MOD006887 International Operations Management

MOD006887 International Operations Management. Case materials for Assignment 011, Tri 1 2019-20 1 of 10
Case materials:
Pálinka International Unlimited
Assignment deadline: TBA

Assignment: 011 Group coursework: operations consultancy
simulation and report
MOD006887 International Operations Management
Module:

Module leader: Tom Farnsworth
Semester/Trimester: Tri 1
Academic year: 2019-20
MOD006887 International Operations Management. Case materials for Assignment 011, Tri 1 2019-20 2 of 10
(0) Background
Pálinka is a traditional alcoholic beverage produced in Eastern Europe, principally Hungary
and Romania. It is distilled from fermented soft fruits – there is a common saying in Hungary
that, if you can make jam or conserve from it, you can make pálinka with it.
Pálinka International Unlimited (PIU) is a small distillery based in Kent, UK. It was established
eighteen months ago by two entrepreneurs, Erzsébet Nagy and Dacian Iridescu. They had
identified an opportunity to distil and supply pálinka to the sizeable diaspora populations of
Hungarians and Romanians in the UK, on three grounds:
§ The likely Brexit restrictions to be placed on freedom of movement between the
European Union and the UK would make it more difficult for visiting family members to
bring home-distilled pálinka to relatives living in the UK;
§ The likely increase in tariffs accompanying the UK’s exit from the European Union free
trade area would make formal importation of pálinka much less commercially
attractive;
§ Owing to the undeveloped market for fruit spirits in the UK, much of the soft fruit grown
in Kent below market grade or conserve grade, is simply turned into animal feed or
compost rather than being fermented and distilled.
After eighteen months of trading, the optimism of PIU’s founders about the commercial viability
of a UK-based pálinka distillery has largely been justified. The fruit growers’ co-operatives in
Kent are only too delighted to sell their utility-grade stone fruits to PIU, because they get a
better price from PIU than they would from animal feed manufacturers. The quality of the PIU
product and the efficiency of its distribution channels have won many retail and wholesale
customers.
In fact, sales have increased considerably to the point at which the capacity of the operation
must be increased; specifically:
§ a second pot still was installed and brought on line three weeks ago;
§ a climate-controlled warehouse extension has been built to improve inbound logistics;
§ new marketing channels have been established;
§ new staff members have joined the production team;
§ a new distribution centre is needed to cope with the volume of sales.
Unfortunately, all of these novel developments are causing problems. The day-to-day running
of the PIU operation is handled by Erzsébet, and she has her hands full training the new staff
and supervising production and outbound logistics. Dacian is the salesman and needs to be
on the road visiting account customers and signing new business. They agree that a little extra
investment in operations management consultancy is justified, and they call in your team to
help.

MOD006887 International Operations Management. Case materials for Assignment 011, Tri 1 2019-20 3 of 10
(1) The strange case of Still no.2
From: Nagy, Erzsébet <e.nagy@piupalinka.co.uk>
Subject: URGENT: fusel alcohols from Still #2
Date: 23 September 2019 at 14:20
To: PIU Quality Team <qcteam@piupalinka.co.uk>
Hi all
I am very concerned by some of the readings for fusel alcohols arising from the second
distillations using the new still. As you know, we need SOME fusel alcohols in the
középpárlat [middle cut] for flavour and mouthfeel in the finished spirit, but some of the
readings seem crazy variable by comparison with Still #1.
Still #2 has been running since the beginning of the month, including 4 September when the
gas supply was interrupted by those idiot builders up the road and we had to restart the
burners. I attach the readings for parts per million of amyl alcohol, which as you know should
be between 10ppm and 30ppm.
I know you are busy with packaging inspections, but there are now three of you, so please
could you find time to check whether we need to take further action over this possible quality
issue.
Thanks,
E.
[Should show in control except for 4
th which is special cause]
MOD006887 International Operations Management. Case materials for Assignment 011, Tri 1 2019-20 4 of 10
(2) Warehouse wisdom
From: Nagy, Erzsébet <e.nagy@piupalinka.co.uk>
Subject: Results from infrared thermometer gauge testing
Date: 23 September 2019 at 17:52
To: PIU Inbound Logistics <ilteam@piupalinka.co.uk>
Dear Adam and Jill
Tunbridge Instruments have finished their analyses of the new infrared thermometers you
have been testing. As you know, we will get a discount on these and the other instruments
for the new climate-controlled warehouse in exchange for testing prototypes 1, 21, 38 and
59.
I attach the results of the Gauge R&R and ANOVA output from their analysis. It looks pretty
good to me. I am out of the office tomorrow but the operations consultants from ARUL will be
here and they can explain the results.
Regards,
E.

