About Treasury Wine Estates Limited

Treasury Wine Estates Limited is an Australian wine producer with a presence on both the domestic and foreign markets. Despite commanding a sizable market share, the vast company suffers from certain organizational management flaws that limit its productivity in the wine production and marketing sector. Overproduction of wine is one of the weaknesses. The wine industry is very profitable. It has drawn a large number of participants on both the national and international levels. There has been overproduction of this commodity, which often exceeds consumer demand. Treasury Wine Estates Limited needs to expand its market base and focus on the emerging market in the long run. Since it is in a position to produce huge volumes of wine, it is the most viable option. The strategy will ensure that it commands a bigger market size, increases profitability and boost the economies of these nations.

The other challenge is the loss of wine during movement. The company handles huge volumes of wine which are susceptible to spoilage. However, this problem can be minimized by the enterprise adopting lean production techniques. The number of movements during the production process can be minimized by having state of the art manufacturing capacity and utilizing a JIT production technology. The strategy will reduce losses and increase the profitability of the enterprise. Finally, the firm faces the challenge of extraction inefficiencies. There is the probability of receiving low-quality grapes which are difficult to process. Additionally, machinery is susceptible to breakdown during the extraction process. The solution lies in the assessing the quality of grapes and maintain the machinery regularly. It would ensure the extraction process runs smoothly and more quality wine is produced.

Weaknesses and Solutions to Treasury Wine Estates Limited Operation Management

Overproduction

Operation management deals to the utilization of the most efficient business practices maximizing production in any enterprise. Most importantly, it involves the conversion of materials into finished goods and other services with the sole intention of maximizing an organization’s profits. Treasury Wine Estates Limited has a lot operation management weaknesses. One of them is the overproduction of wine (Curtin business school, 2016). The large wine manufacturer and exporter was forced to destroy many bottles of its excessive bottles of wine in the year 2013. Most of this wine was either out of date or could not be sold in the market. The destruction process translated into an enormous loss for the enterprise. Increased competition in the Australian wine industry is one of the factors to blame for this excessive production. Wine companies in these countries are continually trying to outdo each other in a bid to command a bigger market size. Being a lucrative industry, this competition is likely not come to an end anytime soon end, so the danger of continued overproduction is real.

Another factor which leads to this excessive production is the existence of good regulatory environment. The Australian government does not impose a lot of legal bottlenecks in the areas of taxation and other forms of controls in this industry. Consequently, Treasury Wine Estates Limited and other wine manufacturers tend to exploit this chance and engage in surplus production. The production of wine outstrips the available market demand. Excellent operating environment directly contributes to surplus production as it encourages the manufacturing of massive quantities of wine. Most of this wine tends to be of poor quality, and the company tends to price it at a lower price in the market in an attempt to drive more sales. Treasury Wine Estates Limited produces a lot of wine to make the maximum usage of the conducive regulatory framework. Additionally, the strengthening of the Australian dollar in the foreign countries makes this wine to be more expensive compared to wines in other nation. As a result, Treasury Wine Estates Limited faces a lot of difficulties in trying to grow its sales. Australia does not operate in isolation. It is a key player in the global commerce. The integration of world trade activities means that wines from other nations can still access the Australian market. Despite this fact. Treasury Wine Estates Limited continues with its production activities even when there is more wine that what consumers demand. The flooding of this commodity in the market creates a wine glut.

The overproduction problem can be solved using several ways. One of them would involve a careful assessment of the wine market before engaging in the production. Although Treasury Wine Estates Limited exists to maximize profits and consolidate its market presence, it should not participate in the unplanned production. The production process is a costly affair which means that a due analysis of the market is equally important for the company to maximize its returns. Perhaps the company needs to pay attention to the economic cycles in Australia and in the whole world where it exports its products. During economic booms, the world economy performs quite well. It presents a robust opportunity for the manufacturer to grow its sales and consequently increase its profit margins, On the other hand, during recessions, the world economy happens to be struggling. During the recession, the global economy is characterized by sluggish demand and decreased consumer spending. The two scenarios are enough warnings to the company to reduce its production capacity. The firm can segment its target market and focus on a key segment of the population where it can offer personalized services. Other competitors would find it difficult to penetrate. Afterward, Treasury Wine Estates Limited can scale its production to the desirable levels as per the market dynamics

Another solution lies in the assessment of the regulatory environment in Australia and other nations where Treasury Wine Estates Limited exports its wine. The existence of sound regulatory framework in Australia does not warrant increased production. Instead, the large firm can work in close collaboration with the Australian authorities to ensure that its product receives fair treatment in foreign countries. The Australian government can negotiate for fair trade terms in the international market for its products. Some of these business conditions might include reduced taxation on Australian wine and the possibility of the Treasury Wine Estates Limited setting up manufacturing facilities in these nations particularly when the costs of production are low. Operations management involves the whole process from the sourcing of raw materials up to when the products or services reach the customers. Thus this aspect of negotiation for improving terms of trade in the global market is critical in ensuring that the firm expands its production potential without having to fear on where to sell its products. Since the company has a potential of producing millions of liters of fine wine, the best viable option would be increasing its competitiveness in these foreign markets.

