize the resulting savings in costs.
Analysis - continued
 Discuss the sensitivity of the model solution to
changes in model parameters
For example:
1) analyze how much reduction in
transportation costs would justify keeping
the existing brewery-distributor relations.
2) discuss other input parameter changes that
would make certain shipment choices in the
current distribution plan, i.e. malt import,
cost-effective.
3) discuss sensitivity to demand changes
Capacity Expansion Decisions
 Multi-period strategic planning problem
 Total beer production capacity can be increased by
opening a new brewery at one of the identified
potential three sites, and by expanding the
capacity of the newly established brewery, if
necessary, over the next three years.
Analysis
 Optimize
• new brewery location and capacity expansion
decisions
• malt and beer distribution decisions over the next
three years
 Objective:
• Minimize the present value of the malt and beer
transportation costs over a 20-year horizon
• and the present value of the capacity expansion costs
• such that all of the beer demand at the distribution
centers is satisfied in each year.