The Supply Chain Game (Network Design)

The Supply Chain Game (Network Design)

Welcome! The Supply Chain Game is an online simulator where you can expand and manage a network of factories and warehouses to supply new markets in new regions on the fictional continent of Pangea.

PANGEA

The Product

Jacobs Industries’ only product is an industrial chemical that can be mixed with air to form foam that is:

·  Lightweight;

·  Stable over a very wide range of temperatures;

·  A very efficient thermal insulator;

·  A very efficient acoustic insulator.

Jacobs sells to manufacturers of products that will pay a premium for foam insulators with these properties. All of Jacobs' customers purchase the foam chemical as a substitute for competitors' products. If Jacobs cannot meet the order when it is received, the customer makes its purchase from a competitor without any loss of future demand.

The Demand

Calopeia: Air conditioner retrofit kitsThe original application of the foam is for kits to retrofit or repair old industrial air conditioners. The properties of the foam made it possible to improve the efficiency of existing air conditioners within the constraints imposed by existing facilities. The industry that builds and sells these kits is concentrated entirely in Calopeia. The market is highly seasonal but otherwise very stable (see also Excel sheet called Calopeia).

Sorange: Hardwood floor laminatesHardwood floors are coming back into fashion. A common product addressing this market is a laminated wood panel that is made to snap together to easily cover a floor. However, poor acoustic properties of the laminates have been a problem in apartment buildings and condominiums where sound is easily transmitted to downstairs neighbors. Manufacturing of the laminates is concentrated in Sorange and two large manufacturers of laminates will add premium product lines with better acoustic insulation on day 640. Those laminates are a market for Jacobs' foam chemical. Demand on day 640 is expected to be 0 and grow linearly until day 1460 by 0.16 each day (see also Excel sheet called Sorange).

Tyran and Fardo: Premium home appliancesCustomers of premium home appliances, especially driers and dishwashers, are willing to pay a premium for sound insulation. An appliance manufacturer with factories in Tyran and Fardo is offering a premium acoustic insulation option on several of its high-end appliances. Those appliances are a market for Jacobs' foam chemical. Demand from these appliance manufacturers will begin on day 640. The average demand is expected to be about 16 per day for both Tyran and Fardo. (see also Excel sheet called TyranFardo).

Entworpe: Insulation products for commercial buildersA single manufacturer supplies insulating quilts for insertion into walls in new construction projects where both wall thinness and thermal insulation are important. These projects include laboratories inside office buildings and saunas inside commercial gyms. The quilts are a market for Jacobs' foam chemical. Demand from the manufacturer will begin on day 640. The demand is not seasonal and is not trending either upward or downward. While the average demand is expected to be about 16 per day the quilt manufacturer will use an inventory policy where 250 units are purchased whenever its inventory drops to a predetermined level. So orders are always for 250 units, but average demand per day is about 16 (see also Excel sheet called Entworpe).

The Assignment

DecisionsJacobs management would like to design a supply chain network for Pangea. It’s current network consist of a factory in Calopeia with a capacity of 20. You have been hired to suggest a network design that will maximize profits for Jacobs Industry. Designing such a network is complex and includes the following decisions:

·  Should the factory in Calopeia be expanded?

·  Should factories in other regions be built? If so, what should their capacity be?

·  Should all markets/regions be served? If not, which markets/regions should be served?

Your network design will run from day 1 till day 1460. Your goal is to maximize the cash position generated by Jacobs during this time. Investment in capital (such as new factories and factory capacity) will become obsolete on day 1460.

Production parametersYou have $20,000,000 to design your network. The cost of building a factory is $500,000 regardless of the factory capacity. The cost of capacity is $50,000. Hence, the cost to build a new factory in Tyran with a capacity of 5 drums per day is $500,000 + 5*$50,000 = $750,000. The cost of adding 20 units of capacity to the existing factory in Calopeia is 20*$50,000 = $1,000,000.

Transportation parametersFinished drums are shipped from the factory warehouse by mail to the customers. Factories can ship to all the regions in Pangea. The shipping costs are as follows:

Shipping time is 1 day independent of origin and destination.

Financial and other parametersAll customers pay $1450 per drum and the production cost is $1200 per drum. The drum must be shipped within 24 hours of receiving the order or the order is lost. Orders may be partially filled and one order may be filled from multiple factories. Each factory has warehouse space to hold up to 500 finished drums. If warehouse space is used completely, the factory will remain idle until warehouse space becomes available.

Interest accrues on cash at 10% per year, compounded daily.