Proposal
Proposal
INDUSTRIAL ENGINEERING
Title: Optimizing the production in a production line of East African bottling share
company (EABSC) by using Operations Research technique: the case of Bahir-Dar
EABSC plant
Submitted by:
Name ID
Mistireselassie Taddese
10111282
Getachew Taddese
1011614
Sintayehu Ayana
1011134
Advisor
Alebachew M.
DATE:09/13/2022
This project will be submitted to Bahir-Dar institute of technology for the partial fulfillment
of our B.Sc. degree certificate requirements of the university in Industrial Engineering.
Approved by:
________ __________
School Director Signature Date
I
ABREVATIONS
II
TABLE OF CONTENT
DECLARATION ............................................................................................................... I
ABREVATIONS .............................................................................................................. II
1. INTRODUCTION ...................................................................................................... 1
3. METHODOLOGY ................................................................................................... 10
III
3.6.2. Data analysis technique............................................................................... 12
CHAPTER FOUR........................................................................................................... 13
4. WORKPLAN ............................................................................................................ 13
REFERENCES................................................................................................................ 15
IV
CHAPTER ONE
1. INTRODUCTION
1.1. Company history
In July 1886, pharmacist John Stith Pemberton from Columbus, Georgia invented the
original Coca-Cola drink, which was advertised as helpful in the relief of headache, to be
placed primarily on sale in drugstores as a medicinal beverage, Pemberton continued
mixing experiments and reached his goal during the month of May, the new product as yet
unnamed nor a carbonated drink, was ready for the market and was made available for sale.
Pemberton's bookkeeper, Frank M. Robinson, is credited with naming the product and
creating its logo. Robinson chose the name Coca-Cola because of its two main ingredients
(coca leaves and kola nuts) and because it sounded like an alliteration. John Pemberton had
taken a break and left Robinson to make and promote, as well as sell Coca-Cola on his
own. He promoted the drink with the limited budget that he had, and succeeded (Wikipidia,
2022).
In 1889, American businessman Asa Griggs Candler completed his purchase of the Coca-
Cola formula and brand from Pemberton's heirs. In 1892, the Coca-Cola Company was
formally founded in Atlanta by Candler. By 1895, Coca-Cola was being sold in every state
in the union. In 1919, the company was sold to Ernest Woodruff's Trust Company of
Georgia (Wikipidia, 2022).
In fact, the demand for Coca-Cola users increases gradually from time to time. In order to
supply for this extensive use of its product, the company headquarter have expanded its
production over 950 factories to feed over 206 countries. It has been in Africa since 1929,
operates in nearly all of Africa's countries and is one of the continent's largest employers
with almost 70,000 employees in 160 plants. It is a giant and Africans buy more than 35
billion bottles of Coke a year (Wikipidia, 2022).
Ethiopia was also a targeted country as EABSC in order to supply sufficiently and reduce
transportation costs. Coca-Cola was first bottled in Ethiopia's capital Addis Ababa in 1959
by the Ethiopian Bottling Share Company, which later opened a second branch in Dire
Dawa in 1965. The two plants were nationalized in 1975 and ran as public
1
companies until 1996, when they were bought by private investors. Just prior to that, in
1995, the Coca-Cola South African Beverage Company (Coca-Cola SABCO) bought
shares in the business and in 1999 signed a joint venture agreement with the plants. In
2001, Coca-Cola SABCO increased its shares to 61 percent and the company changed its
name to the East African Bottling Share Company. EABSC continues to run the two plants
in Addis Ababa and Dire Dawa. And it has expanded its production in the country, Amhara
region, Bahir Dar (Africa outlook, 2022).
EABSC, The Coca-Cola producer, received 300000m2 of land from the Bahir Dar city
administration to build its third coca cola factory in Ethiopia at an outlay of 800 million
Birr. The new site in Bahir Dar was surveyed by the company’s team from South African
terms of accessibility of water, drainage and roads (Melkeam Aschalew, 2022).
Currently the company, which employs over 2,300 people in Addis Ababa, Dire Dawa and
Bahir Dar, produces over 900 million bottles of soft drinks a year. It imports the raw
materials from Middle East countries, such as Israel and Turkey.
East African Bottling Share Company [EABSC] is an African beverage company which is
enrolled by Africans and connected with the whole world as a franchise system of the Coca-
Cola company. East Africa Bottling Share Company as a Coca Cola Franchise Bottler in
2
Ethiopia under Coca-Cola Beverages Africa (CCBA) has three production plants in Addis
Ababa, Dire Dawa and Bahir Dar with an aggressive expansion plan throughout the
country, hence bringing the total number of employees to more than 1,800. Bahir-Dar
Coca-Cola company has had two lines of production with a production capacity of 840000
bottles daily per line, in which it is summed to 1680000 bottles daily.
