BioPharma Case Study
CHAPTER SIX
BioPharma Case Questions
1. How should BioPharma have used its production network in 2009? Should any of the plants have been idled? What is the annual cost of your proposal, including import duties?
This solution was obtained using the tables displayed below. Note that Germany and Japan produced none of the Relax product and that side of their plants has been idled. The annual cost of this solution is: $24.85 Total Transportation Cost (millions) $1,268.31 Total Production Cost (millions) $195.15 Total Tariffs (millions) $1,488,315,983 TOTAL 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
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
3
18
Relax 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
0
Mexico
0
11.35
0
0
3
0
U.S.
0
0
0
0
0
17
Total
7
12
3
8
3
17
Total Plant Output
Plant
Total
Brazil
18
Germany
15
India
18
Japan
2
Mexico
30
U.S.
22
2. 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
BioPharma Case Questions
1. How should BioPharma have used its production network in 2009? Should any of the plants have been idled? What is the annual cost of your proposal, including import duties?
This solution was obtained using the tables displayed below. Note that Germany and Japan produced none of the Relax product and that side of their plants has been idled. The annual cost of this solution is: $24.85 Total Transportation Cost (millions) $1,268.31 Total Production Cost (millions) $195.15 Total Tariffs (millions) $1,488,315,983 TOTAL 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
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
3
18
Relax 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
0
Mexico
0
11.35
0
0
3
0
U.S.
0
0
0
0
0
17
Total
7
12
3
8
3
17
Total Plant Output
Plant
Total
Brazil
18
Germany
15
India
18
Japan
2
Mexico
30
U.S.
22
2. 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