3-1 Project: Organizational Sales

QSO 320 Final Project Business Scenario

Milestone One Prompt:

The Vinho Winery in Lodi, California produces about one million cases of wine a year. It sells its wine

wholesale to four independent wine distributors: Riverside, CA; Oakland, CA; Portland, OR; and Seattle,

WA. They produce three varieties of wine: Ruby Red, Murky White, and Whole-Earth Organic. The

grapes used to produce the three varieties differ, and their production volumes (augmented by grapes

bought from other growers) must be planned at least a year in advance of being pressed into wine. The

wine must be aged a year before being sold.

Vinho Winery advertises their wines in the areas surrounding their four independent wine distributors,

and the cost of this marketing is included in the wine production costs. Vinho contracts with a private

trucking company to move full truckloads of wine. A full truck will consist of 24 pallets of wine, totaling

2,688 cases (16,128 bottles). The minimum shipment they will sell is a pallet of wine (112 cases), and

they contract out delivery of the pallets unless the cost will exceed the cost of using one of their private

trucking company’s trucks. Vinho has brokers arrange cargo to be carried on the return trip (backhaul)

to avoid having their trucks return empty and needing to pay for the round trip. Since little Lodi is not a

major transportation destination, only part of the return trip can be used. (For example, the return from

Seattle can be used to move cargo from Seattle to Eureka, but not all the way to Lodi). Vinho Winery

was recently bought by a private equity firm, and they want an assessment of current operations. Once

completed, they want plans to optimize operations. You are the management consultant who will

conduct the assessment and develop the plans. You will be required to create and program

spreadsheets for your analysis and conclude with summary statements.

Milestone Three Prompt:

For the Lodi Winery, you have been asked by management to examine the data collected and analyzed

in the previous modules. The objective is for you to help management decide on the right mix of wine

bottles to sell based on newly derived profit information while considering the limitations of the

particular types of grapes available for production.

While doing more research on wine production, you realize that it takes 3.5 pounds of grapes to make a

bottle of wine. In addition, you already were provided the price per bottle that the distributors are

paying for each variety of wine:

Price for Red Wine ($) Price for White Wine ($) Price for Organic Wine ($)

7.50 8.00 12.00

After discussing wine production with the operations manager, you also learn that the wineries that

supply the grapes to produce the above types of wine can produce up to a total of 200,000 pounds of

grapes for a six-month supply of wine bottles for the three markets, with the following expected

distribution constraints based on types of grapes. Note that current market demand will not support

more than the below constraints for each type:

Red wine ceiling 22,000 bottles

White wine ceiling 24,000 bottles

Organic wine ceiling 12,000 bottles

Note that the production cost per bottle remains the same as before, that is, 32% of sales or revenue for

red wine, 42.5% of sales for white wine, and 52.5% for organic wine. With additional information you

have gathered, you are now ready to determine the optimum production mix to maximize profit.

References

Balakrishnan, N., Render, B., & Stair, R. (2013). Managerial decision modeling with spreadsheets (3rd ed.). Upper Saddle River, NJ: Pearson Education, Inc.

Lawrence, J., & Pasternack, B. (2002). Applied management science: Modeling, spreadsheet analysis, and communication for decision making (2nd ed.). Hoboken, NJ: John Wiley & Sons, Inc.