It is evident that Treasury Wine Estates Limited exports its products to many nations across the world. However, the firm has not exhausted all the possible countries which can demand its products. The emerging world, especially in Africa, is experiencing an increasing middle class. The population has a taste for products like wine and other imported commodities. Additionally, they have a lot of disposable income. Standards of living in these nations are increasing, and the nations are fast approaching the next stage of economic development. It presents an enormous potential for the processors of finished products since the population there is a shift its demand patterns from unprocessed agricultural commodities to industrial goods. It is the best time for Treasury Wine Estates Limited to venture in this market and grow with the region. The company can establish manufacturing facilities in these areas in addition to selling its products. The majority of the citizens here have the desired technical skills but cannot employ themselves since there are no industries. The high levels of unemployment coupled with the existence of surplus labor are opportunities Treasury Wine Estates Limited van exploit to minimize its costs of production. It will be a double win for the company since it will benefit from the market and a cheaper source of human resources.

Wine Loss through Movement

Treasury Wine Estates Limited faces wine loss through movement. During the fermentation stage, the product is moved from one tank to another in a bid to speed up the whole process. The company sometimes runs out the necessary space hence there is a need to change the product from one tank to another. Since the firm handles a lot of the product, the product losses encountered during this stage are enormous when aggregated together. It is a significant expense to the company which must be dealt with to ensure the long-term profitably of this enterprise. The solution lies on the procuring of the correct strains of yeast. With these strains, there will be no need for transferring the products from one tank to another. Additionally, it would result in more energy and labor savings. Another solution lies in the adoption of Lean production principles. The first step is to make the least amount of movements during the fomentation process. Under a careful analysis, it is advisable for Treasury Wine Estates Limited to undertake both the primary and secondary fermentation at the same time. It will reduce the time taken during the secondary fermentation process by some days.

Treasury Wine Estates Limited can bank on effective temperature control during the fermentation process. Automated temperature systems can monitor temperatures and ensure that the optimum temperature is maintained throughout the fermentation process. The overall result would be the reduction in the fermentation period and an increase in the rate and efficiency of fermentation. Consequently, the movements would be minimized. Treasury Wine Estates Limited stands to reap immensely from the cost savings, energy efficiency, and the production of high-quality wine which is very competitive in the market.

Another stage where Treasury Wine Estates Limited encounters wine loss is during the clarification process. The process involves the removal of the suspended matter in the product before the wine is bottled. The enterprise employs many filtration methods during the filtration prices. Some of them include membrane filtration, earth filtration, and pad filtration. All these methods are highly inefficient and involve the movement of the product which translates into more losses during the movement process. Additionally, they consume a lot of energy translating into more production costs. The best solution for the wine industry is the cross filtration method. The method uses less energy, material, and labor. Additionally, it addresses the challenge of multiple movements. Cross filtration reduces the number of movements needed reducing the product losses during the production process.

A lot of wine tends to be lost during the distribution process. A majority of this product is transported through the road transport system. The process is prone to accidents. Additionally, some bottles might break during the loading process or in the course of delivering to the distribution network (Mercer, Wilkins, Crook, Barry, & Fowler, 2017). Some bottles might break up while being returned to the manufacturing facility especially if the market is saturated. It is a significant challenge which translates into losses for Treasury Wine Estates Limited. The company needs to fully implement the Just In time (JIT) Production technique to ensure that there is no excessive manufacturing. It is one of the lean manufacturing principles which ensures that wine is produced as per the orders. The adoption of this strategy will minimize the number of returns which are susceptible of being damaged while being returned to the company’s warehouse. The policy measure reduces double handling which characterizes the traditional method. The traditional method involves manufacturing, storage and dispatches a long process which increases the probability of the wines being damaged due to the increased handling. Some of the bottles break during this process. Additionally, JIT will allow orders to be processed and dispatched to the distribution networks in only one movement. The enterprise stands to benefit from reduced costs in the areas of logistics and minimizes losses associated with breakages of bottles. Moreover, more efficiency will be realized since the firm does not engage in excess production capacity.

Extraction Inefficiencies

Treasury Wine Estates Limited is faced with production bottlenecks in its value chain (Anderson & Aryal, 2015). Sometimes the large firm is confronted with a lot workload especially in the process of extraction which strains its production capacity. The same challenge is witnessed in the juice extraction industry. A lot of grapes a lost during the harvesting time. The loss is mainly experienced during day harvesting process. Day temperatures are not efficient since they affect the speed of fermentation process. Additionally, there is the inefficiency of the crushing process. In the wine making process, the cooler the grapes, the more suitable it will be for the wine making process. The next stage where enormous losses are experienced is during the crushing process. The process is characterized by high labor demand and the use of large amounts of energy over a short duration of time. Driving wine crushing, the grapes must be gently crushed to reduce the tannins and phenolic compounds from grape skin and the taint of the seeds. A lot of grapes are wasted in the process translating into massive losses for Treasury Wine Estates Limited. What is more, time is of much essence during this process. Grapes are very fragile. The time taken between picking to crushing has to be very hard to minimize the chances of spoilage and quality of the wine. Sometimes the workers are in a hurry leading to the production of low-quality wine which struggles to find clients in the market.