EABSC, Bahir-Dar plant uses filler, washer, mixer, chiller, boiler, packer and unpacker
machines to operate continuously. To perform this there is a well-defined process with a
well-defined cost and raw material intake. The inputs of the EABSC plant are concentrates
of different flavors, sugar, carbo hydrated water, carbon dioxide. Plus, to that the different
beverage alternative that the company strive for market competition are Coca-Cola [Coke],
Sprite, and Fanta with orange flavor. In fact, another input for the production of the
beverages is also, Energy in the form of electricity and fuel [heat energy to ignite the fuel
for steam development; mechanical energy to pump water, beverage, syrup, sugar, and
again to transfer materials across machineries]. And also cost of manufacturing these
different listed flavors also differ by itself.
As we have considered while we were interns, in this company the problem we have
encountered is production profit variation. The energy consumption, raw material
difference, cost of making each flavor may be the case of the production profit variation.
We are required to formulate an optimum way of using an energy, cost and raw material.
We have had the required attention for efficiency and productivity than anyone else.
3
1.4.2. Specific objective
✓ To assess, and analyze data of cost, revenue, energy and raw material for three
different flavors.
✓ To develop input-output relationship of three different flavors.
✓ To formulate LP mathematical model.
✓ To solve and interpret the equation developed
✓ To develop a decision based on the software return value.
4
CHAPTER TWO
2. LITERATURE REVIEW
Linear programming has been widely applied in breweries, as most managerial problems
involve resource allocation. For example, management decision problems such as
production planning, capital budgeting, personnel allocation, advertising and promotion
planning are concerned with the achievement of a given objective (profit maximization or
cost minimization) subject to limited resources (money, material, labor, time, etc.)
(Ekwonwune, E. N., & Edebatu, D. C, 2016).
Linear programming is the best known and one of the most widely used techniques of
management science. It is a mathematical technique for determining the best allocation of
a firm’s limited resources. In his own contribution, ( Harvey M Wagner, 1969), is of the
view that Linear programming involves the description of a real-world decision situation
as a mathematical model that consists of a linear objective function and linear resource
constraints.
5
According to (John Bugler, 2004) Linear Programming is also special technique for
determining the optimum combination of scarce resources in the attainment of some
objectives of economic or other nature. (John Bugler, 2004) contends that it is a method
for solving problems in which an objective function must be maximized or minimized
when considering certain constraints. (John Bugler, 2004) further stated that Linear
programming follows the following steps to transform life problem in industries into linear
programming solution as shown below:
In their contributions, (Andersen, E. D., & Andersen, K. D, 1995), contend that the simplex
algorithm, invented by George Dantzig in 1947, is one of the earliest and best-known
optimization algorithms. The algorithm solves the linear programming problem
𝐴∗𝑥 ≤𝑏
min 𝑓 𝑇 𝑥 𝑠𝑢𝑐ℎ 𝑡ℎ𝑎𝑡 { 𝑙𝑏 ≤ 𝑥 ≤ 𝑢𝑏 }
𝑥
6
The algorithm moves along the edges of the polyhedron defined by the constraints, from
one vertex to another, while decreasing the value of the objective function, 𝑓 𝑇 𝑥, at each
step. They contend that the simplex algorithm has two phases:
✓ Compute an initial basic feasible point. Here, the algorithm finds an initial basic
feasible solution by solving an auxiliary piecewise linear programming problem.
The objective function of the auxiliary problem is the linear penalty function.
✓ Compute the optimal solution to the original problem. Here, the algorithm applies
the simplex algorithm, starting at the initial point from phase 1, to solve the original
problem. At each iteration, the algorithm tests the optimality condition and stops if
the current solution is optimal.
Company managers are often faced with decisions relating to the use of limited
resources. These resources may include men, materials and money. In other sector,
there are insufficient resources available to do as many things as management would
wish. The problem is based on how to decide on which resources would be allocated
to obtain the best result, which may relate to profit or cost or both. Linear Programming
is heavily used in Micro-Economics and Company Management such as Planning,
Production, Transportation, Technology and other issues. Although the modern
management issues are error changing, most companies would like to maximize profits
or minimize cost with limited resources. Therefore, many issues can be characterized
as Linear Programming Problems (Balogun, O. S., Jolayemi, E. T., Akingbade, T. J.,
& Muazu, H. G., 2012).
According to (Balogun, O. S., Role, M. R., Akingbade, T. J., & Akinrefon, A. A., 2013)
to derive solutions from the Linear programming [LP] formulated using the simplex
method, the objective function and the constraints must be standardized.
