Annual Distribution Budget in the Beverage Industry: A Case Study

Nowadays Unicer can improve its tactical distribution planning decisions and study several alternative scenarios for its supply strategies and network configuration thanks to an operations research driven process. In this paper we present the decision support system responsible for this new methodology in the major Portuguese beverage company. At the core of this system there is a mathematical programming-based heuristic that has decision variables related to transportation and inventory management problems. The company runs a set of production and distribution platforms with different characteristics to fulfill customers demand. The main challenge of this work was to render a tactical distribution plan, also known in the company by annual distribution budget, as realistic as possible without jeopardizing the nature of the strategic/tactical tool. The company presents a very complex tactical distribution planning due to the increasing variety of stock-keeping-units and to the need of a very flexible distribution network to satisfy customers, who demand a very fragmented product basket. One of the main causes of this complexity is the existence of uncommon flows of finished products from the distribution centers to the production platforms. These movements yield an intricate supply chain that needs to be properly handled. The quality of the solutions provided and the implementation of a user friendly interface and very readable and editable inputs/outputs for the decision support system gave the necessary motivation for its wide use by the company’s practitioners. The corollary of the utilization of this tool translates on a potential cost reduction of about 2M euro per year, on the quality of information made available to decision makers and on their engagement in looking to operations from a different perspective having a more operations research reasoning.