Operations Management Case Study - 2

Benny Breweries: Bottle Replenishment
THE BOTTLE REPLENISHMENT DECISION Early in 2004, Manish Krishnan, purchasing manager for Benny Breweries, Mangalore, was trying to determine how many bottles to purchase in the coming year. During 2003, the market had leveled off, and 2004 sales predictions were difficult. On the one hand, Krishnan wanted to be sure that sufficient bottles were available to supply 2004 sales levels, yet also wanted to minimize year-end inventories. Covered storage space for empty bottles was tight, and a bottle design change seemed possible in 2005 or 2006. COMPANY BACKGROUND Benny Breweries was located in Mangalore. Over the years, the company had established an excellent reputation. Benny Beer had begun to gain popularity of late, and as a result, a modest market expansion started in 2000. In February 2004, sales reached the highest level in the company’s history. However, in 2003, the sales increase had been well below the trend average (see Exhibits 1 and 2). Four sales peaks occurred during the year: Holi, Christmas, Easter and Onam (refer appended note). Holi was the highest sales period but each peak caused the company to operate on tight schedules and Benny hired more labor and scheduled extra shifts. BREWING PROCESS Beer brewing started with extraction of sugar from malt by an enzymic process. This sugar was then boiled with hops, producing a sterilized and concentrated solution. The resins extracted from the hops during boiling acted as a preservative and gave the beer its bitter flavor. The hops were then removed and the solution was cooled to optimum temperature (10 deg C) for bottom fermentation lasting seven days, during which time the yeast converted the sugar to alcohol and carbon dioxide. After fermentation, the beer was cooled to (-1 deg C) and stored for 10 days (during which time the