Mapping the use of Operations Research in the Wine Industry Martin Kunc 9th Annual Conference of the American Association of Wine Economists AAWE in Mendoza (May 26-30, 2015).

Agenda What is Operational/Operations Research (OR)? Strategic OR vs. OR Supporting Strategy Mapping the application of OR to the Wine Industry My personal experience Conclusions

What is OR? Operational research (OR) encompasses a wide range of problem- solving techniques and methods applied in the pursuit of improved decision-making and efficiency, such as: simulation, mathematical optimization, queuing theory and other stochastic-process models, Markov decision processes, econometric methods, data envelopment analysis, neural networks, expert systems, decision analysis, and analytic hierarchy process.

What is OR? When operational researchers faced a new problem must determine which techniques are most appropriate given: the nature of the system, the goals for improvement defined by the owners of the systems, constraints on time and feasibility to find a solution, Issues related to the implementation of the solution

Strategic OR vs. OR Supporting Strategy Strategic OR (SOR) is defined as operations research that achieves a sustainable competitive advantage. Primary evidence of the existence of strategic OR is the existence of firms which are achieving a sustainable competitive advantage from their use of OR. American Airlines (Yield Management, Crew Pairing, and Arrival-Slot Allocation)  Sabre National Car Rental (revenue management system)  now standard in vehicle renting Sadia (PIPA Project: integrated poultry planning system) P&G (optimally positioning manufacturing operations)

Supporting Strategy using OR

Supporting Strategy using OR: Multiple Activities/Multiple tools

Supporting Strategic Development Process Frameworks, Methods and Models DirectionCreation Rehearsal / Evaluation ChoiceImplementation VisioningBalanced Scorecard Strategic Modelling QM Project mgmtScenario Planning SWOT Supporting Strategy using OR: Multiple Activities/Multiple tools

Mapping the applications of OR in the wine industry Research performed by Florian Buguet-Francois, MSc BAC SSM: Soft System Methodology – DSS; Decision Support System – MCDA/MCDM: MultiCriteria Decision Analysis/Making – VCA: Value Chain Analysis TOWS: Threats/Opportunities/Weaknesses/Strengths Matrix

Mapping the applications of OR in the wine industry

My personal experience System Dynamics applications in Forecasting Wine Tourism Kunc, M Forecasting the development of wine tourism: The case of Chile, International Journal of Wine Business Research, 21:

My personal experience Business Dynamics of On-Premise Wine Trade Kunc, M. Hwang, J Business Dynamics of On-Premise Wine Trade: Cases from South Korea, International Journal of Wine Business Research (forthcoming)

Conclusions The increasing availability of data will facilitate an increase in the application of Strategic OR in diverse areas: production areas, for example, an increase in the adoption of linear programming models to support harvest scheduling, labour allocation, and routing decisions. market research, for example, data mining and statistical analysis to predict human wine taste preferences and quality assessment vine management, for example, managing the amount of fertilisers The use of OR to support strategy in the wine industry remains challenging given the strong use of “intuition” and belief in “uniqueness” existing in the industry.

Gracias Questions?