In 1932 James Galloway founded Natural Home Brewers outside Dundee on the eastern coast of Scotland. At the time, all the local pubs were owned by three national brewers, but a small number of independent clubs sold speciality beer, mainly imported from Scandinavia and Germany. James founded Natural Home Brewers to sell his locally brewed beer to these clubs.

The local government encouraged new industries in the area and gave him a grant. He used this, together with a personal loan from the bank, to start his company. He did most of the work himself, with help from his brother and wife.

There was a clear demand for their beers, but James was more interested in traditional brewing for the local market than making large profits. By 1945 the company was brewing 1500 gallons a week and employed six people. Then there was a sudden surge in demand as new clubs opened in the area, and a number of pubs began selling Natural Home Brew as a special attraction. By 1955 Natural Home Brewers company was employing 120 people. At this point a national brewery made a generous offer and bought the company.

The new owners were keen to maintain the image of Natural Home Brewers and kept the name and brands. They started selling the products in their own pubs, as well as maintaining the original markets. By 1990 Natural Home Brewers employed 1500 people. During various expansions the brewing had been largely automated and although customers thought they were buying from a local brewery, they were actually buying a fairly standard product.

The brewery is now having trouble with its planning. Several of its most experienced production planners retired in the same year, and the current planning often seems haphazard. In particular, there are times when the brewery has trouble meeting demand. Management feels that it is the time to change their planning procedures, and find some way of guaranteeing reasonable schedules. Getting descriptions of the current procedures is the first step in computerizing the whole planning process.

A sample of data was collected over eight months, and agreement was reached about a range of variables. Forecast demand for this period was found, in barrels, as follows:

Month Demand

January 9,000

February 8,000

March 6,000

April 4,000

May 6,000

June 8,000

July 10,000

August 10,000

Costs and manpower requirement were agreed. Although these are not necessarily exact figures they can be used for comparing plans. These include:

• Production cost of 200 a barrel
• Storage cost of 1.5 per cent of production cost a month
• Shortage cost of 10 a barrel a month
• Five-man hours to produce a barrel
• Direct labor force of 225
• Standard wage rate of 8 an hour
• Overtime wage rate of 1.5 times standard rate
• A standard working week of five days
• Hiring and training cost of 400 a person
• Lay-off cost of 500 a person
• Subcontractors can be used at an additional cost of 5 a barrel
• Opening stock is 2000 barrels
• A reserve stock is kept of 25 per cent of forecast monthly demand
• All shortages are back-ordered
• The main products are lager, bitter and mild which generally accounts for 50 per cent, 40 per cent and 10 per cent sales respectively.

Q.2. Then the management wants a master schedule for the period. For the longer term it wants a more formal procedure for designing reliable aggregate plans and master schedule.

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