BioPharma Case Study
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$24.85Total Transportation Cost (millions)
$1,268.31Total Production Cost (millions)
$195.15Total Tariffs (millions)
$1,488,315,983TOTAL COST
Highcal Production
Plant
Latin America
Europe
Asia w/o Japan
Japan
Mexico
U.S.
Brazil
7
0
0
1.23
0
0
Germany
0
15
0
0
0
India
0
0
5
3.77
0
0.35
Japan
0
0
0
2
0
0
Mexico
0
0
0
0
3
12.65
U.S.
0
0
0
0
0
5
Total
7
15
5
7
18Relax Production
Plant
Latin America
Europe
Asia w/o Japan
Japan
Mexico
U.S.
Brazil
7
0
0
2.77
0
0
Germany
0
0
0
0
0
0
India
0
0.65
3
5.23
0
0
Japan
0
0
0
0
0
Mexico
0
11.35
0
0
3
0
U.S.
0
0
0
0
0
17
Total
7
12
3
8
3
17Total Plant Output
Plant
Total
Brazil
18
Germany
15
India
18
2
Mexico
30
U.S.
222. How should Phil structure his global production network? Assume that the past is a reasonable indicator of the future in terms of exchange rates.
Phil should note that the Dollar and Peso have been getting killed by the Euro, Real and the Yen the last three years. Over the five year period, the net movement has not been a disaster, and recognition of business cycles would suggest that it would be wise to retain capacity and capabilities throughout the entire supply chain so that production can be diverted as currencies move against each other.
3. Is there any plant for which it may be worth adding a million kilograms of additional capacity at a fixed cost of $3 million per year?
It doesn’t appear this improves the solution shown in question 1. The plants that are at capacity in part 1 are Brazil, India, Mexico, and the U.S.; adding a million kilograms of capacity to those plants does not result in a lower overall cost for the entire supply chain.
4. How are your recommendations affected by the reduction of duties?
A reduction in duties to 0% across the board results in the following costs:
$38.25Total Transportation Cost (millions)
$1,325.40Total Production Cost (millions)
$0.00Total Tariffs (millions)
$1,363,650,824TOTAL COST
The solution matrix is far less sparse; virtually every market receives imports from every other market with the exception of Mexico and Asia
Plant
Latin America
Europe
Asia w/o Japan
Japan
Mexico
U.S.
Brazil
1.20
2.28
0.62
1.20
0.00
4.90
Germany
1.52
2.90
1.23
1.52
0.95
2.98
India
1.12
2.50
.83
1.12
0.55
2.58
Japan
0.53
1.91
0.53
0.00
1.99
Mexico
1.52
2.90
1.23
1.52
0.95
2.98
U.S.
1.12
2.50
0.83
1.12
0.55
2.58
Total
7
15
5
7
3
18Relax Production
Plant
Latin America
Europe
Asia w/o Japan
Japan
Mexico
U.S.
Brazil
1.48
0.00
1.48
0.00
3.65
Germany
1.52
2.46
0.95
1.66
0.95
3.03
India
1.12
2.06
0.55
1.26
0.55
2.63
Japan
0.53
1.47
0.00
0.67
0.00
2.04
Mexico
1.52
2.46
0.95
1.66
0.95
3.03
U.S.
2.06
0.55
1.26
0.55
2.63
Total
7
12
3
8
3
17Total Plant Output
Plant
Total
Brazil
18.00
Germany
21.67
India
16.87
Japan
9.93
Mexico
21.67
U.S.
16.87
5. The analysis has assumed that each plant has a100 percent yield (percent output of acceptable quality). How would you modify your analysis to account for yield differences across plants?
To adjust for yields less than 100%, the capacity of each plant could be
This global supply chain is exposed to a variety of risks as enumerated below. Supply chain decisions should be made after careful assessment of the likelihood of these events and the effectiveness of possible mitigation plans. Disruptions – disasters, war, terrorism, labor disputes
Delays – inflexibility or poor yield of supply, insufficient supply Systems – IS breakdown, system integration issues
Forecast – inaccurate forecasting
Intellectual property – vertical integration and global sourcing Procurement – exchange rate movement, industry-wide capacity issues Receivables – number and financial strength of customers
Inventory – rate of obsolescence, holding costs, uncertainty of demand Capacity – cost and flexibility of capacit