Business profitability refers to a company's ability to generate income that exceeds its expenses over a certain period.
Can we use data help business owners maximize their profits?
This case study will show you how to use analytics to optimize a bakery’s product selection, ensuring you focus on high-margin items.
Optimize Business Profitability with Data
Problem Statement: Maximizing Profit for a Local Bakery
You want to help your local bakery to maximize its profit.
They sell several types of products, including cakes, pastries and sandwiches.
Available resources
- 4 bakers working 6 hours per day (Total: 24 hours/day)
- 1 assistant for sandwiches 4 hours per day
- 2 ovens that can be used 24 hours per day (Total: 48 hours/day)
- 100 slots available for stock and display
What do they sell?
These items have different resource needs and profit level
Objective: Define the Optimal Production Plan
The business owner would like to understand what this is the best mix of products to maximize its profits.
Chocolate cakes are highly profitable, but they require a long oven time.
This is where Linear Programming with Python can help find the optimal balance while respecting the constraints.
The objective is to maximize the total profit but it's limited by the constraints
- Maximum equipment usage: ovens have limited usage capacity and displays have only 100 slots
- Maximum workforce ressources
What do you need to produce to maximize your daily profit?
Let us run the model, defined in the next section, to determine the optimal mix.
- Results
Lemon Cake = 0
Sandwich = 20
Chocolate Cake = 32
Croissant = 0
Chocolate Eclair = 0
Panini = 0
Profit reached: 328 euros/day
Based on these results, your local bakery owner should focus on Chocolate Cakes and Sandwiches to reach a maximum profit of 328 euros/day.
Can we do better? Let’s have a look at the constraints.
Implementing more constraints and parameters can improve this result, ensuring that your model reflects the actual reality of your business.
- What is the utilization ratio of your resources?
Lemon Cake = 0
Sandwich = 20
Chocolate Cake = 32
Croissant = 0
Chocolate Eclair = 0
Panini = 0
1,440/1,440 minutes of bakers used
2,880/2,880 minutes of oven used
240/240 minutes of assistants working time used
126/200 display slots
Profit reached: 328.0 euros
Good news! You are fully utilizing your equipment and workforce.
However, we still have display slots available.
- What if we have two more assistants to make sandwiches?
Lemon Cake = 0
Sandwich = 60
Chocolate Cake = 32
Croissant = 0
Chocolate Eclair = 0
Panini = 0
Profit reached: 504 euros
- If you recruit two more assistants (4 hours/day), selling more sandwiches can increase your profit by 50%.
These are the discussions you could have with the business owner to help her improve the profitability.
Do you want to try yourself?
You can perform the same exercise yourself with the model deployed on our platform.
Maximize Business Profitability App
A prototype of this model has been deployed on a web app: LogiGreen App
This prototype, currently in development, is already available for test.
How to test it?
You can test the model without uploading data by just following the steps below
Step 1: Go to the business planning page
- 🔗Link: Business Planning Page
Step 2: Select 'Maximize Business Profitability' on the left side bar
You will arrive in the presentation page of the module where you can find a brief presentation of the model with the inputs parameters and the results provided.
Step 3: Go to the 'Analysis' tab
You can select
- Size the equipment and staff availability
Step 4: Launch the Analysis
You can visualize the results.
Do not hesitate to refresh if you face a problem.
Any question?
For any inquiries, please contact us at contact@logi-green.com
This blog post is based on articles originally published on Medium
- Maximize Business Profitability by Samir Saci