OPTIMIZATION OF BEER SIUPPLY NDUSTRIAL CHAIN OPERATIONS

OPTIMIZATION OF INDUSTRIAL OPERATIONS

BEER SUPPLY CHAIN

OPCHAIN-S&OP/BEER SALES & OPERATIONS PLANNING OF BEER SUPPLY CHAIN

Ing. Jesús Velásquez-Bermúdez, Dr. Eng.

Chief Scientist DecisionWare - DO Analytics [email protected]

July 2019

mailto:[email protected]

OPCHAIN-S&OP/BEER - SALES & OPERATIONS PLANNING - OPTIMIZING BEER SUPPLY CHAIN

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INDEX

1. OPCHAIN-S&OP/BEER

2. BEER-EXPRESS SUPPLY CHAIN

2.1. CRAFT BEERS AND INDUSTRIAL BEERS

2.2. DESCRIPTION OF THE PRODUCTIVE SYSTEM

2.3. MATERIALS 2.4. TRANSPORT MODES

2.5. DISTRIBUTION NETWORK 2.6. AVAILABLE TIME

2.7. MODELING INDUSTRIAL PRODUCTION

2.8. COST OF THE OPERATION

3. ENTERPRISE WIDE OPTIMIZATION

4. STATE-OF-THE-ART MODELING OF SALES & OPERATIONS PLANNING

5. COMPUTATIONAL IMPLEMENTATION

6. SUPPLY CHAIN MATHEMATICAL MODELS SUPPORTED BY DECISIONWARE


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SALES & OPERATIONS PLANNING OF BEER SUPPLY CHAIN

1. OPCHAIN-S&OP/BEER

OPCHAIN-S&OP/BEER is the Decision Support System DSS developed by DW to support the Sales

and Operating Planning (S&OP) Process in BEER-EXPRESS (a hypothetic enterprise in the beer sector).

OPCHAIN-S&OP/BEER supports the process of optimizing the aggregate planning of industrial and

logistics operations consisting of defining quantitative goals, among other, for: 1. Weekly/monthly volumes produced in the production lines.

2. Assign final products to be distributed among facilities

3. Selection of modes of transport to be used

OPCHAIN-S&OP/BEER produces quantitative goals, among other, for:

▪ Production Quantities: For each process line and determines the optimal level of production for

each product. ▪ Packaged quantities: for each line of packaging and for each product end determines the optimum

amount of packaging. ▪ Inventory levels: for each storage produces the optimum level of inventory at the end of each

period. It is considered the freshness character of beer. ▪ Resources Consumption: for all the resources involved in the productive process determines its

level of consumption in each plant, packing line, …

▪ Optimum Blending: for products from flexible production formulas, the model determines the optimal blending.

▪ Labor Allocation: determines whether it is necessary to hire extra shifts, in accordance with trade union rules, or if supernumeraries are required, to achieve production goals.

▪ Product Transfers: volumes of transfers of raw material, parts, end products between facilities that

are part of the supply chain.

The end user can select the objective function to use according to his criteria, the most used are: ▪ Minimize production costs, assuming a demand which must meet, or

▪ Revenue maximization by selecting products that are more profitable to produce, according to the structure of the supply chain.

OPCHAIN-S&OP/BEER is available in multiple optimization technologies such as: GAMS, IBM CPLEX

Optimization Studio, AMPL, FICO Xpress Optimization Suite, IMPL, C, PYTHON, GMPL, C-GUROBI … .


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The first version of OPCHAIN-S&OP/BEER was developed in 1991. To obtain the algebraic formulation

or a demo of OPCHAIN-S&OP/BEER please send a mail to [email protected]

2. BEER-EXPRESS SUPPLY CHAIN

Below is conceptualization of the production chain served by BEER-EXPRESS that have craft beers and industrial beers.

This section describes BEER-XPRESS supply chain that is modeled on OPCHAIN-S&OP/BEER, this

modeling S&OP model can be considered traditional, newer versions (state-of-the-art) are described in a later section.

2.1. CRAFT BEERS AND INDUSTRIAL BEERS

All beer is made with four basic elements: barley, water, hops and yeast.

The main difference between industrial and craft beer is the proportions, raw material treatment and the brewing process. The proportion of raw materials is lower in industrial beers which also use non-natural

preservatives. Craft beers do not use any artificial additives, the brewing process is manual from grinding malts to bottling.

Craft beer is a completely different beer from industrial beer, since the moment it has no chemical additives it is really artisanal, made by people who permanently research new formulas. It is not an

industrial process; this makes it more attractive in taste and presentation. Each brew-master develops his own formula or recipe, to achieve what his audience most accepts. That's why you'll find different

tastes even within the same type of beer. That makes it a more expensive product than industrial beer.

We can talk about three categories of beer:

1. Homemade Brewers: they have a rudimentary team that allows, with some luck, to repeat close the same recipe in different productions. A homemade brewer makes his beer to enjoy himself or

with friends. 2. Microbreweries (brewpubs: small manufacturers, have a more sophisticated equipment than home

brewers: tanks, pumps, filters... but they don't get to the level of sophistication of industrial breweries.

