Develop a linear program model

Question

Assignment:

Introduction

Current legislation in the state of Minnesota prohibits the sale of liquor at off-sale locations, i.e. liquor stores, on Sundays, Thanksgiving Day and Christmas Day, and restricts hours of operation for off-sale liquor stores to 8 am to 10 pm, Monday through Saturday. The Blue Laws that are currently in place also, includes various regulations via a three tier system for supply and demand that is focused on, limiting overconsumption, deny access to minors, ensure public safety and allow for community control and ultimately create fair competition in the marketplace.

While there are strict rules and regulations around supply and distribution, in recent years there have been various exceptions made related to Brew-on Premises Stores, wineries, municipal liquor stores and sales of 3.2 percent alcohol at grocery and convenient stores. In recent months, there has been yet another push from state and local governments and the public to repeal current legislation by lifting the ban of off-sale liquor sales on Sundays, with the following alternative restrictions:

(a) No sales of intoxicating liquor may be made by an off-sale licensee:

(1) Before 10:00 a.m. or after 6:00 p.m. on a Sunday;

(2) Before 8:00 a.m. or after 10:00 p.m. on Monday through Saturday;

(3) On Thanksgiving Day;

(4) On Christmas Day, December 25^th; or

(5) After 8:00 p.m. on Christmas Eve, December 24th

(b)No deliver of alcohol to an off-sale retailer may be made by a carrier of accepted by the retailer on a Sunday. 2

As of February 26, 2017, the proposed new bill has passed through the state House of Representatives and has moved on to the State Senate. Minnesota Governor Mark Dayton has stated publically that if the House and Senate pass this legislation, he will leverage his veto power and will sign this law into legislation.

Problem Statement

The project team has been assigned with evaluating the potential impact on

the new law will have on a liquor store and explore potential opportunities to capitalize on the new legislation. The team has chosen to take the perspective a small liquor store business, Tonka Bottle Shop, which is located in Deep haven, MN.

Preliminary research and general public opinion provides evidence that smaller privately owned businesses will be confronted with a more difficult challenge adjusting to the new legislation. Generally speaking, many small liquor storeowners believe that adding another day to sell liquor will not increase their overall sales; it may just simply spread out the same profit opportunity over seven days instead of six days. Consequently, the belief is that they will essentially reduce overall profit due to the increase in operational costs that are associated to operating on Sunday without an increase in overall sales.

While previous studies from other states have shown a historical average 4.4% increase in overall alcohol sales and an additional $215 million in revenue generated after lifting a Sunday restriction, data also shows that approximately 20% of small business liquors stores have been forced to close as well. Big box retailer like, Total Wine, MGM, Costco, etc. have easily been able to take on the added operational costs, while small business owners have struggled in a variety of ways. Not only do they have to remain open one additional day, they must adjust inventory strategies, promotional pricing, hire additional employees at times or add another workday for them personally. This adjustment has approved taxing from both a financial and personal perspective.

Financial Data:

Current
Current Revenue
Sales per square foot Yearly	2200
Square feet	2000
	$4,400,000.00
Yearly sales	Square foot percent per product
Beer	0.2
Wine	0.65
Liquor	0.15
Current	Percent revenue from product
Beer	0.3
Liquor	0.3
Wine	0.4
	1
With high mark-up wine
Sales per square foot Yearly	2355
Square feet	2000
	$4,710,000.00
Yearly sales	Square foot percent per product
Beer	0.2
Wine	0.4
Liquor	0.15
High mark-up wine	0.15
Current	Percent revenue from product
Beer	0.3
Liquor	0.3
Wine	0.3
High -mark up wine	0.1

number of employees	10
number of payrole hours per week	160
Hourly wage	11.84
Regular manager wage	50,562.00
Expenses (fixed)	5.00%	of revenue
Current	Inventory costs as a percent of revenue
Beer	23%
Liquor	23%
Wine	42.80%
With high mark-up wine
number of employees	10
number of payrole hours per week	160
Hourly wage	11.84
Wine manager wage	54,093.00
Expenses (fixed)	5.00%	of revenue
Current	Inventory costs as a percent of revenue
Beer	23%
Liquor	23%
High mark-up wine
Wine	42.80%
Financials- current Financials seven days Financials closed Monday Day Percent Sales Dollars Monday 0.09 $396,000.00 Monday 0.09 363600 Monday 0.09 0 Tuesday 0.1 $440,000.00 Tuesday 0.1 404000 Tuesday 0.1 404000 Wednesday 0.12 $528,000.00 Wednesday 0.12 484800 Wednesday 0.12 484800 Thursday 0.15 $660,000.00 Thursday 0.15 606000 Thursday 0.15 606000 Friday 0.2 $880,000.00 Friday 0.15 $660,000.00 Friday 0.15 606000 Saturday 0.34 $1,496,000.00 Saturday 0.25 $1,100,000.00 Saturday 0.25 1010000 Total 1 $4,400,000.00 Sunday 0.2 $880,000.00 Sunday 0.2 808000 Total $4,498,400.00 $3,918,800.00 Revenue Sales per square foot Yearly 2200 Square feet 2000 Yearly sales $4,400,000.00

a) Develop a linear program model

b) Simulation Model

c) Decision Tree Model

Interprete your results