7
Any vector X satisfying the constraints of the Linear Programming Problems is called
Feasible Solution of the problem (Fogiel, 1996; Schulze, 1998; Chinneck, 2000).
✓ See that all right-hand side are positive, if a constraint has negative right-hand side
multiply it by -1 to make right-hand side positive.
✓ Convert all the inequalities by the addition of slack or by subtraction of surplus
variable as the case may be.
✓ Find the starting Basic Feasible Solution.
✓ Construct the Simplex
✓ Testing for optimality of Basic Feasible Solution by computing Δ𝑍𝑗 − 𝐸𝑗 If Z E j j
Δ𝑍𝑗 − 𝐸𝑗 ≥0, the solution is optimal; otherwise, we proceed to the next step.
✓ To improve on the Basic Feasible Solution, we find the basic matrix. The variable
that corresponds to the most negative of Δ𝑍𝑗 − 𝐸𝑗 is the incoming vector while the
variable that corresponds to the minimum ratio.
✓ The key element or the pivot element is determined by considering the intersection
between the arrows that corresponds to both incoming and outgoing vectors. The
key element is used to generate the next table. In the next table, pivot element is
replaced by unity, while all other elements of the pivot column are replaced by zero.
To calculate the new values for all other elements in the remaining rows of that first
column, we use the relation.
𝑁𝑒𝑤 𝑟𝑜𝑤 = 𝐹𝑜𝑟𝑚𝑒𝑟 𝑒𝑙𝑒𝑚𝑒𝑛𝑡 𝑖𝑛 𝑜𝑙𝑑 𝑟𝑜𝑤𝑠 −
(𝑖𝑛𝑡𝑒𝑟𝑠𝑒𝑐𝑡𝑖𝑜𝑛 𝑒𝑙𝑒𝑚𝑒𝑛𝑡 𝑖𝑛 𝑡ℎ𝑒 𝑜𝑙𝑑 𝑟𝑜𝑤) ∗
(𝐶𝑜𝑟𝑟𝑒𝑠𝑝𝑜𝑛𝑑𝑖𝑛𝑔 𝑒𝑙𝑒𝑚𝑒𝑛𝑡 𝑜𝑓 𝑟𝑒𝑝𝑙𝑎𝑐𝑖𝑛𝑔 𝑟𝑜𝑤).
✓ Test of this new Basic Feasible Solution for optimality as it is not optimal; repeat
the process till optimal solution is obtained. This was implemented by the software
management scientist version.
According to (Balogun, O. S., Jolayemi, E. T., Akingbade, T. J., & Muazu, H. G., 2012)
the linear programming of the company's operations was formulated and the best results
were obtained using a program of the Simplex method. The result shows that two
8
particular items must be produced even when the firm must satisfy the demands of the
other--which are not profitable--in the areas around the factories. The research aims to
determine how to allocate the limited resources and raw materials of Nigeria Bottling
Company (Coca-Cola) and the Ilorin plant in Kwara State to obtain maximum profit
contribution. It also aims to identify the products that contribute to this profit, but it is
not totally usable in the world because of country based products and raw material
relationship.
As a research gap we have encountered that the research’s, which have conducted
before are country based and applicable with other companies only. But they have
done what is very essential to perform our task with our target company Bahir-Dar
EABSC plant. So we are going to do our task for our case company, but more or less it
can be used plants of this company in our country.
9
CHAPTER THREE
3. METHODOLOGY
3.1. Introduction
Research methodology is the steps to follow for studying or investigation systematically to
solve the research problem using various research methods. This is the research process
which incorporate formulating the research topic, critically reviewing the literature,
understanding the philosophy and approach, designing the research, collecting data through
primary and secondary data collection methods, analyzing data using either quantitative or
qualitative tools, and presenting the findings. Accordingly, this part presents the procedures
that used in carrying out the research including research design, population and sampling
techniques, and data collection methods and method of data analysis.
10
3.4. Source of data and data type
✓ Primary data
It is a data originated for the first time through direct efforts and experiences for addressing
research problems and also it is known as raw data.it is tedious and time taker to collect
the data. For our project we will collect the data raw material, energy and cost of different
flavors.
✓ Secondary data
Will be collected and processed by some other agency but the investigator uses it for his
study. Before using the secondary data, scrutiny must be done to assess the suitability,
reliability, adequacy, and accuracy of the data. We will obtain from published sources such
as published documents of operation research, company manuals, Text books and more
over by referring projects which have been performed before or from any other source., for
example websites. Use of secondary data saves time and cost. We will also collect data
from documents and annual reports that help to cross check the official information to get
details concerning to our study.
