Ward Thomas and Sons, Inc

Abstract

An MBA student attempts to use linear programming to help his family reduce feeding costs on their dairy farm. The objectives of the case include practice at formulating linear-programming problems (in particular, deciding what level of detail is appropriate) and recognizing that insights gained from building linear-programming models often exceed the original intent. Excerpt UVA-QA-0378 Rev. Feb., 4, 2013 WARD THOMAS AND SONS, INC. Another beautiful August day in 1987 was drawing to a close as Brian Thomas reviewed the data he had collected on milk production at Ward Thomas and Sons, Inc. (WT&S). Caught in the profitability squeeze affecting the dairy industry nationwide, WT&S had suffered through several years of minimal or negative profit from its milking operations. Thomas, an MBA student, was anxious to see if he could help his family by using his recently acquired knowledge of linear programming to reduce the cost of feeding the dairy herd, thereby improving the farm's competitive position. The Dairy Industry The decade of the 1980s had not been kind to the dairy industry as it struggled through a period of declining profitability. Although farmers had become more productive (average annual milk production per cow had increased from 7,761 lb. in 1940 to 15,528 lb. in 1987), people had become more health conscious. As a result, per capita consumption of milk and milk-related products had remained constant or, in some cases, declined. In addition, the price of dairy products had not kept pace with inflation, and farm profit margins had narrowed considerably. Federal milk-subsidy programs had been cut back, lowering the level of payments to farmers. In the mid-1980s, the Department of Agriculture had even implemented a temporary program that paid farmers to sell entire herds and discontinue dairy farming in an effort to lower the total supply of milk. . . .