Many parts of the process are done manually (addition of grain and hops, washing of instruments, etc.) and a personal/regional profile is sought beer on "such a side" and not "such a brand". A micro-

brewery makes his beer to sell but also to enjoy it: he wants that his "creature" to be revered by all. 3. Industrial breweries: they make thousands and thousands of liters and where there are not so

many people behind. Most stages are robotic or automated and the quantities and chemistry of the

elements are thoroughly controlled. Industrial breweries seek to lower costs, increase their sales and position their brands; doesn't make the beer he likes best, but the beer he leaves the most money.

From a mathematical modeling point of view, a network of micro-breweries resembles a network of

industrial breweries, which differ in the technologies used and in production scales.

2.2. DESCRIPTION OF THE PRODUCTIVE SYSTEM

For the conceptualization of the production system of S&OP-BEER, an extended version, by DW, of the

terminology used in ISA-95 (Instrument Society of America, United States, 1999), is used as a reference, which hierarchically establishes the physical places associated with the production system, as shown in

the following figure, adapted from Enterprise Control System Integration. Part 1 - Models and Terminology

(ISA-95).

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PROCESOS

BATCH

PROCESOS

CONTINUOSMANUFACTURA

Y ENSAMBLE

ESTRUCTURA DEL SISTEMA PRODUCTIVOS NORMA ISA-95 AMPLIADA

Enterprise Control System Integration. Models and Terminology (ISA-S95).

EMPRESA

SITIO

ÁREA

CELDA DEPROCESO

UNIDAD DE PRODUCCIÓN

LÍNEA DE PRODUCCCIÓN

CELDA DE TRABAJO

UNIDAD

ZONAS DEALMACENAMIENTO

UNIDAD DE ALMACENAMIENTO

UNIDAD

MODULOS DELEQUIPO

MODULOS DECONTROL

CENTROS DE TRABAJO

UNIDADESDE TRABAJO

ALMACENAMIENTO

COMPAÑIA

Leyenda

Contiene 0 o más

Contiene 1 o más

The following table presents the hierarchical conceptualization established by the standard, including the extension made by DW.

HIERARCHICAL STRUCTURE OF PRODUCTIVE SYSTEMS

NORM ISA-95

Compañía ▪ Debido a que el nivel más alto de la norma ISA S95 corresponde empres, se introdujo el concepto de

Compañía para identificar a la organización global que comparte una misión definida, metas y objetivos con las empresas que operan a nivel local

Empresa ▪ Una Empresa es una colección de sitios y áreas, y representa el nivel superior de una jerarquía de

equipos basado en roles. ▪ Las funciones del nivel cuatro al que pertenece la empresa son generalmente compartidas con el sitio.

Sitio (Fábrica)

▪ Un Sitio es un conjunto físico, geográfico o lógico determinado por la empresa. ▪ Puede contener áreas, líneas de producción, celdas de procesos, y las unidades de producción.. ▪ Los sitios generalmente tienen bien definidos los medios de fabricación.

Área

▪ Un Área es una agrupación lógica, física o geográfica determinada por el sitio. ▪ Puede contener centros de trabajo, tales como las celdas de proceso, unidades de producción, líneas

de producción y las zonas de almacenamiento. ▪ Las áreas generalmente tienen bien definidos los medios de fabricación y las capacidades. ▪ Un área se compone de los elementos de nivel inferior en donde realizan las funciones de fabricación.

Centro de Trabajo

▪ Un centro de trabajo es un elemento de la jerarquía de equipos bajo un área. ▪ Un centro de trabajo es cualquier elemento de equipo subordinado a un área que puede ser definido

por el usuario en una extensión del modelo de jerarquía de equipo basado en roles. ▪ Los tipos de centros de trabajo definidos específicamente son celdas de procesos, unidades de

producción, líneas de producción, o zonas de almacenamiento. ▪ Los centros de trabajo tienen bien definidos los medios y las capacidades

Unidad de Trabajo

▪ Una unidad de trabajo es cualquier elemento de la jerarquía del equipo en un centro de trabajo. ▪ Las unidades de trabajo tienen bien definidas los medios y las capacidades.

Celda de Proceso

▪ Están asociadas a procesos de producción por lotes (batch). ▪ El tipo de proceso y la familia de productos producidos identifica a menudo la celda de proceso. ▪ Las definiciones para las celdas y unidades de proceso están definidas en el estándar del IEC 61512 y

de ISA S88.01.

Unidad de Producción

▪ Las unidades de producción son donde se realizan procesos continuos de fabricación. ▪ Las unidades de producción están compuestas de unidades. ▪ Una unidad de producción en general abarca todo el equipo necesario para un segmento de la

producción continua que funciona de una manera relativamente autónomo. ▪ La actividad de procesamiento principal o producto generado a menudo identifica la unidad de

producción.

Línea de Producción

▪ Las líneas de producción y las celdas de trabajo son los niveles más bajos presentados en la norma. ▪ Las celdas de trabajo se identifican cuando hay flexibilidad en una ruta de trabajo dentro de una línea

de producción, normalmente asociada a procesos discretos de manufactura y ensamble. ▪ Las líneas de producción están integradas por celdas de trabajo se componen de los elementos de

nivel inferior.

Zona de Almacenamiento

▪ Es un tipo de centro de trabajo que tiene los medios necesarios para la recepción, el almacenamiento, la recuperación, el movimiento y el transporte de materiales. Esto puede incluir el movimiento de materiales de un centro de trabajo a otro centro de trabajo o entre las empresas.


