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8/12/2019 Class Introduce

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Anadolu Efes Case

Optimization of Location,Distribution and Capacity Expansion

Decisions


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Company Background

Anadolu Efes Leading beer producer and distributor in Turkey

Emerging international presence in EasternEurope and Central Asia

operates 9 breweriesand 4 malteriesin 5countries

annual beer production capacity: 1.4 billionliters

sells its products in over 30 countries

domestic market - 77% of total sales volume


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Organization

Anadolu Holding

Anadolu Efes

(Beverage Group)Production Group:

Brewery and Malteries

International Operations:Efes Breweries International

Soft Drinks:

Coca-Cola

Sales and Distribution:Efes Marketing


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Efes Domestic Beer Market Share

In 2000, Efes share in the Turkish beer marketreached a record high of 78%

0

100

200

300

400

500

600

700

1986

1988

1990

1992

1994

1996

1998

2000

50

55

60

65

70

75

80

Sales Volume (million

liters)

Market Share (%)


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Domestic Beer Market

Potential for market growth

Per capita beer consumption in Turkey increasedby more than 50% from 1995 to 2000

Annual population growth of 1-2% over the yearsincreases the adult population each year

Market Size

730 million liters sales and around $294 million

sales value in 2001

Turkey ranks as the tenth largest beer-consumingnation in Europe


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Beer Trivia

Who drinks the most beer?Annual Beer Consumption

1. USA 23.00 billion liters

2. China 20.73

3. Germany 10.46

4. Brazil 7.88

5. Japan 7.15


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Beer Trivia

Who drinks the most beer?Per Capita Beer Consumption

Czech Republichas the largest per capitabeer consumption in the world: 156 liters

Global average is around 25 liters


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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 beengrowing

Major US and Europe based brewers have been

focusing on Eastern Europe, China and the CIS

countries


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Efes Strategic Goals

Business diversification and internationalpresence

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


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Plans

1. Optimize malt and beer distribution networkto provide leverage against increasing

competition

2. Open new breweries and possibly expand the

capacity over the next several years to supply

for increased demand


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Analysis

1. Improve the current distr ibution system

Analyze Efesdistribution strategy anddevelop a malt and beer shipment plan thatminimizes total transportation costs

2. Determine when and where Efes should build

new breweries and possibly expand their

capacities

Optimize distribution, location, and capacityexpansion decisions over the next three years.


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Beer Trivia

a) 1,000 years

b) 2,000 yearsc) 7,000 years

d) 20,000 years

How long have we been drinking beer?


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How long have we been drinking beer?

The earliest recorded beerrecipe was found in claytablets written 7,000 yearsago.

Beer originated inMesopotamia and thenfound its way to Anatolia.

Four thousand years ago

in Anatolia, Hittites, weredrinking beer in daily lifeas well as in sacred rituals.


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Beer Production

Barley Malt

Hops

+

+ H2O + yeast =


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Beer Production Process

malting barley

distilling

brewing

bottling

Mashing

Boiling

Fermentation

Aging


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Production and Distribution System


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Afyon

Konya

Import

Istanbul

Ankara

Istanbul

Izmir

Antalya

Bursa

Kayseri

Export

Distribution System - CurrentMalt

Supply / Capacity

24 / 30

2 / 68

20 / 20

BeerDemand

103

74

50

60

102

13

202/ 220

200 / 200

BrewerySupply / Capacity

0

0

50

0

0

0

0

60

102

13

24

Current

Malt Transportation

Current

Beer Transportation


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Current Distribution System

The current shipment plan enforces certainrestrictions due to established relations between

brewery-distributor pairs:

Ankarabrewery supplies all the beer demandof Bursadistributor

Istanbulbrewery supplies all the beer demand

of Antalyadistributor

Total shipment costs can be reduced by optimizing

the shipment plan


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Analysis

Optimize the distribution system by formulatingand solving a linear programming model,

1) with existing relationship limitations,

2) by relaxing these limitations,and summarize the resulting savings in costs.


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Analysis - continued

Discuss the sensitivity of the model solution tochanges in model parameters

For example:

1) analyze how much reduction intransportation costs would justify keepingthe existing brewery-distributor relations.

2) discuss other input parameter changes thatwould make certain shipment choices in thecurrent distribution plan, i.e. malt import,cost-effective.

3) discuss sensitivity to demand changes


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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.

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