improving supply chain performance in the beer industry...the three main ingredients for beer: malt,...

Disclaimer: The case does not reflect the financial position of any company. The Company stated here is purely fictional and

created for educational purpose only.

Improving Supply Chain Performance in the Beer Industry

Arun Khanna sat in the room with his mobile ringing incessantly. Being the Operations head of Robin

Breweries, Pondicherry came with its own challenges. Malt, one of the raw material required for the

production of beer, was on the verge of stock-out and there was nothing he could do about it. If the malt

did not reach on time, production would be stalled. This was a problem he was facing for quite a while

now and it was high time he came up with a solution. December, being the peak tourist season in

Pondicherry, was proving to be profitable for Robin Breweries as the sale of Robin beer witnessed a

boom.

Background of the company

Robin Breweries Group, founded by Mr. Thomas Lloyd in 1915 was a conglomerate of a number of British

brewing houses in Southern India. In 1947, Mr. Rangaswamy took over as the first Indian Director.

However, the most visible and by far, the most profitable brand, Robin Beer made its entry in the

eighties; after the company had expanded greatly following addition of other breweries. The group also

forayed into the agro and pharmaceutical business with Krishi and Plasma under its umbrella.

About Robin Beer

Robin Beer, officially launched in the year 1987, is the most trusted brand in India. With a market share

of around 48% in India and 65% in Pondicherry, it is the leading brand in beer industry. It is available in

various variants in India : Robin Mild, Robin Strong etc. Out of these, 85% of the revenue is earned only

from Robin Strong in Pondicherry.

Robin Breweries has a total revenue of Rs. 6000 crore per year, out of which Rs.350 Crore are contributed

from Pondicherry only. The demand of beer market in Pondicherry fluctuates according to the season.

Since Pondicherry is hugely dependent on tourism, the demand of beer witnesses a surge in the months

of November to May. Robin Strong, being hugely popular in Pondicherry, is difficult to predict in terms

of sales volume.



The demand for various variants depend on the season as well: 78% of the demand is of mild beer in the

months of June to October, whereas the demand of strong beer increases to 30-35% from November to

May.

Beer making process

Ingredients

The three main ingredients for Beer: Malt, Hops and Barley are sourced from the northern parts of India

(Punjab, Haryana), Argentina and Australia for the production of Beer in Pondicherry. Malt, one of the

most crucial ingredient, is bought from Uttarakhand to the plant in Pondicherry. The lead time for

delivery of malt is 7 days. Malt is stored in a silo of capacity 80 metric tons.

Carbon Dioxide is added to beer to improve its shelf life. The production plant aims to be self-sufficient

as far as the requirement of carbon dioxide is concerned. However, due to leakages and increased

consumption, the demand of Carbon dioxide is not fulfilled, which forces Mr. Khanna to source in Carbon

Dioxide from an agricultural plant in Pondicherry. In order to produce 1000L of beer, 45 kg of Solidified

Carbon Dioxide is required. On an average, 80% of the demands are met within the plant, but it varies

hugely according to the production of beer in the plant.

Process

First, the Malt is crushed using broken rice and starch is produced. Enzymes are added to this solution

and it is allowed to rest for 7 days. After this, the clear liquid called “Wort” is removed. The solution is

then passed through lauter tun machine where the husk acts as filter bed for obtaining clear wort

through filtration process. The further process takes place in VOP machine. The sugar extract on the Bed

is removed using sparging and the remaining liquid is sold as cattle feed. The wort is then sent for boiling

where color and hops are added. This process takes about 60 mins. The solution is then sent to a

whirlpool where the protein settles at the bottom. This entire process takes about 8 hours. The quality

check is frequently done by using gravity quality. Per day 165hl is produced in every brewing cycle. In

total 8 brews are given per day wherein 2700 kg of malt is used per brew. The whole process after

fermentation to bottling takes 6 days.



The Pondicherry plant of Robin Breweries Group produces 4.5 Lakh of beer cases per month, at 70%

efficiency. Mr. Khanna wants to improve this efficiency to 78%. However, with the increased efficiency,

comes the challenges like synchronization between brewing and beer production, storage and

distribution of finished goods.

