Synopsis
- Client faced complex challenges in the production planning and blending of age distilled spirits.
- Needed to balance a long-term and short-term view of demand forecasts, making continuous decisions on the liquidation of aged distillate and production of new distillate.
- Developed an optimization-based decision support system utilizing linear programming (using ILOG’s CPLEX optimization toolset).
- Optimized the production planning and blending of the spirits.
- The decision support system has become an integral part of the client's long-term planning process.
Article
A large-scale producer of aged distilled spirits, such as bourbon, faced complex challenges in the production planning and blending of the spirits. They needed to balance a long-term and short-term view of demand forecasts, making continuous decisions on the liquidation of aged distillate and production of new distillate. Key considerations included:
- Determining the quantities and production schedules for each spirit to meet future demands, considering production capacity and current inventory.
- Liquidation (dumped from barrels) decisions: choosing the right inventory (and ages) of spirits to blend and meet near-term demands.
- Interplay between production and liquidation decisions, balancing current inventory usage with future production to meet intermediate-term demands.
BP3 developed an optimization-based decision support system to address these intricate challenges. The optimization model utilizes linear programming and was developed using ILOG’s CPLEX optimization toolset.
The decision support system has become an integral part of the client's long-term planning process. It effectively aligns production and liquidation strategies with demand forecasts, ensuring efficient use of resources and meeting market demands timely.