Reference no: EM133399007

Case: Bonaire is a small Dutch island off the coast of Venezuela, best known for its scuba diving and flamingos. Bonaire's only export is salt, produced by solar evaporation in a single facility, called Bonaire Salt (BS), in the southern portion of the island. Bas Tol, a representative from a large international conglomerate, is visiting Bonaire because his company is interested in buying Bonaire Salt. He met with Bart Snelder, the manager of Bonaire Salt, to discuss its operations.

Bart laid out on the table a map of the facility showing 16 different pans. Each pan is a rectangular area about 350 meters by 300 meters. The pans are filled with sea water, which evaporates over time, leaving a thick layer of sea salt. Half of the pans are dedicated to making "brine"-water with a high salt content (25 percent by weight rather than 3.5 percent, which is typical of sea water). The brine from those pans is pumped into the other eight pans to complete the process. To be specific, each of those eight pans is flooded with brine for 43 weeks. At the end of those 43 weeks, the pans are dry and there is a 30-centimeter-thick layer of salt covering the entire pan. At that point, the salt is harvested.

Harvesting is done with bulldozers that scrape the layer of salt in the pan. Dump trucks carry the salt to a central area where the salt is stored in large outdoor conical piles. A large conveyor is used to transport the salt from those piles to a pier next to the facility so that the salt can be loaded onto a ship for transportation to markets around the world.

A single bulldozer can complete the harvesting of a pan in 10 weeks. Multiple bulldozers can be used to harvest and the harvesting time is proportional to the number of bulldozers. For example, Bonaire Salt currently has two bulldozers, so on average it takes 5 weeks to harvest a pan when both bulldozers work continuously on the same pan. They have plenty of dump trucks, so the availability of trucks does not constrain the process.

Each of the eight pans yields about 40,000 tons of salt per harvest. (A ton is 1000 kilograms.) The conveyor system can load a ship at the rate of 20,000 tons per week. The storage area can accommodate 15 cones. Each cone can be 18 meters high and 40 meters across, holding about 9600 tons of salt.

Bas notes that at the current time Bonaire salt sells for about $25 per ton on the market. Before his company can formulate a bid for Bonaire Salt, he needs to do some calculations to better understand both the current output of Bonaire Salt and the potential output from the facility.

Question 1. Given current operations, how much salt can Bonaire Salt produce per week on average (in tons)?

Question 2. Bart suggests that it could increase output if it purchases another bulldozer. If it did, what would be its average weekly output of salt (in tons)?

Question 3. Bas has another idea for increasing output. He suggests that it could divide each of the eight producing pans it has in half, to make 16 producing pans. Bas assumes that this could be done without losing much productive area, meaning that two of the smaller pans can yield as much salt as the combined larger (current) pan. Even under that optimistic assumption, Bart doesn't think it would increase average weekly output because it wouldn't change the amount of area actually producing salt. Who is correct?

Question 4. A third idea for increasing output was also discussed: Add more producing pans. Based on a map of the land around the facility, Bas believes it probably could add three more producing pans of the same size as the eight current ones (and there would be enough capacity in the brine-producing pans to support these three additional producing pans). How much would that increase weekly average output of Bonaire Salt?