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HIERARCHICAL STRUCTURE OF PRODUCTIVE SYSTEMS NORM ISA-95

▪ Ejemplos de zonas de almacenamiento: bodega, patio de remolques, patio de tanques, patio de silos, terminal de barcos, patio del ferrocarril, zona de espera.

Unidad ▪ Las Unidades son el nivel más bajo en donde se realizan procesos continuos y batch de fabricación. ▪ Las Unidades componen las Unidades de Producción y las Celdas de Proceso. ▪ Las Unidades tienen bien definida los medios de procesamiento y las capacidades de rendimiento

Celda de Trabajo

▪ Las celdas de trabajo son los niveles más bajos presentados en la norma. ▪ Las celdas de trabajo se identifican cuando hay flexibilidad en una ruta de trabajo dentro de una línea

de producción, normalmente asociada a procesos discretos de manufactura y ensamble. ▪ Las líneas de producción se componen de los elementos de nivel inferior. ▪ Tienen capacidades de producción bien definidas.

Unidad de Almacenamiento

▪ Es un tipo de unidad de trabajo ▪ Las unidades de almacenamiento suelen ser de interés para los sistemas de negocios sólo cuando las

funciones de negocio mantienen inventarios a un nivel más detallado que una zona de almacenamiento.

▪ La ubicación física de una unidad de almacenamiento puede cambiar con el tiempo, por ejemplo, los productos en tránsito.

▪ Las unidades de almacenamiento pueden ser dedicados a un determinado material, grupo de materiales, o método de almacenamiento.

▪ Ejemplos de unidades almacenamiento: estante / tolva / compartimiento, remolque, contenedor, tanque, sección de la tubería, cabezales, equipos compartidos, silo, sección de la tubería, cabezales, equipos compartidos, barco, bodega de la nave, contenedor, barril, tanque, vagón , pallet, barril.

A factory (site) is group several plants/productive areas, geographically located in one place, in which

specific industrial work is carried out. Areas can be of the following types: 1. Port

2. Malting plant 3. Processing plant (beers, malted products, soft drinks, ...)

4. Packaging plant 5. Supplies production plant

6. Distribution center.

This concept is used in the model to describe production and product transport processes. A factory has no production, it occurs in the associated areas/plants. The production processes that are considered are

batch processing.

The following diagram shows the connectivity of the supply chain served by BEER-EXPRESS. It has

included the processing of soft drinks and other beverages, since this configuration is found in many countries where BEER-EXPRESS operates, this seeks a comprehensive view of the problem to be

modeled.

Breweries

Production OthersDrinks

BeerMalted

Distribution Centers

DrinksJuicesWater

Malt

SecondaryTransportation

InputsProduction

BREWERY AND SOFT DRINKS SUPPLY CHAIN

Syrup Production

SugarWater

Syrup

BottlesTopCansLabels

SKUs

SKUs

Primary Transportation

Consume Centers

SKUs

SKUs

FACTORY

Returnable Containers

Maltingcompanies

Ports

Packing line

Packing line

Packing line

Barley Distribution Centers

SKUs

2.2.1. PORTS


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The ports correspond to facilities for handling: i) the importation/exportation of the barley to be sent to the malting plants, and ii) the importation/exportation of beers.

2.2.2. PROCESS PLANTS

Plants in which raw materials are transformed into products. In the beverage business, and taking into

account the supply chain served by BEER-EXPRESS, OPCHAIN-S&OP/BEER considers the following

types of processing plants: water, beer and malt, juices and soft drinks, if it is necessary may be

considered to include other types of plants, such as liquors.

Plants are described by similar technical-economic parameters, but not necessarily using the same

equations. The following types of areas are considered: 1. Malting plant

2. Processing plant (beers, malted products, soft drinks, ...) 3. Packaging plant

4. Supplies production plant

5. Repacking plant

Areas can be composed of various types of process cells.

2.2.2.1. MALTING PLANTS

Processing plants that convert barley into malt, the main input of the brewing industry, greatly influencing

most of its characteristics such as body, taste and aroma. The following table describes the main processes that occur inside the malting plants.

MALTA PRODUCTION PROCESS

Receiving, storing and cleaning the barley

At this stage, barley imported from countries such as Canada, France, Australia and Argentina are received and stored in silos located in malting plants, where it is subjected to a physical cleaning process shaking the malt barley as a step prior to the malting process.

Soaking

Barley is subjected in tanks to water dives followed by stages of draining and suction of carbonic gas in order to increase its humidity and in turn activate the grain for germination. Air is bubbling during dives and a refrigerated air injection is performed during carbon gas suction to promote grain breathing.

Germination

This process involves subjecting the grain under conditions that promote its breathing in a controlled manner (low temperatures and airflow). During germination the barley grain becomes evident its physical transformation by the appearance and development of the acrospire or incipient stem.

Roasting At this stage the germinated grain is subjected to contact with hot air to adjust its moisture content, develop the color, aroma and flavor of the malt.

Malt cleaning and storage

Prior to silos storage, the roasted malt is removed from the germ and is again cleaned in shaking type machines. Before its dispatch to the breweries the malt must undergo a "rest period" in the silos for at least three weeks, in order to stabilize its characteristics.

2.2.2.2. BREWERIES

The processing plant called brewery is divided into several process cells, namely:

▪ Kitchens ▪ Fermented tanks

▪ Maturation tanks

▪ Filters

In addition to the cells it is all the internal transport infrastructure of the liquids inside the brewery, which is not considered herein. The following table describes the three main processes that occur inside

breweries.

