Reference no: EM133139176

49680 Value Chain Engineering Systems - University of Technology Sydney

Assignment: Engineering the supply chain of BarCo Corporation

Objective 1: Understand the business problem from the perspective of supply chain and operations management lens such as - Supply, Demand, Sustainability and Decision Making.

Objective 2: Determine Strategic Options/recommendations and quantify the benefits (tangible and intangible) and the risks to achieve the expected outcomes.

Objective 3: Apply research skills and appropriate methodologies to solve optimisation problems

Problem Context:

The General Manager of BarCo Corporation, received notification from MaxEnergy that natural gas supplies were being rapidly depleted. In the event of a shortage, MaxEnergy, the main producer and distributor of natural gas in the region, would allocate gas to its customers under the following provisions established by the Federal Commission:

First Priority: Residential and commercial heating and cooling

Second Priority: Commercial and industrial firms that use natural gas as a source of raw material

Third Priority: Industrial firms that use natural gas as a boiler fuel

In the communication, it was mentioned that most of BarCo's uses were in the second and third priority classifications. Hence, BarCo would probably be subjected to "rolling brownouts", temporary and periodic curtailments of natural gas supplies. MaxEnergy planned to monitor its pipeline pressures and order reductions to maintain minimum levels. MaxEnergy preferred that its customers initiate the reduction process to minimize the effect on their industrial processes. MaxEnergy was authorized, however, to curtail supplies unilaterally if pipeline pressure fell below minimum levels.

The natural gas shortage was created by the unprecedented heat wave/bushfires of the summer of 2019. Electrical generating plants were operating at capacity to supply electricity to operate air conditioning and refrigeration units. Although, long-range plans called for these utility companies to convert to coal, oil, or nuclear fuel, natural gas remained the dominant boiler fuel.

CURTAILMENT PLAN

BarCo's problem was to determine which of its products would be least affected by the gas curtailment. All of the BarCo complexes would be included in the curtailment region in the event of a brownout. Except for BarCo's ammonia operations, all gas purchased was used as boiler fuel. In its ammonia plant, gas is used as a source of raw materials which is less polluting (compared to its use as a boiler fuel) and in-line with BarCo's sustainability plan for the future. In a detailed discussion with the CEO of MaxEnergy, BarCo learned that MaxEnergy would not specify the products to be curtailed. The curtailment procedure would be based primarily on a customer's usage pattern. Hence, BarCo had the flexibility to absorb curtailments where they would have minimum impact on profits.

Based on this information, BarCo called a staff meeting to discuss a contingency plan for allocation of natural gas among the firm's products if curtailments became a reality. The specific objective was to minimize the impact on profits/overhead contribution. After a week of study, the information in Tables 1, 2, 3 was presented to BarCo management.

TABLE 1 Contribution to profit and overhead

TABLE 2 Operational data

TABLE 3 Natural Gas consumption data

BarCo has three manufacturing plants (A, B and C) and MaxEnergy supplies Natural Gas to these plants from its existing 3 locations (I, J, K). The distribution costs and the supply and demand data is provided in Table 4.

TABLE 4 Distribution cost ($ per unit) and Supply/Demand data

Assuming the distribution costs are paid by the BarCo, the management team also wants to identify the best distribution plan under curtailment. BarCo's contract with MaxEnergy specified a maximum of 90,000 cu.ft. X 103 per day for its complexes. However, curtailments are projected to be based on actual usage rather than contractual maximums. The current natural gas usage is 85,680 cu. ft. x 103 per day. MaxEnergy projects curtailments in the range of 20 to 40 percent and it impacts all of the MaxEnergy plants equally.

Tasks (To be included in the Report):

Q1. Define the business problem and propose a Linear Programming model which can be helpful in analyzing this situation. Make sure you descripe the model assumptions.
Q2. Formulate and resolve production plan for 20 and 40% curtailment of natural gas usage.
Q3. Formulate and resolve distribution plan for 30% and 50% curtailment scenarios.
Q4. Based on your analysis, provide a discussion on BarCo's options and your recommendations for (i) the production and (ii) distribution plan; during the curtailment scenario.
Q5. Conduct the sensitivity analysis for baseline scenario and describe the key outcomes (for both production and distribution plans) in simple terms for the top management. Please use visualizations (graphs, tables, etc) to better communicate your points.
Q6. Contribution to profit and overhead for products from BarCo has a lot of fluctuations. Provide your recommendations for the management in terms of the impact of such changes on the production plans.
Q7. Explore a scenario in which BarCo minmizes its environmental impacts. Decribe how this objective can influence the company's profits, etc. (Assumption: the company generate 10 kg ( 6kg production + 4 kg distribution) CO2 emissions per day in the baseline scenario).

Tasks (To be included in the Video):
Q1. Describe the problem with appropriate level of details.
Q2. Identify and justify the analysis method chosen to solve this problem.
Q3. List down key assumptions that were used while solving this case study.
Q4. Provide a summary of results obtained from the analysis and key recommendations.
Q5. Include important calculations in the main text and other analysis in the appendix.

Attachment:- Value Chain Engineering Systems.rar