Beer is packaged in glass bottles (650ml and 330ml capacity) as well as beer cans. Out of all the beer that

is sold in Pondicherry, 85% of the empty beer bottles come back to Pondicherry production plant in

PIPDIC. Out of these, 10-15% of the bottle break due to handling and sterilization. The rest of the bottles

required are new, costing Rs. 12 per bottle.

Distribution

There are five distributors of Robin beer in Pondicherry, determined through reverse auctioning. With

the massive sales of Robin, there is no dearth of retailers across the state. Robin can be found in every

locality of Pondicherry. For selling the brand, the company provides incentives like neon signs, hoardings,

storage cabinets, schemes like 5+1 free.

The Dilemma

Mr. Khanna had to meet the COO in a week’s time. In order to find a solution to the existing problems in

the plant, he decided to invite Mr. Tharoor from BSS consultancy, one of the leading Supply Chain and

Operations Consulting firms in India.

In the meeting with Mr. Tharoor, Mr. Khanna briefed him about the problem of stock out of Malt in the

recent period. The plant was also not able to achieve the desired fill rate, which was affecting their

relation with the distributors, thereby resulting in reduced sales.

After the meeting, Mr. Tharoor decided to take a field visit to get an overview of the entire process. He

also went through the previous records of the plant wherein he went through the supply and demand

data of the various SKUs of the current financial year (Exhibit 2). The operations department also

provided him the details of the opening and closing stock of the various SKUs of Robin beer (Exhibit 3).



Upon going through all the data, Mr. Tharoor met Mr. Khanna the next day. In the meeting, Mr. Tharoor

asked him to check if there was a mismatch between the lead time of malt and the number of days in

which malt was consumed, and whether it was having an overall effect on the plant efficiency. He also

suggested that the plant can look into improving its safety stock and the sales forecast for the next three

months.

Now Mr. Khanna was contemplating how to incorporate these suggestions to improve the plant process.

From Mr. Khanna’s perspective, suggest the improvements that can be made to improve the business

processes of the organization.

Exhibit 1: Cost breakup of one bottle of beer

Cost component Percentage of MRP

Profit Margin 12-15

Cost of Production + Duties 85-87



Exhibit 2: Demand And Supply Of Different SKUs

18-Apr 18-May 18-Jun 18-Jul 18-Aug

SKUs of Robin Beer

Demand Supply Demand Supply Demand Supply Demand Supply Demand Supply

RL - 650 131045 87577 103688 100822 88771 70762 55176 52874 58304 45194

RM- 330 123117 112075 116107 105519 98585 90927 59550 59520 89153 64457

RS - 650 36377 26162 25413 25359 28671 32830 20490 21449 23260 18977

RSS - 330 960 3538 6897 6021 6961 6613 5163 4173 4653 4419

RL - 500ML - Cans

25275 19899 18622 22289 24693 24313 23760 16972 19430 12891

RS - 500ML Cans

30763 22816 26104 21226 24242 25568 23687 21315 22864 16915

Total 347537 272068 296831 281236 271923 251013 187826 176302 217663 162853

18-Sep 18-Oct 18-Nov 18-Dec

SKUs of Robin Beer

Demand Supply Demand Supply Demand Supply Demand Supply

RL - 650 80915 73258 79759 75708 126606 132224 187339 181697

RM - 330 88492 90423 114019 111843 161844 169402 230262 225517

RS - 650 23296 19492 35777 40659 51418 50638 64944 56966

RSP - 330 3875 3462 7056 8050 11824 10689 10449 11461

RL - 500ML - Cans

20718 14188 26828 25570 32553 25127 38801 38455

RS - 500ML Cans

5602 19142 28708 20641 40253 40795 47978 48000

TOTAL 222898 219965 292147 282471 424498 428875 579773 562096

Note: For the calculation of lead time, consider both fermentation and post fermentation time period.



Exhibit 3: Opening and closing stock for different SKUs

PER UNIT COST OPENING STOCK AS ON 01.4.2018 CLOSING STOCK AS ON 31.12.2018

RL - 650 80 14898 4729

RM- 330 25 11752 10424

RS - 650 95 50 5898

RSS - 330 50 3764 1770

RL - 500ML - Cans

60 1646 3931

RS - 500ML Cans

56 194 3209



Note: All the data attached herewith is fictional and does not exactly match Industry Standards.

improving supply chain performance in the beer industry...the three main ingredients for beer: malt,...

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