BEER PRODUCTION PROCESS

Must Elaboration

The main characteristics that determine the identity of each brand are defined in the cooking room, according to the raw materials selected and the process applied. The process begins with grinding the barley malt, a stage necessary to release the starch from inside the grain. The starch provided by the malt is transformed into fermentable sugar thanks to several temperature changes. Likewise, the sweet must containing


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BEER PRODUCTION PROCESS

fermentable sugar, proteins, amino acids, vitamins and minerals is separated from the malt shell. The must is boiled, and during the process the hops are added to give the bitterness and aroma.

Fermentation and maturation

When the must is fermented, the yeast transforms the sugars of the wort into alcohol and carbonic gas and contributes to the aroma and taste of beer. At the end of this process the "green beer" is obtained, so called because it has not yet reached its ideal ripening point for consumption; To achieve this, it is necessary to keep the beer in tanks with sub-zero temperatures. Due to the effect of time and cold, the taste and aroma are refined, and a more stable product is obtained.

Filtration Finally, it is necessary to stabilize and give that clean and clear appearance to beer. Through the filtration process, yeasts and other solid remains are separated. During this process, the quantities of carbonic gas (CO2) are adjusted. After this procedure finally appears the bright beer that we all know.

The brewery does not work as a mass production line, as there are multiple cells of each type, and more

than one way to produce the products that will later be packaged.

Cooked(½ day)Malt

MaltingCompanies

Fermentation Tanks

(10 days)

Maturated Tanks

(3-5 days)

Must

Filtered

D W

CarbonationBBT

Malted Products

Packing line

Packing line

Packing line

Brand Product:Diluted beer

Malted products

BREWERYBrewery

Green BeerMust

Maturated Tanks

(1-2.5 days)

DeaeratedWater

CO2

De aerator

CO2Purifier

Maturated Beer

DETAILED PROCESSING IN THE BREWERY AREA

As an aggregate production entity, the brewery processes malt as a raw material and transforms it into

diluted beer and malted products ready for the packaging process. At the productivity level it is described based on the time required (hours) to produce a certain quantity (hectoliters) of a given product. Two

product categories are processed in a brewery: beer and malted products.

To produce beer the malt is cooked and transformed into must then fermented into tanks producing the

so-called green must which is matured in a tank to produce concentrated beer which is diluted, incorporating water and carbonic gas (CO2, "carbonation") to obtain diluted beer before starting the

packaging process.

Similarly, malted products are produced, being the main difference that does not go through the

fermentation process. The following table presents the relationship of musts and brands that occur in BEER-EXPRESS

MOSTO MARCA

Torobayo Torobayo

Budwaiser Budwaiser

Pilsener Pilsener

Modelo Modelo Estándar

Torero Torero

Malteados Malta Dulce

Cruz Naranja Roja Cruz Naranja Roja

Cruz Naranja Rubia Cruz Naranja Rubia

Cruz Naranja Negra Cruz Naranja Negra


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It is possible to transport green or mature products between breweries; in this case the transported product must be stored in the maturation tanks before packaging.

2.2.2.3. PACKING PLANTS

Plants in which the product is packed in the different presentations transforming it into a commercial product. The work cells in the packaging plant correspond to the packing lines on which the packaging

operation of commercial products is physically carried out, each with its own technical characteristics and limitations with respect to operations they can do.

Línea Envasado

Línea Envasado

Línea Envasado

Marca:Cerveza DiluidaProductos Malteados

Producto ComercialSKU

Containers:Botellas, Latas

Materiales:Tapas, Etiquetas

Tiempo:Horas Normales, Extras

Cervecerías

CentroDistribución Producción

OtrasBebidas

Marca:Otras Bebidas

2.2.2.4. SUPPLIES PRODUCING PLANTS

Plants that produce the supplies (bottles, lids, cans, labels, ... ) that are used to produce commercial products.

2.2.3. DISTRIBUTION CENTERS

The distribution centers (CDs) is the facility in which there is inventory of SKUs, coming from the

packaging plants, and / or containers and / or inputs, from the plants producing inputs and the return of

containers from the consumption areas.

In BEER-EXPRESS three levels of distribution centers are considered; the characteristics of these CDs are:

1. CD1: They are in the same place as a packaging plant.

2. CD2: They are not in the same place as a packaging plant. 3. CD3: They are not in the same place as a packaging plant, they differ with CD2s by having less

storage capacity.

At the connectivity level, in BEER-EXPRESS, the following operating standards are met, for the distribution of commercial products:

▪ All CD1s are connected to each other

▪ CD1s are connected to CD2 and CD3 ▪ CD2 and CD3 are not connected to other CDs

▪ All CDs are connected to sets of consumption centers


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Cervecerías

Centros de Distribución

3

CONECTIVIDAD DE TRANSPORTE DE LA CADENA

CentrosConsumo

Malterias

Puertos


1


2

Envasadoras

Some CDs can pack combos and re-pack commercial products.

