Managerial Chemical Report

Executive Summary

Chemical Industry is one of the largest sectors in the world economy as almost all the products manufactured in the world require chemical products in their production, and according to the reports, the creation of materials with the help of chemicals is increasing 3-4% per year. The chemical industry requires a high level of managerial practices as it requires handling the hazardous gases and sensitive chemicals in an essential manner. As discussed above, it is a significant economic sector, and like other industries, it requires tohave well designed managerial planning and practices for the effective results. Here this report will present the supply chain analytics report for the BK Chemical Corporation. The main objective of this report is to highlight the business problem in the current scenario of the company in the analytical form. Further, the report will formulate the linear programming for the BK Chemicals, considering the 20% and 40 % curtailment of the natural gas usage. To present the elaborated linear programming results, the required assumptions according to the case study description will be given. At the end of the report according to found results, the recommendations for eliminating the problems in the organization based on the concepts of the supply chain management will be presented.

Table of Contents

Executive Summary. 2

1.0 Introduction. 3

1.1 Background. 4

2.0 Problem specification. 4

3.0 Supply chain management of a good Chemical company. 6

4.0 Linear programming for supply chain management. 8

Situation: -. 9

Constraints –. 10

Objective –. 10

Recommendation. 12

Conclusion. 12

References. 13

1.0 Introduction

Supply chain management is a useful set of practices in the management of the flows of goods and services, and it includes all the processes that transform raw materials into the final products. It helps in providing the active streamlined business supply-side activities to achieve the maximum customer value and achieve the optimal profit through these practices. It provides a road map to the suppliers to develop and implement the supply chains that are very efficient and cost-effective both. It covers all the aspects from production to product development to the information system required to achieve the expected results. But developing a proper supply chain management plan for the chemical Industry requires extra effort due to complexities associated in the industry. Chemical Industry accounts for more than $150 million world economy that is a very significant figure in the overall world economy (Brinton, 2003). The chemical industry has many tightly interconnected operating units such as blending, separating, reacting and packaging the final product. Here in this report, the supply chain management for the B.K chemical Corporation will be presented.

1.1 Background

B.K Chemical Corporation in its New South Wales division has got the notice through the Max Energy about rolling brownouts for the natural gas. Max is the largest producer and distributor of the natural gas in the region; the shortage of supply of the gas will create many problems for the overall production of the company. The Max has to take this decision due to the current summer season, and they do not have sufficient electrical supply required for air conditioning and refrigerating unit for the gases in this season. Secondly, according to guidelines given by government the company is required to provide a priority to the residential people’srequirements then second priority is needed to be given to the commercial and industrial firms that use natural gases as their raw material. Lastly, the third priority is required to be given to the Industrial firms that use the natural gases for their boiler requirements. The main chemical products of the company come under the second and third category. Along with this to have a proper gas supply in the system, it is expected from the Max gas pipe supply system to be at the particular level strictly.

2.0 Problem specification

Here to get the sufficient gas supply at the B.K chemicals, a proper supply chain management is required to develop. The company also needs improving the 20% and 40% curtailment plan for the products in the company. This plan has to be developed with consideration of the market profit and requirement of gas for the production of the material. The main objective is to develop a proper plan so that the regular profit percentage is not affected by it.

The data obtained through the analytical study is as follows-

Analysis – The above table demonstrates that the highest profit products of the company are Ammonium Nitrate and Urea. Then the production of Ammonium phosphate is also profitable with a profit of $120 per Ton. The lowest profit product is Caustic soda, with a benefit of $60 per Ton. Now in our second table, the Operational data of the company products will be presented-

(Source: Chang, 2005)

Analysis- The highest natural gas consumption product is for caustic soda thanfor Chlorineand is then forAmmonium nitrate and urea. From the analysis of the above table, the maximum profit products are Ammonium Nitrate and Urea, so the rolling of the gas supply for their production cannot be done. The rolling should be for these products in all cases as moving down will put a serious impact on the overall profit percentage of the company.

Along with above specifications, the General Manager of the B.K Chemical Corporationin the New South Wales division of BK Chemicals Corporationhas specified that the Max Energy can provide the maximum of 90,000 x 10³ cu ft per day. But the total current usage of the natural gas is 85, 680 x 10³cu ft per day, which is much higher than the supplied quantity of the gases (Chang, 2003).

It is highly required to develop a proper supply chain plan based on the linear programming rules so that an optimal solution to this problem can be achieved.

Main points to be considered-

In the time of summer season according to the profit percentage, the reduction of the production of the caustic soda can be made through it has high production capacity the profit margin is low in comparison to the other products.
To concentrate more on the gas supply for the Ammonium Nitrate and Urea.

3.0 Supply chain management of an excellent Chemical company

As discussed in the above section, the supply chain management of the chemical company requires extra consideration due to various complexities associated with it. It is highly necessary to follow the following principles of the Supply chain management system such as-

Following the selectivity in research and development-

It is essential to invest in the seamless transition in the operations. The core concentration should be given to developing effective methods for alternative and effective strategies for performing the work in the usual manner.

Fig1: Supply chain system

Collaborate with long term relationship

It is an excellent practice to collaborate with team members and supplies selectively and perform the long-term relationship so that in case of slow down or shortage the solution to come out of the problem can be found through proper collaboration.

Perform the resilient, optimized and dynamic operations

It is also a good practice to adopt the resilient, streamlined and dynamic procedures with extensive research and study that will help in obtaining the expected results. It is also required to follow the market standards and variations to enhance security in business operations.

