Mapping the use of Operations Research in the Wine Industry Martin Kunc 9th Annual Conference of the...
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Mapping the use of Operations Research in the Wine Industry Martin Kunc ual Conference of the American Association of Wine Economists AAWE in Mendoza (May 26-30,
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Transcript of Mapping the use of Operations Research in the Wine Industry Martin Kunc 9th Annual Conference of the...
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?• When operational 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
Supporting Strategy using OR: Multiple Activities/Multiple tools
Supporting Strategic Development
Process
Frameworks, Methods and Models
Direction CreationRehearsal /Evaluation
Choice Implementation
Visioning BalancedScorecard
StrategicModelling
QMProject mgmtScenarioPlanning
SWOT
Supporting Strategy using OR: Multiple Activities/Multiple tools
Mapping the applications of OR in the wine industry
Research performed by Florian Buguet-Francois, MSc BAC
SSM: Soft System Methodology – DSS; Decision Support System – MCDA/MCDM: MultiCriteria Decision Analysis/Making – VCA: Value Chain AnalysisTOWS: Threats/Opportunities/Weaknesses/Strengths Matrix
Mapping the applications of OR in the wine industry
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
Kunc, M. Hwang, J. 2015. Business Dynamics of On-Premise Wine Trade: Cases from South Korea, International Journal of Wine Business Research (forthcoming)
Service Quality
Staff Motivation
CustomerSatisfaction
Staff Training Staff Knowledge
Staff HelpfulnessPremise
Atmosphere
Word ofMouth
Number ofCustomers
Wine List DiversityProgressive
Pricing
Central Location
Premise Size
Sales
Turnover
Profit
Costs
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Issues Implications Wine sales processes in on-premise
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
Service Management Servicescape External and internal
settings arrangement (e.g. interior design, ambience, architecture, car park)
Servicescape should be consistent with the pricing and market positioning of the on-premise
Front line employees
Staff knowledge (e.g. sommeliers in fine dining)
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.
Word of mouth
Customer satisfaction (e.g. consumption experience)
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.
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.
