A « Stochastic » Linear Program for The Tunisian

Olive Oil Supply Chain

Hatem Masri&

Hanen Hamza

QM350: Operations ResearchQM350: Operations Research

University of Bahrain

Introduction Supply Chain Management

Agricultural supply chain

Tunisian olive oil

The structure of olive oil sector in Tunisia

Objective of the study: Planning activities of the oil mill

OLIVE TREESCULTIVATION

HARVESTINGOLIVES

TRANSPORT OLIVES

TO THE OIL MILLS

Transportationand Storage of

olives

CONTROL OF THE QUALITY OF THE OLIVES

Weighing, Washing,

Leaves removal

EXTRACTION OF OLIVE OIL

1.The classical system 2.The pressure system

3.The Continuous process with 3 phase decanters4.The Continuous process with 2 phase decanters.

THE SOLID-LIQUIDSEPARATION PROCESS

BY PRESSURE OR CENTRIFUGATION

OLIVE OILSTORAGE

OLIVE OILCONDITIONING

DISTRIBUTION OF OLIVE OIL

OLIVE OIL SUPPLY CHAIN

CRUSHING THE OLIVES WITH PITS

MIXING OLIVES AND PITS TO CREATE

OLIVE PASTE

LIQUID-LIQUIDSEPARATION PROCESS BY

DECANTATION AND CENTRIFUGATION

Surface: 1.6 million hectares, 35% of cultivable lands

57% of total agricultural farm labour.

Oil mills: 1600 unitsCS: 840, PS: 318, CP:320, MS: 111

Triturating capacity 31745 tons/ DayThe storage capacity: 300 thousand tons

The total production of olive oils173 thousand tons

National Office of Oil (NOO)(70% of the production)

Private exporters (21% of the production)

Conditioning units(9% of the production)

External market 66,5% of the production

Interiors Market +stock 33,5% of the production

Tunisian Tunisian Olive Oil Olive Oil SectorSector

The classical system (CS) The pressure system (PS) The continuous process (CP) The mixed system (MS)

Problems Of the Tunisian Olive Oil Supply chain (1)

The Problems Of Olive Harvest: Lack of specialized labor increases the

harvesting duration (till may) and the beating down damage olives

Climate scarce and irregular rains

Mechanical harvesting of olives will be essential in order to reduce the time of harvest according to the size of the Tunisian olive tree and so avoid the problem caused by the shortage in labor.

Problems Of the Tunisian Olive Oil Supply chain (2)

Problems Of Olive Oil Production: The increase in the olive oil production cost Price of olive is unstable. Quality of Olives Storage capacity of olives and olive oil Regression to the position of Tunisian olive oil on

the world market.

Encourage investment on olive oil mills to increase the extraction capacity of olive oil.

Create a label of quality for the Tunisian olive oil.

Problems Of the Tunisian Olive Oil Supply chain (3)

Problems Of Olive Oil Distribution About 90% of Tunisian olive oil exports are in

a bulk. Traditional Market: 87% of Tunisian olive oil

exports are to Italy and Spain. Low Competition Capacity of the Tunisian

Exporters. Internal Market Supply chain is not Optimized

Optimize the olive oil production chain

The Olives

U1

Um

Mm

UuThe units

PpThe olive oils

Demand

tmtmPR ,,

tmtmPR ,,

tmtmtmtmuUu

PRRPRRPRUP ,1,,,,

ttm SOPRR ,

tmutmu OUUP ,,,

tmutmu OUUP,,,

1,1,1,, mmmuUu

PRRPRUP

utTt

FDTCARDOU

)(

t,m,um,p,ut,p,u UPEP

tptpuUu

DEP ,,,

~

Model Constraints

A s

toch

asti

c li

near

pro

gram

to th

e ol

ive

oil p

rodu

ctio

n ch

ain

The Recourse Approach

)w(D)w(YEP it,pit,pt,p,uUu

tptpuUu

DEP ,,,

~

where is the quantity of shortage on demand

)w(Y it,p

Th

e L

P C

ert

ain

ty

Eq

uiv

ale

nt

Empirical Study: RUSPINA RUSPINA was created after the liberalization

of the olive oil sector in Tunisia. Major player in the olive oil sector and

especially in the export of the virgin olive oil to the United States and Europe.

Uncertainty on the demand from national and international olive oil markets

RUSPINA has to plan its production during the olive oil production period (4 months from November to the end of February) to satisfy the random demand.

RUSPINA Production Chain RUSPINA has two olive oil production units with a

continuous process. The first unit uses a three-phase decanter and the second a two-phase decanter.

The company can increase the production by using two additional units, the first with a traditional system and the second with a pressure system

Storage capacity is equal to 5000 Kg of olives The company produces 4 types of olive oil: extra-

virgin olive oil, fine virgin olive oil, semi-fine virgin olive oil and lampante oil

Olives In the local market, there are seven varieties of

olives, namely Chemlali, Chemchali, Chetoui, Oueslati, Zalmati, Sayali and Gerboui

To reduce the size of the study, we limit ourselves to three scenarios: Weak production of olive oil. Medium production of olive oil. High production of olive oil.

Opimization Solver Using data collected from RUSPINA, we solved the

linear program using LINGO 9 optimization solver. The optimal solution values give the company more than 12% additional profits.

The traditional system has never been used along the production period (120 days).

Units of trituration Number of days used

Traditional 0

Pressing 40

Three-phases decanters 97

Two-phases decanters 80

Quantity of Olives to Purchase and Store

Percentage of Varieties of Olives Crushed

Expected Quantities of Supply and Demand

Conclusion and Perspectives Tunisian olive oil sector:

the non efficiency of traditional production units compared to other production units.

the importance of some olive varieties as the chemchali and sayali varieties that we must encourage farmers to plant olive trees from these two varieties

RUSPINA needs to Increase its storage capacity of olives oil and, therefore,

makes profit from an expected low price of olive oil; Sign production contract with farmers to purchase olives

from the two varieties chemchali and sayali; Look for a new production unit with three-phase

decanters to ameliorate the trituration capacity.

THANK YOU