Applichem

As far as cost per million of the product is concerned, Frankfurt has a minimum of 2.02 per million pound whereas, Sunchem has a maximum i.e. 38.45 per million pound.But this cost difference is not only because of the operating efficiencies but it may beattributed to many reasons as follows:a. Difference in cost of raw material A with Frankfurt being minimum at 24.02 andSunchem at a maximum of 29.62.b. Difference of package, load and shipping costs which may be attributed to thenumber of different packing sizes being done by various plants. Changing thesize of bag in the packaging line takes a lot of labor time. Gary ran about 80package sizes whereas Frankfurt ran only 50 kilo packages. In case of Frankfurt,the cost of packaging is less at 3.35 US dollars per hundred pounds ascompared to other plants because this plant bulk shipped the product to other company plants which then packaged it and shipped it to customers.c. Difference in direct labor cost in various countries. Mexico has minimum labor cost at just 2.38 whereas Sunchem on the other extreme at 12.82.To see at what levels of production and transportation the total costs will beminimized, we have tried to compute

simplex linear programming using solver

inexcel spreadsheet (attached as annexure). From the solution computed by solver, itcomes out that all the units should continue to produce but as far as possible, supplyshould be in the same country and costs levied on transportation should be saved. As far as running of Gary is concerned, the though it appears that the plant is notdoing well but when we critically analyze the facts and figures, it comes out that thoughcapacity utilization is not that good at the plat but cost per unit (7.35 per million pound)is much lesser than Venezuelan, Canadian and Sunchem plant. Also, the yield is verygood at 94.7.