1 / 14

Applichem Case

Applichem Case. OM 888 Supply Chain Modeling and Analysis. Applichem. Produces Release-ease, a specialty chemical 6 plants that manufacture Release-ease Gary, Indiana Frankfurt, Germany Mexico Canada Venezuela Japan (Sunchem) Competitive Situation

megara
Download Presentation

Applichem Case

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Applichem Case OM 888 Supply Chain Modeling and Analysis

  2. Applichem • Produces Release-ease, a specialty chemical • 6 plants that manufacture Release-ease • Gary, Indiana • Frankfurt, Germany • Mexico • Canada • Venezuela • Japan (Sunchem) • Competitive Situation • Applichem = Market Leader, Revenues $ 75 Million (1982) • Main competitor has one large plant

  3. What is the Objective? • Minimize cost? • What costs? • Transportation • Manufacturing • Fixed versus variable? • What are appropriate measures? • How to incorporate exchange rate changes? • What about different sizes and capabilities of plants?

  4. Compare Plants

  5. What measurement should we use? • What is a fair comparison? (economies of scale, different technologies) • Cost per pound to manufacture? (different costs) • Total labor/volume? (labor costs, packaging issues) • Capital/volume? (capacity issues) • Cost before packaging per pound?

  6. Costs at different plants

  7. Frankfurt Sunchem Mexico Venezuela Gary Canada

  8. Too Much Capacity? Total Demand = 79.9 M lbs; Total Capacity = 100.7 M lbs Should we close a plant? Which one? Might there be reasons for having excess capacity or keeping all plants open? Safety problems (chemical), transport costs/time, hedging

  9. One Approach: LP Model Purpose Conduct “what-if” analysis to find better network supply chain structure Objective Minimize costs measured in some common form (1982 U.S. $) Decision Variables How much to make at each plant; how much to ship between regions Constraints Capacity constraints, demand limitations, non-negativity (import restrictions, etc.) Data Costs, import tariffs, exchange rates, capacity/demand info

  10. How to Solve? • Basic “what if” analysis • Trial-and-error • Inefficient, not guaranteed to get optimal solution • Excel Solver Still, is this necessarily the best (or even a good) solution? Things change (exchange rates, inflation, etc.) http://www.oanda.com/convert/classic http://www.sunshinecable.com/~eisehan/V80-10en.htm International Monetary Fund: International Financial Statistics Yearbook.

  11. Is there a better way to solve?

  12. What’s the Point? • Conclusion: Recourse actions from excess capacity can improve expected profit while reducing risk! Recourse actions – capacity decisions made before demand realized; production decisions made after demand realized.

  13. Other Actions Spadaro Could Take? • Sharing technology and innovations across plants • Improve Gary’s yield • Reduce costs in Venezuela • Sunchem is high-cost, but also extremely efficient • What is impact of closure? • Changing management structure • Ensure technology and improvements transfer • If we close our most technologically advanced plant, what does this tell others about priorities?

  14. Just Can’t Get Enough Applichem… • Check out: Lowe et al. “Screening Location Strategies to Reduce Exchange Rate Risk.” European Journal of Operations Research. 2002. Cohen and Huchzermeier. “Global Supply Chain Management: A Survey of Research and Applications.” Chapter 21 in Quantitative Models for Supply Chain Management. Eds. S. Tayur, R. Ganeshan, M. Magazine. 1999.

More Related