The data collection method we will follow to perform our entire project is questionnaire:
questionnaire will be distributed to the top managers who are involved in inventory
management of the company namely finance and audit workers, utility managers in order
to understand the energy usage, production team leaders in order to understand the raw
material proportion of different flavors.
✓ Observation
In some extent we will follow observation, the observation will take only one days in order
to understand the energy and raw material proportion of three different flavors. Plus, to that
the observation will be extended to reviewing company manuals.
11
3.5. Variables and measurement
The variables we will encounter in our project are suspected as an input [dependent
variables and independent variables].
✓ the number of raw materials in which each flavor is developed with, which are
concentrates, sugar, water and carbon dioxide.
✓ The energy usage of different flavors of the company.
12
CHAPTER FOUR
4. WORKPLAN
Table 4.1: project schedule
6/15/2022
7/12/2022
7/12/2022
8/12/2022
7/1/2022
7/5/2022
7/7/2022
7/9/2022
7/1/2022
7/3/2022
EABSC
PRODUCTION
OPTIMIZATION 70 6/15/2022 8/24/2022
Task
Task Description Duration Start Date End Date
ID
X X X X X X X X X
1 Literature review 40 6/15/2022 7/25/2022
X X X
2 Develop questions 3 7/1/2022 7/4/2022 X
Construct
3 questionnaire 1 7/5/2022 7/6/2022
schedule X
Finalize
4 questionnaire 1 7/7/2022 7/8/2022
schedule X
Select questionary
5 2 7/9/2022 7/11/2022
participants
X
Conduct
6 13 7/12/2022 7/25/2022
questionaries
X
Construct
7 observation 1 7/1/2022 7/2/2022
schedule
X
Conduct
8 1 7/3/2022 7/4/2022
observation
X
Transcribe
9 questionaries and 30 7/12/2022 8/11/2022
observations
X
Analyze
10 12 8/44/2022
transcriptions
8/12/2022
Documentation 60 8/24/2022
11 6/15/2022
13
CHAPTER FIVE
5. BUDGET PLAN
Budget Description
Unit cost
Quantity
Subtotal
category
cost
Travel Traveling by bus to collect data. 𝐸𝑇𝐵
10
13 times
𝑡𝑟𝑎𝑣𝑒𝑙
ETB
130
Materials Pen 1 pack 𝐸𝑇𝐵
435 𝑝𝑎𝑐𝑘
needed
Paper 1 pack 𝐸𝑇𝐵
4205 ETB
220
𝑝𝑎𝑐𝑘
Voice recorder 1 3200 𝐸𝑇𝐵
Flash disk 1 350 𝐸𝑇𝐵
Copy Total of 425 copies 2𝐸𝑇𝐵
850 ETB
𝑐𝑜𝑝𝑦
copies
425
Total cost
5185
ETB
14
REFERENCES
Harvey M Wagner. (1969). Principles of operations research, with applications to
managerial decisions. In Prentice-Hall international series in management.
Englewood Cliffs, N.J., Prentice-Hall.
Africa outlook. (2022, 06 12). Retrieved from East Africa Bottling Share Company:
https://www.africaoutlookmag.com/company-profiles/6-east-africa-bottling-
share-company
Austin. (2022, 06 12). indeed.com. Retrieved from Types of Research: Definitions and
Examples: https://www.indeed.com/career-advice/career-development/types-of-
research
Balogun, O. S., Jolayemi, E. T., Akingbade, T. J., & Muazu, H. G. (2012). Use of linear
programming for optimal production in a production line in coca–cola bottling
company. International Journal of Engineering Research and Applications, 2004-
2007.
Balogun, O. S., Jolayemi, E. T., Akingbade, T. J., & Muazu, H. G. (2012). Use of linear
programming for optimal production in a production line in coca–cola bottling
company, ilorin. International Journal of Engineering Research and Applications,
2004-2007.
Balogun, O. S., Role, M. R., Akingbade, T. J., & Akinrefon, A. A. (2013). Application of
linear programming in a manufacturing company in feed masters, kulende, kwara
State. The International Journal of Logistics Management.
15
Ekwonwune, E. N., & Edebatu, D. C. (2016). Application of linear programming
algorithm in the optimization of financial portfolio of Golden Guinea Breweries
Plc, Nigeria. Open Journal of Modelling and Simulation .
Melkeam Aschalew. (2022, 06 12). addisfortune.net. Retrieved from Coca Cola to Kick
Off Bahir Dar Plant Construction: https://addisfortune.net/articles/coca-cola-to-
kick-off-bahir-dar-plant-construction/
16