Amigo Brewing $-$ Operations

Pablo was debating what to do$.$ He had been working at his family$$s small brewery for a number

of years and was being groomed to take it over. The brewery produced eight types of beers

including lagers, ales and specialty beers such as honey brewed beers, light beers, etc. Four of

these brands had just recently been launched. Their most popular variety of beer was the Amigo

which made up about $75\%$ of all sales. Customers included local restaurants, bars and a number

of local liquor stores. Restaurants and bars would typically order by the pallet, which consisted

of $24$ cases of beer. Amigo Brewing was selling about $$3$ million in beer per year with revenue

of about $$20$ per case.

Currently orders would come in and a team of $2$ workers would manually load pallets as per the

customer$$s specific requests. Cases would be organized in different sections for the workers to

load. The two employees were paid $$10/$ hour and paid for $40$ hour weeks. Holidays would be

staggered during slow periods so there was always someone able to handle deliveries, but staff

from a different department could help out when necessary as well. The two loaders were given

the days orders and arranged the pallets in a suitable order for the delivery trucks to process.

Before Pablo lay a proposal to automate part of the shipping dock. A competitor of theirs was

selling an automated loader they were replacing, which could be used on one line to load all of

one variety. It couldn$$t be used to select different beer varieties and would make most sense set

up to load the Amigo Brand of beer on the pallets. With this device in place, Pablo feels he could

find some cost savings through laying off one of the loaders, and the loader would also operate a

lot faster than a manual operation. The asking price for the automated loader was $$75,000$ fully

installed.

The company had been around for a number of years and wasn$$t growing particularly quickly.

Some of the new brands that had been developed were done so in order to boost sales and gain

market share in the specialty markets. The Amigo brand was expected to remain consistent, but

the company was hoping to see increased sales from the other brands as their popularity spread.

Pablo was left to analyze and make this decision on his own. Whatever he decided the company

would do$,$ but Pablo wanted to make sure whatever he did was in the best interest of the

company.

BUSM $1115$

$1)$ What are some of the major considerations to think about when deciding to automate the

process?

$2)$ How much money would be saved each year with the automated line?

$3)$ What benefits $/$ drawbacks would the automated line have? What is the current daily plant

capacity and how much will this machine help?

$4)$ What would you do in Pablo$$s case and why?