2.2.4. CONSUMPTION ZONES

Consumption zones correspond to the sites where demand for commercial products is realized. The

following are three levels of grouping of the territory where demand can be measured/allocated

1. Basic Territorial Unit (BTU): corresponds to the minimum unit in which the territory is divided. 2. Demand Cluster: corresponds to a set of BTUs that are grouped together in order to facilitate the

management of the data considering their connectivity at the secondary transport level. 3. Consumption Zones: corresponds to the sites where BEER-EXPRESS delivers the commercial

products to the network of distributors and intermediaries that will carry the products to the points

of sale. Each distribution center is associated with a set of consumption zones.

In BEER-EXPRESS the measurement and projection of demand are carried out at the level of the consumption zones. Demand in towns/cities is obtained through mathematical models developed by

BEER-EXPRESS.

2.3. MATERIALS

Products that are handled in the production system can be classified into one of the following types:

1. Raw materials 2. Attached products (rice, corn syrup, ... )

3. Industrial products

4. Supplies 5. Added products (cups, caps, ...)

2.3.1. RAW MATERIALS

The fundamental raw material of the process corresponds to barley, which enters the production system

through ports, from where they must be sent to the malting plant to perform the first transformation

process in the production chain.

2.3.2. ATTACHED PRODUCTS

The attached products are un-malted cereals (rice) that are added to beer due to the high diastatic force

(ferment) of the malt in order to have good stability. Syrup is also considered as an attached product.

2.3.3. INDUSTRIALS PRODUCTS


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Industrial products refer to commercial products, intermediate products and/or by-products that are produced in the different industrial processes that are carried out along the supply chain. Conventionally

all products have a SKU (stock keeping unit) that identifies them.

2.3.3.1. PRODUCTS CATEGORIES

In BEER-EXPRESS products fall into two categories: Beers and malted products.

The breweries can also produce isotonic, soft drinks and waters.

By the processing status, products can be divided into bulk and packaged liquids. The first are produced

in breweries and are grouped by brands, the seconds are produced in the packing plants and are linked

to commercially SKUs.

The products handled in the industrial system are: ▪ By-products:

▪ Malt

▪ Must ▪ Green must

▪ Malted product ▪ Mature beer

▪ Brand beer ▪ Comercial product (SKU)

The by-products correspond to intermediate products of the production process whose result is the branded product before being packaged, which corresponds to diluted beer.

Commercial products resulting from the packaging of the branded product in a specific container

(presentation). Within commercial products, the following classifications may be considered:

1. Normal: products from production plants that are packaged on packaging lines in packaging plants. 2. Repackaged: products obtained from packaging plants at distribution centers from other packaged

products; these products are not packaged directly in packaging plants. 3. Substitute Products: products that are created temporarily (e.g. for an event or promotion), that

have their own demand and their own SKU, and which at the end of their life cycle (demand period)

the residuals can be used to meet the demand of the called the parent/main product of the substitute product.

4. Export Product: Industrial products that are exported, to meet the demand must be considered repackaging processes and export processing times.

5. Imported Product: Industrial products that are imported, to meet the demand must consider the processing times of the import and the reduction of freshness time due to the time of travel.

6. Combos: combinations of normal or repackaged products, which have their own demand and their

own SKU, and are obtained in packing plants at distribution centers. A combo may contain added products that are not produced by BEER-EXPRESS, for example a set of cups.

An important feature of commercial products is that they must ensure freshness and therefore their

accumulation in inventories for very long periods is not convenient/feasible. Each commercial product

must be associated with a lifetime that defines the management of inventories.

2.3.4. ADDED PRODUCTS

Products not produced in BEER-EXPRESS that are incorporated into the combos.

2.3.5. SUPPLIES

They correspond to materials that are used along the different links of the supply chain. Two types should

be considered: ▪ Containers


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▪ Others supplies

Containers correspond to three types of products: packaging, plastic boxes and pallets; they are divided into returnable and non-returnable. Returnable involve special management within the supply chain as

they must be managed by the model and they correspond to company assets.

2.4. TRANSPORT MODES

They are used to transport products between the different sites where the supply chain operates. They

differ by capacity and cost of utilization.

The distribution activity is carried out by the modes of transport and can be classified into three types

according to the links participating within the distribution channel. 1. Primary Distribution: is the distribution of products from the point of manufacture to a distribution

center. 2. Secondary Distribution: is the distribution of products from a distribution center to the end

customer.

3. Reverse Distribution: This is the return of the load from a distribution center to the manufacturing plant or the return of load from the end customer to the distribution center. It is related to returns

and handling of returnees.

The following modes of transport are considered: CCC Tankers for concentrated beer transport

TPP Primary transport by own vehicle

TPO Primary outsourcing transport (carrier company) TSO Transportation by intermediary partners

TVP Secondary transport by own vehicle TOU Secondary transport outsourcing (carrier company)

Inventario

Producto

Final

Centro

Reempaque

Zona

Consumo

Producto Re-empacado

Combo

Producto

Comercial

Producto Comercial

Combos

Producto Re-empacadoBahías

Despacho

Bahías

Recibo

Containers

Inventario

Producto

Containers

Envasadoras

Producto Comercial

Combos

Producto Re-empacado

Producto

Comercial

TRANSPORT OF PRODUCTS

Containers

2.5. DISTRIBUTION NETWORK

The distribution network of industrial products is modeled based on the concept of route or "connection" or "road corridor" which joins two sites in which the supply chain operates.

