Posts tagged “BOOST SALES”

Building an Algorithm from Overproduction

 

BigOnIT

Making too much of something – overproduction – is generally viewed negatively: it requires additional raw materials, energy, unnecessary work/effort, and waste handling; Runner moneyas none of these add value to the product, overproduction is often regarded as wasteful or quite literally waste if the excess is simply discarded.

Outside of highly automated processes and production lines, there will be waste. Companies often “err” on the side of safety for a production run and produce too much rather than too little which would result in an even more costly additional production run.

But why would anyone want to over produce, in a world were economies scales have for so many years allowed high volume low cost production per unit, one could say that any overproduction and its continuation is no more than a waste of economic resourc.e

Production houses more and more have to balance customer choice as part of the volume needed to create value, Customers are demanding products that are offering so much choice that they are becoming unique, – the world of customer choice has moved to customer customisation and the more customisation the customer demands they more the interact in the creation of the products they need.

Perhaps one other change that’s affecting the one fits all of high volume production low cost products is manufacturing has the ability to establish far more routes to market that was ever possible and create brands and products that can be sold at various parts of the product life cycle with services and delivery times built into every part of production innovation cycle.

With the development of new routes to market and the increase choice that customers are demanding the opportunities to develop processes that allow overproduction as part of extended range of unique product that allows higher value is creating smaller product life cycles that create higher over value.

With the development of newer routes to market and the demand for newer be spoke products the ability to overproduce can be targeted at the growing number of customers that are looking for more customised products: given sufficient quantities, you can think of this excess as “bespoke”, “limited edition”, or “Artisan” product.

Creating the artisan product

Let us look at coffee roasting. Coffee blends are roasted in batches (say 120kg), taken from one or more silos of raw commodity beans.

Given that many batches (up to 20 tonnes) can be roasted each day, how many potential artisan bags of coffee could be produced due to the excess of coffee roasted each day?

We can express the total weight roasted as the sum of the batch weight that is sold as a unit and the overproduction (the excess). Alternatively the overproduction can be expressed as

1

If the weight of a bag of artisan coffee is Weightbag kg (i.e. kg/bag), then the number of bags produced each day due to “overproduction” can be expressed as

2

3

(assuming that Weightroasted does not change).

Given that each Weightroasted is a blend of N silos of raw (commodity) coffee then each Weightroasted can be expressed as the sum of the amounts of coffee (in kg) taken from N silos as

4

where Weightsiloi is the amount of commodity coffee (in kg) taken from the ith silo.

Assuming that the mixing is uniform throughout the roasting process then the amount of commodity coffee (in kg) taken from the ith silo within a unit batch sold Weightbatch can be simply expressed as

10

Therefore the overproduction or excess in each batch can be expressed as

6

7

or the number of artisan bags that you can make from overproduction in a day can be expressed as

8

We assumed a constant Weightroasted throughout the day. If this is not the case then Numberbags/day per day can be expressed as

9

for a constant blend mix, constant Weightbatch, and a weight of an artisan bag of coffee Weightbag

Maximising your excess

Therefore if only weight is considered, for a weight of coffee roasted in each batch Weightroasted, (Weightbatch is fixed) you can increase the Numberbags by

1. Decreasing the weight of an artisan bag of coffee – Weightbag
2. Increasing the number of runs within a day with excess – Numberruns/day

In conclusion

The weight of raw coffee in each Silo is bought as a commodity at a known price. Optimising (minimising) the cost of a blend across the silos along with the production costs will make the Artisan coffee more profitable.

 

Extending our approach.

Our approach does not include factors such as production loss. These will consider within a future blog post.