Mapping Operations Research in Wine Industry
Exploring the application of Operations Research (OR) in the wine industry, covering strategic vs. supporting strategies, problem-solving techniques, and achieving competitive advantage. Insights from the 9th Annual Conference of the American Association of Wine Economists."
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Presentation Transcript
Mapping the use of Operations Research in the Wine Industry Martin Kunc 9th Annual Conference of the American Association of Wine Economists AAWE in Mendoza (May 26-30, 2015).
Agenda What is Operational/Operations Research (OR)? Strategic OR vs. OR Supporting Strategy Mapping the application of OR to the Wine Industry My personal experience Conclusions
What is OR? Operational research (OR) encompasses a wide range of problem- solving techniques and methods applied in the pursuit of improved decision-making and efficiency, such as: simulation, mathematical optimization, queuing theory and other stochastic-process models, Markov decision processes, econometric methods, data envelopment analysis, neural networks, expert systems, decision analysis, and analytic hierarchy process.
What is OR? Whenoperational researchers faced a new problem must determine which techniques are most appropriate given: the nature of the system, the goals for improvement defined by the owners of the systems, constraints on time and feasibility to find a solution, Issues related to the implementation of the solution
Strategic OR vs. OR Supporting Strategy Strategic OR (SOR) is defined as operations research that achieves a sustainable competitive advantage. Primary evidence of the existence of strategic OR is the existence of firms which are achieving a sustainable competitive advantage from their use of OR. American Airlines (Yield Management, Crew Pairing, and Arrival-Slot Allocation) Sabre National Car Rental (revenue management system) now standard in vehicle renting Sadia (PIPA Project: integrated poultry planning system) P&G (optimally positioning manufacturing operations)
Supporting Strategy using OR: Multiple Activities/Multiple tools
Supporting Strategic Development Supporting Strategy using OR: Multiple Activities/Multiple tools Process Rehearsal / Evaluation Direction Creation Choice Implementation QM Visioning SWOT Scenario Planning Balanced Scorecard Strategic Modelling Project mgmt Frameworks, Methods and Models
Mapping the applications of OR in the wine industry SSM: Soft System Methodology DSS; Decision Support System MCDA/MCDM: MultiCriteria Decision Analysis/Making VCA: Value Chain Analysis TOWS: Threats/Opportunities/Weaknesses/Strengths Matrix Research performed by Florian Buguet-Francois, MSc BAC
My personal experience System Dynamics applications in Forecasting Wine Tourism Kunc, M. 2009. Forecasting the development of wine tourism: The case of Chile, International Journal of Wine Business Research, 21: 325-338
My personal experience Business Dynamics of On-Premise Wine Trade Issues Implications Wine list management (e.g. diversity, preparation), inventory, pricing Size of wine list can impact on level of service and profits for on-premise. Success may increase wine list. Strategies: Specialisation vs. Extensiveness Pricing affects inventory turnaround Servicescape should be consistent with the pricing and market positioning of the on- premise Wine sales processes in on- premise Number of Customers + - - + + A Service Quality + Sales Service Management Servicescape External and internal + Word of Mouth Premise Size + Customer Satisfaction + + settings arrangement (e.g. interior design, ambience, architecture, car park) Staff knowledge (e.g. sommeliers in fine dining) - B + + + D + Staff Motivation C Central Location Front line employees Staff knowledge needs to be developed as the business attracts more clients but it should not be at the expense of making the service more complex. Customers respond positively to a coherent market positioning: alignment between wine sales processes, servicescape and front line employees. Word of mouth can be powerful engine to make business more complex as managers try to satisfy everybody. Turnover + Premise Atmosphere Staff Helpfulness + Customer satisfaction (e.g. consumption experience) Word of mouth Wine List Diversity Progressive Pricing Staff Training Staff Knowledge + + - + Profit + + - Costs + Kunc, M. Hwang, J. 2015. Business Dynamics of On-Premise Wine Trade: Cases from South Korea, International Journal of Wine Business Research (forthcoming)
Conclusions The increasing availability of data will facilitate an increase in the application of Strategic OR in diverse areas: production areas, for example, an increase in the adoption of linear programming models to support harvest scheduling, labour allocation, and routing decisions. market research, for example, data mining and statistical analysis to predict human wine taste preferences and quality assessment vine management, for example, managing the amount of fertilisers The use of OR to support strategy in the wine industry remains challenging given the strong use of intuition and belief in uniqueness existing in the industry.
Gracias Gracias Questions? Email: mhkunc@gmail.com
