Assignment title: Management


Emporium Coffee is a family owned and run producer of extraordinary fine coffee for use in high-quality restaurants in Italy. The company produces two coffee blends: 'O-blend' – which creates an amazing dark and rich coffee; and 'F-blend' – which creates a lighter and silkier coffee. Due to the nature of the market into which Emporium Coffee sells its products, these two coffee blends, O-blend and F-blend, must each have a precise number of 'caffeine units' per 250 grams of ground coffee ('caffeine units' are simply a linear scale on which Emporium Coffee grades its ground coffee). Since 'O-blend' is richer than F-blend, the former has a higher concentration of caffeine and must carry precisely 7.5 caffeine units per 250 grams of ground coffee. F-blend requires only 6 caffeine units per 250 grams. Emporium Coffee sells its coffee in units of 250 grams. Each 250 gram unit of O-blend sells for $190, while F-blend sells for $165 per unit. Production costs (excluding the cost of the raw beans) are $25 per 250 gram unit of O-blend and $22 for F-blend. Overhead costs associated with both O-blend and F-blend are the same at $10 per 250 gram unit. Emporium Coffee maintains stringent quality control over its products and this extends to its procurement of raw coffee beans. In this regard, the company is very careful about the source of its raw coffee beans and only uses two particular types – the first is 'Arusha beans' sourced from Papua New Guinea, while the second is 'Boyo beans' from Cameroon in Central Africa. Several months of historical Arusha bean purchase price data is contained in the Emporium Coffee Raw Data spreadsheet. Unfortunately, no such data is available for Boyo beans. The Arusha beans contain a higher concentration of caffeine and are capable of delivering 9.5 caffeine units per 250 grams of ground roasted coffee. Boyo beans offer only 5 caffeine units per 250 grams of ground roasted coffee. Moreover, since O-blend and F-blend are both premium products, Emporium places an order for fresh raw beans each month (i.e. delivery occurs once only at the beginning of each month) and the company has capacity to hold up to 1,250 kilograms of Arusha beans and 3,750 kilograms of Boyo beans in inventory. The two products, O-blend and F-blend, are produced by roasting the two types of raw coffee beans, Arusha beans and Boyo beans, then grinding those beans and combining them in amounts to achieve the correct number of caffeine units for each specific product. Gerard Gambino, the head of the family that owns Emporium Coffee, and his children were discussing the company's profitability and during that conversation he reminded them that Emporium Coffee is well respected among the top restauranteurs in Italy and that means there has been excess demand for both O-blend and F-blend for many years. Gerard's son, Vincent, stated that all the indicators suggested that that situation wouldn't change within the next five to ten years, but their market power might be reduced through competition and this could cause downward pressure on the selling price for O-blend. Gerard's eldest daughter, Loraine, then proclaimed that the company might not be optimising production and that they should invest in a numerical model to determine the quantity of O-blend and F-blend to produce each month. All the family members thought that this was an excellent idea that should be commenced without delay. YOU ARE REQUIRED TO: Design and build a comprehensive, robust, accurate and necessarily flexible model (i.e. an MS Excel spreadsheet) to fully analyse the stated business problem. As a minimum you will need to determine the optimal production plan for the use of Arusha beans and Boyo beans, and the resultant quantities of O-blend and F-blend (i.e. in units of 250 grams) that should be produced to maximise the company's monthly profits.