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MOD006887 International Operations Management. Case materials for Assignment 011, Tri 1 2019-20 6 of 10
(3) Lean on me (when you’re not strong)
From: Nagy, Erzsébet <e.nagy@piupalinka.co.uk>
Subject: Making better use of our space!
Date: 23 September 2019 at 19:36
To: PIU Inbound Logistics <ilteam@piupalinka.co.uk>
Dear all
While I am away tomorrow the consultants from ARUL will be looking at the efficiency of our
operation in terms of how we use our space and where our equipment is set up, so don’t be
alarmed by strangers with clipboards wandering about.
It occurred to me that, now we have the new still and the climate controlled warehouse
room, we could probably make things more efficient in terms of the way our equipment is
arranged. We can’t move the stills, the chillers, or the mains water supply, but we can move
anything else if we need to.
Inbound logistics
Inspection (pre storage)
Humidification
Weighing
Production
Inspection (post storage)
Grading
Washing
Stoning
Weighing
Fermentation
First distillation (Still #1)
Second distillation (Still #2)
Cooling (heat exchanger)
Bottling
Labelling
Packaging
Outbound logistics
Picking and packing
Palleting (large loads)
Please see below for a floorplan of the unit. I have only included the transforming resources
which cannot be physically moved (i.e. the climate-controlled warehouse, the pot stills, and
the mains water supply).

MOD006887 International Operations Management. Case materials for Assignment 011, Tri 1 2019-20 7 of 10
MOD006887 International Operations Management. Case materials for Assignment 011, Tri 1 2019-20 8 of 10
(4) How to get ahead in advertising
From: Iridescu, Dacian <d.iridescu@piupalinka.co.uk>
Subject: Cost v benefits – marketing B2B and B2C
Date: 25 September 2019 at 10:40
To:
Nagy, Erzsébet <e.nagy@piupalinka.co.uk>
Hi Erzsi
I’m just looking at the sales figures for the last seven quarters in comparison with our
marketing spend, and also at the number of visits I’ve made to each wholesaler in
comparison with their average monthly orders. I want to know how effective our marketing
activities have been: overall, and in terms of whether we should focus on B2C or B2B
markets. Eight wholesalers is a lot to manage, you know? Especially given the lower
margins.
Can you ask those eggheads from ARUL to run some kind of analysis?
Dacian

Sales
meetings
held with
each
wholesaler
12 9 7 6 4 3 2 2
A/c spend
per month
(£)
5,770 6,120 5,730 5,460 6,470 5,530 5,220 5,410

 

Social media
advertising spend (£)
B2C sales (£ 000)
2,200 230
1,800 193
3,300 400
1,500 160
2,900 220
1,800 670
4,300 845

MOD006887 International Operations Management. Case materials for Assignment 011, Tri 1 2019-20 9 of 10
(5) Defying gravity?
From: Nagy, Erzsébet <e.nagy@piupalinka.co.uk>
Subject: New distribution centre, PIU Ltd
Date: 30 September 2019 at 09:12
To:
Lywood, Henry <henry.lywood@bexleysurveyors.co.uk>
Dear Henry
Further to our recent initial discussion about possible sites for our new distribution centre,
please find below some additional information about our existing sites. As you know, space
for outbound logistics is at a premium in our production facility now that we have added the
second pot still and the climate-controlled warehouse.
Our three most significant wholesalers are all located around the M25, in Rickmansworth,
Cheshunt and Orpington:

MOD006887 International Operations Management. Case materials for Assignment 011, Tri 1 2019-20 10 of 10
The grid location and pallets processed per month for the three existing locations are given
in the table below:

Facility Cx Cy Pallets/month
Rickmansworth 1.5 83.0 45
Cheshunt 63.5 95.0 32
Orpington 80.5 22.0 19

What we need to know as a matter of urgency, is the ideal location for a fourth distributor.
Thanks very much for your initial research and the identification of potential sites in Watford,
South Croydon and Mitcham.
We have some MBA students from ARU London working with us at the moment doing some
operations consultancy; I will ask them if they can work out which of these three potential
sites would be optimal considering the volume of business we are doing at the existing
three.
Kind regards
Erzsébet