The path corresponds in the mathematical modeling to an index to which the possible transfers of

products between the facilities that are linked. The following types of routes are considered:

▪ Process plant to processor plant ▪ Process plant to local distribution center

▪ Distribution center to distribution center ▪ Distribution center to consumer zone


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▪ Distribution center to port ▪ Port to distribution center

The previous routes are linked to the products and modes of transport and the freight that causes the use of the route.

2.6. AVAILABLE TIME

The actual production capacity of the system depends on the availability of time for productive tasks. In the case of BEER-EXPRESS, the following business rules are considered:

▪ Three productive shifts are available ▪ In a period, there are ordinary days (usually Monday to Saturday) and non-ordinary days (Sundays

and/or public holidays)

▪ Each turn lasts eight (8) hours ▪ There is a maximum of overtime that can be worked on in the period

▪ In the period, unavailable time may be presented for scheduled maintenance.

Based on the above the availability the time for production must be estimated based on the normal hours

that the contracted shifts must work and the extra overtime that each of these shifts can work.

2.7. MODELING INDUSTRIAL PRODUCTION

The general rules for production modeling are:

▪ In each period the production is modeled based on the distribution of the total time available in the

time used by each of the different technologies that can be processed in a production unit

TIMES DEDICATED TO EACH AVAILABLE TECHNOLOGIES ≤ AVAILABLE TIME

▪ Time spent on a technology is calculated as the quantity produced multiplied by the production time (the inverse of the production rate)

TIME TECHNOLOGY =

PRODUCTION TIME (HOURS/UNIT) × PRODUCTION QUANTITY (UNIT)

▪ The available time corresponds to the total normal hours plus overtime less the time spent on

maintenance and preparation of the production units.

AVAILABLE TIME = NORMAL HOURS + OVERTIME - PREPARATION TIME - MAINTENANCE TIME

With respect to any of the values on the right side they can be a parameter or a variable, this depends on the scope of the modeling.

o Normal hours: is a variable in cases where the model decides whether to activate a shift. The

time provided by a shift will be equal to eight (8) hours multiplied by the number of working days of the period, which can be used, or not, in production.

o Overtime: is a variable whose value determines the model, according to its convenience or not.

o Preparation Time: is a parameter that is related to the preparation of production units to perform a production activity. The preparation time of the processes depends on the production

process, for tactical planning models should be estimated since, normally, their detailed modeling

involves binary variables which increase significantly the time to solve the mathematical problem. Given the type of models, for strategic and tactical problems these parameters are not related

to the sequence of activities in a machine, as is the case in operational models (scheduling).


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o Maintenance Time: is a parameter that must be divided into routine maintenance and scheduled maintenance. Routine maintenance corresponds to maintenance activities that are

carried out permanently to ensure the proper functioning of the production units, the scheduled maintenance activities involving paralysis or “degrade” productive capacity.

▪ About routine maintenance time plus preparation time these are associated with the factory efficiency of the processes.

▪ With respect to scheduled maintenance time. The estimate of this time is different for periods in the

short term and for long-term periods.

o Short term: maintenance time must come from short-term preventive/corrective maintenance

plans which are defined prior to the model run. These maintenance activities involve paralyzing the production unit and/or losing its productivity which must be converted into unavailable

equivalent hours.

SCHEDULED MAINTENANCE TIME =

DATA READ OR CALCULATED FROM THE DERRATE READ

o Medium Term: in this case preventive/corrective maintenance plans are not known in detail, therefore the time-loss estimate is done using an unavailability factor that affects all periods; .

then the available time is calculated as:

EXPECTED SCHEDULED MAINTENANCE TIME =

(TOTAL TIME PERIOD) - (1 - OPERATIONAL UNAVAILABILITY)

2.8. COST OF THE OPERATION

The objective of optimization may be to:

▪ Minimize production costs calculated as the sum of all variable costs that depend on the

production level of the supply chain. In this case it is considered that all demand should be met regardless of the relationship between the marginal cost of production and the selling price of the

product. For a p potential deficit in demand attention the cost is assumed to be "infinite" by forcing

the model to meet as much demand as possible.

▪ Maximize the operational profit calculated as the difference in sales revenue less production costs. In this case, the demand is met only in cases where it generates profit, i.e. until the marginal

cost of production are letter or equal to the selling price of the product; the cost of the deficit is assumed equal to zero.

The following are the costs considered:

▪ Production Costs at the Processing Plants: they are related to the variable cost of production that is derived from the operation of the processing plants, depending on the level of activity of the

production system. The following costs are considered: supplies, ordinary hours and overtime. To

establish the total cost of supplies it is necessary to know the unit costs of the supplies in each of the processing plants. These costs can be considered as exogenous, independent of the chain operation

(bought supplies), or as endogenous, dependent on the operation of the chain (supplies produced in the supply chain). In addition, production formulas that determine the unit consumption of resources

according to production under the different technologies that exist in processing plants are required.

▪ Inter-Facility Transportation Costs: relate to the cost of transporting raw materials, supplies and

industrial products between the facilities that make up the supply chain. They are usually set based on the associated freight between sites for the different materials and for different modes of

transport.


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▪ Inventory Costs: are related to the cost associated with inventories stored at the different facilities that make up the chain. Conventionally they are associated with:

o Financial costs generated by the opportunity cost of the economic value of stored inventories, it can be calculated as a fraction of the cost of the stored material

o Inventory management costs that correspond to a direct cost generated by inventory existence,

such as cooling costs that may require a certain type of product. o Storage cost, corresponds to an additional cost that is paid when the capacity of the warehouse

is exceeded, can be associated with a penalty or to the cost of renting space/volume.