Develop robust risk management strategies
Along with the above practices, it is also highly required to diligent compliance with the regulatory and safety standards this will help in creating the secondary market competitive strategy and develop market strength.
Giving value to the customers as well to the employees

It is highly required to provide the value to the customers as they are the primary stakeholders for the company to achieve the expected results. Along with this giving value to the employees is also highly required as they are the primary path makers for achieving the objective.

Manage the costs

To have a better market share, it is highly required to manage the value of the products that can be obtained by maintaining the effective supply chain system for the company.

Adopting the latest technologies

It is always a good practice to take advance technology by performing the extensive research study and performing the work.

To develop the proper resource allocation plan

To obtain the effective results, it is highly required to create the healthy resource allocation plan so that useful results can be captured even in the limited resources (Chang, 2004).

4.0 Linear programming for supply chain management

Linear programming is a well-designed technique to achieve optimal results through effective management decisions to work on the limited available resources. It is a widely used mathematical technique used for fifty years. The planning and decision making is a useful tool for resource allocationactivities. Most importantly, the representation of the entire supply chain system is based on the Linear programming decision making concepts. Its concepts help in deciding the amount of the raw material to be requested to each supplier as well helps in formulating the optimal distribution of the products to the customers based on available resources, time and depending on the maximum demand of the customer (Gjerdrum, Shah and Papageorgiou, 2000).

Steps in Linear programming

Optimization Analysis

In this step, the analysis of the best values for the decision variables that are required to be maximized (or minimized) to achieve the set objective following certain constraints.

Answering the management questions

In this step, the answers to various issues related to the supply chain system are performed and are tried to answer the following questions-

How should we allocate the budget to maximize the profit?
How to make the best inventory for the resources available?

Formulation of the linear programming model for the given case study- B.K Chemical Corporation

Situation: –

To achieve thetotal current usage requirement of the natural gas of 85, 680 x 10³cu ft per day. The main objective is to develop a proper plan so that the regular profit percentage is not affected by it. The management team has to find the optimal strategy for the usage of the supplied gas through the Max gas services.

Constraints –

Max gas services are the most significant gas service provider in the region, but the Max Energy can provide the maximum of 90,000 x 10³ cu ft per day in the summer season. But the total current usage of the natural gas is 85, 680 x 10³cu ft per day, which is much higher than the supplied quantity of the gases.
The constraint for the Max gas supply instructed by a government authority is-

Told to give priority to the residential people’srequirements then second priority is required to be given to the commercial and industrial firms that use natural gases as their raw material. Lastly, the third priority is needed to be given to the Industrial firms that use the natural gases for their boiler requirements.

The company also requires developing the 20% and 40% curtailment plan for the products in the company.
The requirement is much higher than the supplied quantity of the gases through Max gas supplier services as the leading chemical products of the company comes under the second and third category.

Objective –

To achieve the maximum profit through the supplied gas available and try to maintain the same profit percentage even in the summer season too. This can be achieved by minimizing the usage of natural gas in the company without least affecting the overall profit percentage of the company.

Benefits of optimization-

The profit percentage of the company cannot be deprecated.
The company will prepare itself for such a similar situation.

Decision variables for assumptions-

D1- The highest profit products of the company are Ammonium Nitrate and Urea. Then the production of Ammonium phosphate is also profitable with a profit of $120 per Ton. The lowest profit product is Caustic soda, with a benefit of $60 per Ton.

D2- The highest natural gas consumption product is for caustic soda than for Chlorineand is then for Ammonium nitrate and urea.

Optimization objective – To provide the continuous supply of required gas for the maximum profit products; otherwise, the profit percentage will not be achieved.

Mathematical formulation

Here x_i is in tones

And xi¹ is in tones

Minimize

(80×1 + 120×2 + 140 x3 + 140 x4 + 90×5+ 70×6 + 60×7+90×8) – (80×1¹+ 120×2¹+ 140×3¹+140×4¹+ 90×5¹+ 70×6¹+ 60×7¹+90×8¹)

Now

20/100 *t < [(8×1 + 12×2 + 14 x3 + 14×4 + 9×5+ 7×6 + 6×7+9×8) – ( 8×1¹+ 12×2¹+ 14×3¹+14×4¹+ 9×5¹+ 7×6¹+ 6×7¹+9×8¹)

1000< 40/100 t

Where t= 85680 x 10³

The above specified mathematical formulation restricts the constraints and help in least affecting the profit percentage of the company.

5. Recommendation

The B.K ChemicalsCorporation should develop the policies in written form for their vision and mission statement.
The organization should provide an adequate budget for improving its supply chain section according to the latest technology.
The organization should develop techniques for improving their customer relationship.
The company should look for other suppliers may be small in size else than Max gas supplier company for their organization so that they can arrange the required gases through them.

Conclusion

The chemical industry requires a high level of managerial practices as it requires handling the hazardous gases and sensitive chemicals in an essential manner. As discussed above, it is a significant economic sector, and like other industries, it needs to have well designed managerial planning and practices for the effective results. The above report has given me an excellent opportunity to learn in more depth about the supply chain system management with the help of Linear programming in a practical way which is going to be very beneficial for my entire career.

References

Brinton, S,( 2003), ERP consolidation: A day in the life of a big ERP rollup Celanese needs to merge seven SAP systems into one, a project expected to take 1000 days, Pearson publication

Chang, J., (2003), Chemical industry slammed with credit ratings downgrades, Chemical Market Reporter, Springer Publication

Chang, J.,(2004), Chemical Mergers and Acquisitions Activity Heats up as Financial Buyers Converge on Sector, PHI publication

Chang, J., (2005), Chemical Industry M&A Activity Surges, Springer publication

Gjerdrum, A., Shah, N. and Papageorgiou, (2000), L. A combined optimization and agentbased approach for supply chain modeling and performance enhancement, R.D publication