Optimizing Production Planning and Trade at Jan de Wit Company
The Problem
Jan de Wit Company is a major grower and seller of ornamental lily plants and flowers in Brazil, with bulbs originating in Holland. Producing about 420,000 pots and 220,000 bunches of lilies each year, Jan de Wit had trouble planning production manually. So many parameters were involved that the company had to split the planning to control the productive process. Analytics expertise in linear programming and optimization was required to help the company leverage the uncertainties associated with planning future crops and other functions.
The Analytics Solution
Jan de Wit implemented a decision support system based on linear programming as a production-planning and trade tool, capable of calculating the number of flower beds in a specific greenhouse, from a specific bulb batch, of a specific variety, for a specific purpose, taking into consideration planting and expected harvesting weeks. The decision support system maximizes the farm's total contribution margin, subject to such constraints as market-defined sales limits, market requirements, characteristics of the production cycle duration, technical requirements, bulb inventory, and greenhouse limitations.
The Value
Between 1999 and 2000, company revenue grew 26%, sales increased 14.8% for pots and 29.3% for bunches, costs fell from 87.9% to 84.7% of sales, income from operations increased 60%, return on owner's equity went from 15.1 to 22.5%, and best quality cut lilies jumped from 11% to 61% of the quantities sold. The system also suggested changes in the product mix.
General Manager and Owner Johannes Petrus W. de Wit said, "It is the soul of my business, the basis for cost and investment budgeting. Based on the quantities to be produced, I can extrapolate the supplies needed. Based on bottlenecks identified by the sensitivity analysis, I can direct investments. The system also forecasts the revenue in flux, to which I endeavor to match my payments. The budget became trustworthy. I can now dedicate more of myself to the management of my business."
