Craft Brewery Supply Chain

ByAnand Gautam

Nathalie Sacre 

Problem Description & GoalsDecision: Should we open a brewery that

will ship our new craft brew to three different states with highest consumption of alcohol per capita?

Goal: Maximize annual profit while maintaining low stocks and minimizing delivery costs.

Annual Budget - $100 million for initial investment in factory, buying land and other variable costs

Model Formulation

Influence Diagram

Model Formulation Continued

Model Implementation Find a Location for Brewery Determine the Brewery Equipment and Supplies Determine the Brewery Employees and Staff

(Labor cost) Determine the Brewery Annual Budget Determine Misc. Inputs

STATEPER CAPITA BEER CONSUMPTION

(GALLONS)

Per Capita Beer Consumption

(Ounces)

% CHANGE IN SHIPMENTS 2003 - 2011

Delaware 34.3 4390.4 10.80%Louisiana 34.1 4364.8 -6.10%

Iowa 33.7 4313.6 0.80%Maine 33.5 4288 12.50%Hawaii 31.2 3993.6 1.90%

Colorado 30.9 3955.2 8.40%Alaska 29.8 3814.4 8.90%

Arizona 29.8 3814.4 -1%Illinois 28.9 3699.2 -5.80%Idaho 28.3 3622.4 6.50%

Kansas 28.2 3609.6 -2%Florida 27.8 3558.4 -4.90%

Arkansas 26.3 3366.4 4.30%Indiana 26.1 3340.8 -0.50%Georgia 25.9 3315.2 -0.20%

California 25.4 3251.2 5.30%Kentucky 23.9 3059.2 -2.80%Maryland 23.3 2982.4 -2.90%

Connecticut 21.8 2790.4 -3%

Selected States

Distances & Costs

Wilmington Dover Newark Bangor Lewiston Portland Denver Fort Collins Colorado Springs

Wilmington 15 51.2 13.4 568 471 441 1722 1718 1703Dover 51.2 12 49.4 608 511 480 1747 1750 1728

Newark 13.4 49.4 15 574 477 447 1722 1700 1704Bangor 568 608 574 10 107 129 2198 2175 2267

Lewiston 471 511 477 107 12 36.1 2103 2080 2172Portland 441 480 447 129 36.1 15 2071 2048 2139Denver 1722 1747 1722 2198 2103 2071 10 65.1 68.4

Fort Collins 1718 1750 1700 2175 2080 2048 65.1 15 133Colorado Springs 1703 1728 1704 2267 2172 2139 68.4 133 10

Variable Costs Units per Barrel Cost per Unit Cost per Barrel ($)

Raw MaterialGrain Bill/ Malted Barley (lbs) 50 $0.50 $25

Hops (lbs) 1 $10.00 $10

Yeast(gallons) 1 $10.00 $10

UtilitiesWater(gallons) 248 $0.01 $2

Electricity(KWH) 40 $0.15 $6

Natural Gas(therms) 4 $1.00 $4

Labor $2.69

Total Variable Cost $60.17

Model Implementation continued:Decision Variable: N i j - Amount of barrel produced from brewery i to demand point j, X i - Optimal location of brewery

Objective Function: Annual Profit = Revenue – Total Cost

+ PCR ()]

Where: dij is the distance traveled from the factory to demand locations in miles

Constraints: Total Cost ≤ Annual budget ($100M)   

Xi = 1 if location is selectedXi = 0 otherwise

Excel Simulation & Decision Analysis

ConclusionsBased on an annual profit of $183M;

we have made the decision to open a craft brewery.

The brewery will be located in Newark, DE.

As a startup, we will only deliver to the states of Delaware & Maine.

The brewery will produce 12 Oz bottles and package them in a 30 pack case

Q/A