Another challenged which leads to the loss of wine in the whole value chain process is the handling of the massive volumes of grapes over a short period. It is a problem which is imminent in other sectors such as juice extraction. Treasury Wine Estates Limited is a mass processor of wine. As such, it deals with a lot of raw materials which need to be carefully handled in an attempt to improve the success of the production process. Crushing huge volumes of grapes over a short period leads to losses as workers are in a race against time.

The fermentation process is an essential determinant of the quality of wine. As such its needs to be given a lot of attention. However, a problem lies in the fact that it is not easy to find available space to carry out this essential process. Decreasing the time needed for fermentation would allow more fermentation to take place, produce more wine at a cheaper cost and reduce the need for more tanks. However, in most cases, this fundamental process fails to start as per the plans of the company. Additionally, when it starts, it runs slowly or fails to finish. The bottlenecks have the limitation of increasing the time needed for fermentation and the loss of the raw materials, most notably the grapes.

The process of fermentation requires optimum microbial conditions. Excellent microbial conditions reduce the time needed for fermentation and increase the quality of wine. Yeast is critical in the fermentation process. Wine yeast strains are continually evolving. Many suppliers are finding it difficult to supply the correct species. Providing the wrong choices hurt the wine production process. Moreover, from time to time the company is finding its challenging to set up the proper microbial conditions for the process. It should be noted that creating those conditions is a difficult task. In some cases, the company fails to establish the most efficient environment for the microbial organisms to carry out the fermentation prices. It has the effect of increasing losses to the enterprise.

In an attempt to cool the temperature of the grapes delivered to the processing facility, the best time to harvest and deliver these raw materials happens to be during the night. Upon delivery, the grapes need to be immediately stored in the cold stores as they await the crushing and the fermentation process. The efficiency in handling the grapes would reduce the losses incurred during the initial stages handling of these valuable inputs. Additionally, the quality of the grapes received in the processing facility needs to be carefully assessed before the production begins. The low quality should be immediately eliminated since they contaminate the quality of the final products. The process would be of massive benefits to Treasury Wine Estates Limited since it improves the quality of the fine wine which is more competitive in the market.

During the crushing process, the risk of machinery breaking down is very likely. Machine breakdowns delay the processing of grapes which lead to losses. The solution lies n the regalia maintenance of the crushing machinery. Standby facilities should be ready in case of any breakdown. Treasury Wine Estates Limited can contract the process to other wineries after doing a comprehensive cost-benefit analysis. It is important for the enterprise to ensure that the crushing capacity is adequately matched to the ability of the machines. The organization strategy ensures that grapes are not kept for a long time before they are processed into wine. The process of maintaining tools and contracting crushing process cushion the company the losses which might occur in the case their machinery breaks down.

Additionally, there is the risk of machinery running below their capacity especially when grape production is low. The less than the maximum usage of the equipment lead to exposing of the machinery to oxygen and the growth of microorganisms. When the machines resume operations, they contaminate the quality of wine making it uncompetitive in the market. The problem can be addressed by leasing out the excess capacity to other wines which might be constrained regarding machinery. It ensures that the machinery is always operational and hence the wine is not contaminated.

Fermentation tanks and the availability of space are key factors which lead to the loss of wine at Treasury Wine Estates Limited. The firm needs to invest more tanks and space to ensure the smooth running of the fermentation process. The capital investment will benefit the company by reducing the losses incurred when the fermentation process is slow. Additionally, the firm will benefit from high-quality wine and increased production of wine to increase its market size. Another important strategy for dealing with this challenging is ensuring that the excellent microbial conditions are always available for the fermentation prices. Fermentation is a harsh environment for yeast, and hence the company needs to ensure the perfect conditions exist. The process requires an accurate analysis of the ideal conditions by qualified staff. If this is achieved, Treasury Wine Estates Limited will benefit from higher wine quality and decreased Fermentation time which increases the overall production efficiency.

All in all, Treasury Wine Estates Limited is a great company. However, it is faced with many problems. Some of them include overproduction and product losses. The company can address these issues by expanding into other markets and adopting modern production techniques.

References

Anderson, K., & Aryal, N. R. (2015). Growth and cycles in Australia’s wine industry: A statistical compendium, 1843 to 2013. Retrieved from The University of Adelaide: https://www.adelaide.edu.au/wine-econ/databases/winehistory/winehistory-exec-summ-0215.pdf

Curtin business school. (2016, February). Wa wine exports: Building an economic future with China. retrieved from Curtin business school: http://business.curtin.edu.au/wp-content/uploads/sites/5/2016/02/bcec-wa-wine-exports-report.pdf

Mercer, G., Wilkins, A., Crook, J., Barry, S., & Fowler, A. (2017). The shelf life of wine. Retrieved from University of Wollongong: http://www.uow.edu.au/content/groups/public/@web/@inf/@math/documents/doc/uow051218.pdf

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