A Linear Programming Approach to the Efficient Allocation of Resources in the Brewing of Tusker Lager

Abstract

Tusker lager is produced by Kenya Breweries Ltd a wholly owned subsidiary of East African Breweries Ltd. The company produces six different brands of beer, namely; Tusker, City, Tusker Export, White Cap, Pilsner and Guiness. Tusker lager the item of interest in this thesis accounts for about 80% of the total production of the six braThts. Rising costs as a result of inflation have threatened the company's profit performance for the last three years and in the financial year ended June 30th 1975, the company 's profits fell by over one million pounds or 26% compared to the performance in the previous year. As far back as late 1974 the company has on several occasions used a trial and error method to vary the quanti ties of the ingredients that go into the manufacture of Tusker in order to find a mix that will ninimize costs on these materials. Some of these trials were successful in providing a beer of some acceptable quality but the approach was rather slow in providing the best pr cg r amme fer the company to adopt. In this thesis the author makes an attempt to determine through the use of a linear programming model, referred to as TULP in the text, that optimal combination of the ingredients that go into the manufacure of Tusker) a combination or mix that will minimiz e costs and at the same time maintain the w ell known quality and taste of the brand. Some sensitivity analysis is done inorder to assess how the suggested optimal combination would be affected by changes in the prices of the ingredients as welI as the quantities used.

The results show that, due to quality requirements and other company objectives the quantities cannot be varied very much without affecting the optimal combination ; however , it is found to be rather insensitive to changes in the prices of the ingredients. And if the profitability position of the firm has to be improved other strategies have to be incorporated into the operating plan , Some of these strategies are mentioned as recommendations in the last chapter.