▪ Sales Revenue: generated at the time of sale products in consumption areas

3. ENTERPRISE WIDE OPTIMIZATION

Unsurprisingly, the power of computing, the structure of organizations and the structure of mathematical

models have evolved over time. Based on the fundamental concepts of tactic planning, expressed in the book “Planning Production, Inventories, and Work Force” written, during the 1950s of the last

century, by Charles Holt, Franco Modigliani (Nobel Prize), John F. Muth, Herbert A. Simon (Nobel

Prize), Charles P. Bonini and Peter R. Winter the models have evolved together with the practices of the business planning, which in modern times have followed the following steps:

1. SCM: Supply Chain Management 2. S&OP: Sales & Operations Planning

3. IBP: Integrated Business Planning

Companies committed to Prescriptive Advanced Analytics as decision support, mathematical

modeling has been extended to go cover the holistic view of the organization, increasingly large and globalized. We have gone from a coordinated vision of decisions: feeding a model to another model, the

vision of integrated, multiple models assembled in a big model. This allows you the computing power to which we have access. It has gone from a coordinated view of decisions: one model feeding to another

model, to the integrated vision, multiple models assembled into a single large model; this is allowed by

the computing power to which we have access. The diagram, built from a diagram included in the digital item "Beyond Supply Chain Optimization to Enterprise Optimization" of Professor Jeremy

Shapiro, allows to visualize the concepts expressed. This holistic vision of globalized industrial systems is known as Enterprise Wide Optimization (EWO) and may be equivalent to Integrated Business Planning

(IBP).

SCM: Supply Chain ManagementModel

S&OP: Sales & Operations PlanningModel

IBP: Integrated Business Planning Model

4. STATE-OF-THE-ART MODELING OF SALES & OPERATIONS PLANNING


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Traditionally, Sales and Operations Planning (S&OP) is an integrated management process of business through which the executive leadership team continually achieves focus, alignment and

synchronization of production planning from a sales forecast. S&OP includes an updated forecast of goals that leads to a set of plans for several functions of the organization (sales, production,

inventory, deliveries, development of new products, and financial).

Quantitatively, short product life cycles and high volatility of demand require more frequent review

of S&OP. Depending on the speed of industrial processes, S&OP may allow scheduling of supply chain activities (operational decisions).

Metas Mensuales

S&OP-OMPlanificación

TácticaMensual

Demanda Mediano/Corto Plazo

PolíticasInventarios

Proyección Mercado

Mediano/Corto

Plazo

PolíticaInventarios

RequerimientoMateriales

S&OP-OSPlanificación

TácticaSemanal

Programación Compras

Programación Producción

Programación Distribución

Metas Operativas

Diarias

S&OP-ODPlanificación

TácticaDías

MetasSemanales

A properly implemented S&OP process, permanently reviews the demand of products and the supply

of raw materials and supplies. The re-planning process focuses on the changes that occur with

respect to the previously agreed plan, while helping the management to understand how the company achieved its current productivity, its main goal is to anticipate future results and plan

activities for it.

Considering the current state of optimization technologies, the correct S&OP must be supported in a mathematical programming model, whose origin is based on the aggregate production

programming specified in the fundamental work done by Holt, Muth, Modigliani, Simon, Bonini and

Winters. Today, and for several decades now, the traditional S&OP mathematical model is limited to planning production taking as border conditions: i) sales, ii) preventive maintenance, iii) financial

budget, and iv) the workforce.

However, the power of current computers allows to integrate (endogenizar), in a single model, the

definition of the system environment, so that the values of these variables are part of the results of the optimization algorithm, so just to approach an optimal solution from a holistic point of view that

consider the organization as a 'unique' entity and not as separate watertight, each with a definition of what should be its optimal behavior.

In short an S&OP model at the level of the state-of-the-art must integrates the following systems:

i) production, ii) marketing & sales, iii) financial budgets, iv) human resources, v)

sourcing/procurement, vi) distribution, vii) maintenance and viii) energy/water (industrial services). An S&OP model can analyze scenarios that provide an optimal holistic solution; it will be better than

the union of multiple solutions obtained individually by each function (sub-system), taking the

remaining systems as a boundary condition. All the above functions can be included in OPCHAIN-

S&OP/BEER.

The following diagram describes the above.


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S&OP: SALES & OPERATIONS PLANNING

MODELING

S&OP

Sales & Operation Planning

Tactical Planning

ProductionSystem

SalesSystem(INPUT)

S&OP

Sales & Operation Planning

Tactical Planning

ProductionSystem

EnergySystem

MaintenanceSystem

Sales & MarketingSystem

FinancialSystem

Human ResourceSystem

DistributionSystem

SourcingSystem

TRADITIONAL STATE-OF-THE-ART

MaintenanceSystem(INPUT)

FinancialSystem(INPUT)

According to the OPCHAIN-S&OP/BEER development form, based on the OPTEX Expert

Optimization System, the modernization of the S&OP process can be visualized as integrating multiple mathematical models that can be used individually, or integrated according to decisions and/or studies

supported by the DSS.

