As part of their Operations & Supply Management class, taught by Zhijian Cui, September 2011 MIM students visited DYC Distilleries in Palazuelos de Eresma, Segovia.
The entire class, together with Professor Cui, left from IE campus to the distillery, where they were greeted by Elena Esteban, PR Manager in Beam Global Spirits & Wine – Distilerías DYC. During the two hour tour, Elena recounted the distillery’s history, from its foundation by Segovian entrepreneur Nicomedes García in 1958 to its acquisition by Beam Global Spirits & Wine, while a creative video further explained all the innovations and changes put into place in the last 50 years. The visit ended with a tasting of the different whiskies produced at DYC.
To give further insights, MIM Sept 2011 student Alberto García recounts the trip from his perspective and makes a few recommendations:
The company visit to DYC was both fun and a great opportunity to apply the tools learned in class while being able to take a break from the hectic pace at which everything moves at IE. I was struck to see how challenging operations management is in the whiskey industry. For instance, the lead time from raw material (wheat) to the final product (whiskey) is at least 5 years. This makes demand forecasts impossible and leaves DYC with no room for late adjustments. The whiskey production process is also quite interesting; it is composed of 11 steps, among which aging in the barrel is the bottleneck. Based on all the steps, the production capacity is idle during most of the year. Thus, management is faced with the difficult task of effectively utilizing the idle capacity and matching supply and demand in the whiskey market.
One recommendation that may solve the idle capacity problem would be to produce other products. Since from the 11 steps in the whiskey production, 7 are similar to the beer production process which also includes a much shorter lead time, the company may consider producing beer when bottleneck (aging at barrel) is at full capacity.
Furthermore, to address the issue of matching supply and demand in the whiskey market, DYC may contemplate outsourcing the whiskey production to external manufacturers, keeping only the minimal production capacity in-house to meet the lowest demand while contracting out the extra whiskey demand. Alternatively, DYC may only produce the 5-year-old whiskey and contract out the whiskey with more aging years.
Overall, while these recommendations are mere suggestions that are possibly not even feasible, it was thanks to the course on Supply and Operations Management that we were able to identify and assess such key operational challenges.