Abstract
This minor dissertation investigates the suitability of linear programming techniques to optimise profitability and productivity in the fast-moving consumer goods (FMCG) industry. The impact of Six Sigma implementation on the dual objective function problem is also explored. An extensive literature review is conducted to understand the nature of the FMCG industry and the importance of productivity and profitability in its context, given that it’s a highly competitive industry.
Productivity and profitability cannot be optimised without tackling the classic scheduling and inventory problems that many industrialists are faced with. The scheduling and inventory problem is addressed through the lot-sizing concept which was introduced by Harris in 1913. A mixed integer linear programming (MILP) model suitable for the FMCG industry is selected with reference to the classification of lot sizing models found in literature, the classification is based on the type of problem that the model intends to solve. For example, capacitated versus uncapacitated plant, finite versus infinite periods and satisfied versus unsatisfied demands amongst other factors.
Two literature derived case studies that are representative of the FMCG industry are used to answer the research question in this work through simulation in the General Algebraic Modelling System (GAMS) software. The simulation is done for different levels of Six Sigma maturity to quantify the impact of Six Sigma implementation on profitability and productivity.
The study found that linear programming can be used as an optimisation technique in the FMCG industry with the lot sizing concept. The implementation of Six Sigma has a big impact on profitability and productivity as it reduces number of defects and failures thus improving quality of products and maximising the output with minimal re-work. Six Sigma implementation needs top management support to succeed, this work can be used to build a business case for resources to be directed at implementing Six Sigma as it provides an easy and quick way of showing the benefits of Six Sigma implementation.
KEYWORDS: profitability, productivity, Six Sigma, FMCG, linear programming.