For more information the reader is invited to consult:

▪ Enterprise Wide Optimization – Integrated Financial & Industrial Operations Planning https://www.linkedin.com/pulse/enterprise-wide-optimization-financial-industrial-jesus-velasquez/

▪ Enterprise Wide Optimization - Transfer Pricing Optimization. https://www.linkedin.com/pulse/enterprise-wide-optimization-transfer-prices-jesus-velasquez/

▪ Advanced Supply Chain Optimization. Traditional & State-of-The-Art Models

https://www.linkedin.com/pulse/supply-chain-optimization-jesus-velasquez/

5. COMPUTATIONAL IMPLEMENTATION

OPCHAIN-S&OP/BEER it was developed using the cognitive robot OPTEX Expert Optimization

System, therefore the OPCHAIN-S&OP/BEER inherits fundamental principles under which is built

OPTEX, making the OPCHAIN-S&OP/BEER a cognitive robot to design, implement and maintain

mathematical models of optimization for the beer industry.

For more information the reader is invited to consult:

▪ OPTEX – Optimization Expert System

https://www.linkedin.com/pulse/optex-optimization-expert-system-new-approah-make-models-velasquez/

https://www.linkedin.com/pulse/enterprise-wide-optimization-financial-industrial-jesus-velasquez/

https://www.linkedin.com/pulse/enterprise-wide-optimization-transfer-prices-jesus-velasquez/

https://www.linkedin.com/pulse/supply-chain-optimization-jesus-velasquez/




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Based in OPTEX, BEER-EXPRESS may develop new mathematical models to support other functions in the organization (design, inventories, sourcing, production scheduling, available-to-promise, distribution

scheduling, … ) or to expand the decisions support by OPCHAIN-S&OP/BEER.

Due to the implementation using OPTEX, OPCHAIN-S&OP/BEER is available in multiple optimization

technologies such as: GAMS, IBM CPLEX Optimization Studio, AMPL, FICO Xpress Optimization

Suite, IMPL, C, PYTHON, GMPL, … .

The implementation of the OPCHAIN-S&OP/BEER focuses on a relational information system that

storage the data (input and output).

All the user interface is generated by OPTEX without computer programming activities, all elements are generated, on-line, by the robot OPTEX.

OPCHAIN-S&OP/BEERRELATIONAL INFORMATION SYSTEM

COMMON

DATA MODEL

INFORMATIONSYSTEM


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CERVECERÍAS

CERVECERÍAS PRODUCTO

CERVECERÍAS HORAS

CERVECERÍASRECURSOS PRODUCTO

CERVECERÍASCONDICIONES

INICIALES

CERVECERÍASRECURSOS

CERVECERÍASFÁBRICAS

ENVASADORAS

ENVASADORASCENTROS DE

DISTRIBUCIÓN

ENVASADORASRECURSOS

ENVASADORASFÁBRICAS

The results of the runs of the models can be presented in any visualizer oriented to handle a large amount of data.


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DISTRIBUTION CENTER ID

6. SUPPLY CHAIN MATHEMATICAL MODELS SUPPORTED BY DECISIONWARE

The following diagram shows the functions of the models that DW supports to complement the services

offered by OPCHAIN-S&OP/BEER. All models can be deployed by sharing the same data model, so

that connectivity between models is through the information system.


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ERP

S&OPSales & Operations

Planning

Policy ofInventories

ProductionGoals

Distribution Goals

Material Consumption Goals

ProductionOrders

Distribution Orders

Purchase Orders

ExpansionPlans

OPERATIONS

STRATEGY

TACTICAL PLANNING

SourcingOptimization

ProductionScheduling

ATPAvailable-To-PromiseProduction → Clients

→ Routes

DistributionRouting

Multi-Echelon Inventory

Optimization

Historical DataSales – InventoriesSyndicated Data Bases

DemandProbabilisticCharacterizationModels

DemandCharacterization:

Clients & Competence

PricingOptimization

Marketing-MixMarket-ShareOptimization

Projection Demand &

Prices

InventoriesBalance

InventoriesRedistribution

Marketing BudgetEvents SchedulingMarketing Mix Decisions

TACTICAL PLANNING

OPERATIONS

Short-Term

Demand Forecast

DEMAND SUPPLY

STRATEGY

Resilient Supply Chain

Design

Suggested Order

Optimization

Suggested Order

Policy ofInventories

Medium-TermDemand Forecast

Long-Term

Demand Forecast

OPTIMIZATION MODELS FOR INDUSTRIAL VALUE CHAINS

More information about models and technical publications:

▪ Catalogue of Advanced Analytics & Optimizations Mathematical Models https://www.linkedin.com/pulse/advanced-analytical-optimization-models-machine-neural-

velasquez/

▪ Catalogue Techno-Economic Publications https://www.linkedin.com/pulse/catalogue-techno-economic-publications-jesus-velasquez/

▪ Book Mathematical Programing 4.0 for Industry 4.0 Cyber-Physical Systems for courses in Advanced Applied Optimization.

https://www.linkedin.com/pulse/mathematical-programing-40-industry-cyber-physical-book-velasquez/

https://www.linkedin.com/pulse/advanced-analytical-optimization-models-machine-neural-velasquez/

https://www.linkedin.com/pulse/advanced-analytical-optimization-models-machine-neural-velasquez/

https://www.linkedin.com/pulse/catalogue-techno-economic-publications-jesus-velasquez/



Documents

OPTIMIZATION OF BEER SIUPPLY NDUSTRIAL CHAIN OPERATIONS