Case: Greaves Brewery: Bottle Replenishment

Business Logistics and Supply Chain Management

January 3, 2013

I.

Statement of the Problem/Key Strategic Issue

Greaves Brewery is a manufacturer of beer situated in Trinidad with tourist market as one of
marketing niche. Yearly sales peak occur on Carnival, Christmas, Easter and Independence month.
Alex Benson, the purchasing manager, have difficulty in determining the number of reusable bottles to
order from its long-term German supplier for the year 2004 due to a planned new bottle design on
either year 2005 or 2006. This means that remaining all old-designed bottles, new or used, would be
scrapped out by the year 2005 or 2006. Added dilemma is the unreliable sales forecast done by both
the sales and plant manager of the company for the year 2004. Past company record shows that
inadequate available empty bottles for production use resulted in huge revenue loss. Scheduling of
new bottle order, timely empty bottle turnaround time and replenishment of bottle in the bottling
department must also be taken into consideration. How many reusable bottles must Mr. Benson order
to ensure availability of adequate reusable bottles is on-hand to supply the demand of the 2004 sales
with minimum inventory in anticipation of the arrival of the new bottle design?

II.

Statement of the Objectives

To be able to provide an accurate sales forecast for the year 2004 using forecasting
techniques and models as basis for decision making
To be able to develop a plan to expedite return of reusable bottles from customers
To be able to determine the ordering process needed for the bottle replacement and
replenishment
III.
Relevant Case Facts/Findings
Company:
Greaves Brewery
Industry:
Beer Industry
Market Niche:
Tourist
Location:
Carribean Island of Trinidad
Founder:
John Greaves in 1924
Strengths:
Has established a long-term supplier relationship with a reliable German glass manufacturer
Weakness:
Unreliable sales forecast for the year 2004
During peak season, company operates on a tight schedule incurring more labor expense and
added production cost which eventually decrease profit margin
Information and data needed for making decisions are not available and unreliable such as
bottle turnaround time, length of time of total in-service bottles were replaced with new
bottles
Bottle replenishment does not meet the sales demand for the year
Threats:
Sudden change in government regulation such as increase in excise tax which directly affect units
sales price as the company passes this increase to customer
Local bottle manufacturers were equipped only to produce clear glass bottle
Opportunities:
Tourist market niche is growing evidenced by sudden increase in sales during February 2004.
Other Relevant Facts:
-minimum order quantity is 15,000 cases per year.
-Minimum delivery per month is 5,000 cases.
-Design of the bottle will be changed by 2005 or 2006.
- Order practice is 75% of the annual demand is ordered on March then remaining order on
August.

IV.

1.

Alternatives
Alternative
Order quantity for March
are 154 and 131 for the
year 2004 -2005; Order
quantity for August are
131 and 0 for the year
2004 -2005

Assumptions
The bottle requirement is
based on the four biggest
month demand and
revolve it

Pros
Assurance that we will
meet all the sales
demand during peak
seasons

Cons
Ending inventory total is 793
thousand to be scrapped at
the beginning of 2006

Less inventory scrapped

at the year 2006 compare
to option 1(-14 thousand)

Ending inventory total is 748

thousand bottles to be
scrapped at the beginning of
2006

Minimum of 1 thousand
empty bottle inventory at
the beginning of 2006
A result of faster rate of
bottle return from 90% to
94.5% due to the
campaign, incentive and
prizes given in-line with
bottle management
concerning endcustomer

Prepare and develop a plan or

systematic process of
collection of empty bottles
from retailers or wholesalers,
safekeeping, storage and
replenishment.
Inventory or audit of empty
bottles vs items disposed as
prizes or incentives is needed

Every month there will

be a 5% base on the sales
demand allowance for
allowance for additional
demand, brokerage, lost,
etc.
Forecasting tools used is
logarithmic

2.

3.

Order quantity for March

are 100 and 54 for the
year 2004 -2005; Order
quantity for August are 33
and 0 for the year 2004
-2005

The usage rate of new

bottles is used to
determine the quantity
needed.
Use the Sales increase as
a basis for the increase in
volume of bottles.
Forecasting tools logarithmic
Order quantity for March The bottle requirement is
are 154 and 131 for the
based on the two biggest
year 2004 -2005; Order
month demand and
quantity for August are 66 revolve it
and 0 for the year 2004
-2005
Every month there will be
a 5% base on the sales
demand allowance for
allowance for additional
demand, brokerage, lost,
etc.
Forecasting tool logarithmic

V. Conclusion
a. Recommendation/s
We recommend to implement option three (ACA 3) that in determining the quantity needed the usage rate
of new bottles is used. Use the sales increase as a basis for the increase in volume of bottles. The option yielded the
least number of inventories, 1,000 empty bottles, by the start of 2006 minimizing scrapped cost.
Total sales forecast for year 2004 and 2005 is 4252 and 4405 respectively using the logarithmic forecasting
tool. See Appendix for comparison of the different forecasting tools tried such as exponential, linear, polynomial in
degree 2 and 3, power, moving average in degree2. Logarithmic forecasting tool yielded the best result with the
following forecasting accuracy results:
MAD = 96.0472
MSE = 20775.38
MAPE = 2.777
b. Implementation Approach/Timetable
1. Approach on New Product Design and Ordering
The design of new bottles must be done early to meet the target year 2005 or 2006.
By the second half of 2004, planning for monthly order must be collaborated with the supplier. At this
point, the 75% of the year demand has been ordered.
First half of 2005, the design for the new bottle must be finalized and turned over to the supplier.
Production side must be informed of the design changes to give them enough time to adjust production process
if new design includes changes in height, width of bottle etc in time for year 2006. By the third quarter of 2005,
the ordering of the new design of bottle must already be done, as well as, recalibration on the production side.

2. Bottle Management this will be implemented on April 2004. Our goal is to develop a plan to
expedite return of empty bottles: management of empty bottles like campaign in-line with returning
bottles examples follows:
a. Retailers (sari-sari stores, mini-marts establishments that directly communicate with endconsumer ) proposed incentive: for every 1 case of empty reusable bottles returned there would be free 1
bottle of full goods beer plus refund of deposits
.b. End consumer 1. Raffle stub will be given for a chance to win grocery items, tumblers, coolers,
freezers for every 1 bottle empty reusable bottle
2. Outright items in exchange for empty bottles returned such as pens,
keychains, tags, glass or mugs etc.

APPENDIX
BREWERY PROCESS
1. Sugar was boiled with hops, producing a sterilized and concentration.
2. The hops were then removed and been cooled to optimum temperature 10C from the bottom
fermentation lasting 7 days.
3. The beer was cooled to -1C and stored for 10 days.
4. Filtered through diatomaceous earth.
5. After 24 hours storage, it would be put to polishing filtration.
6. The beer will undergo artificial carbonation.
7. Bottling and packaging.
*** 1 day, pre fermentation process, 7 days fermentation process, 10 days post fermentation process, 1
day polishing, 1 day packaging.
*** Total of at least 19 days to prepare the beer.
BEER PRICE
Retail Price
Excise tax (Nov. 1997)
Bottle Deposit
Additional Tax( July 2001)
Additional Tax( July 2003)
TOTAL
$

9.90
0.60
0.90
0.90
1.20

12.60