Georgia Pacific—Case Competition

GEORGIA PACIFIC—CASE COMPETITIONBRAD HOSKING AND TAYLOR WILSON

INTRODUCTION TO THE PROJECT

Georgia-Pacific produces a paper towel under the brand name Sparkle® Develop a production plan to ensure Georgia-Pacific can continue

production of Sparkle® Wet Strength Resin (WSR) is used to produce Sparkle® WSR contains 3 key chemicals

Adipic Acid (AA), Diethylenetriamine (DEA), and Epichlorohydrin (EPI) Project Objective: Keep the production of Epichlorohydrin (EPI) continuous

in the event of a supplier problem

PREMISES

Primary supplier had production issue starting Sept. 1st, 2015 Primary supplier has 3 weeks to fix production issue or GP will contract a new supplier GP’s shipment schedule is constant through end of November October premise: use 3-day moving average to determine the demands for the 31st day of

October Short-term premises:

o Primary Supplier’s last shipment will reach GP on Sept. 7th

o Supplier 2—spot buy price Sept. $0.99, supplier safety rating B, location: domestic, lead time 1 weeko Supplier 4—spot buy price Sept. $1.00, supplier safety rating B, location: domestic, lead time 1 week

Long-term premises:o Implement long-term solution if Primary supplier cannot fix production issueo Retest product quality from supplier 5 during 3rd week

BASELINESparkle

Manufacturing Cost ($)

Wood Pulp material cost ($)

WSR Interplant

Freight Cost

WSR Manufacturin

g Cost ($)

WSR Material Cost

($)

Sparkle Production Total

Cost ($)

$121,634 $134,136 $516 $722 $45,773 $302,781 $121,634 $134,136 $324 $453 $2,620 $259,167 $112,882 $124,484 $324 $453 $2,620 $240,763

$62,104 $68,487 $324 $453 $2,620 $133,989 $67,280 $74,195 $324 $453 $2,620 $144,871 $85,393 $94,170 $324 $453 $2,620 $182,960 $72,455 $79,902 $324 $453 $2,620 $155,754 $87,981 $97,024 $438 $613 $3,547 $189,603 $87,981 $97,024 $438 $613 $3,547 $189,603 $90,569 $99,877 $406 $569 $3,292 $194,714 $87,981 $97,024 $224 $313 $1,811 $187,353 $93,156 $102,731 $242 $339 $1,962 $198,431 $77,630 $85,609 $307 $430 $2,490 $166,468 $80,218 $88,463 $261 $365 $2,113 $171,420 $75,043 $82,755 $317 $444 $2,566 $161,124 $82,806 $91,316 $317 $444 $2,566 $177,448 $85,393 $94,170 $326 $457 $2,641 $182,987 $90,569 $99,877 $317 $444 $2,566 $193,772 $87,981 $97,024 $335 $470 $2,717 $188,527 $85,393 $94,170 $280 $391 $2,264 $182,498 $87,981 $97,024 $289 $404 $2,339 $188,037 $80,218 $88,463 $270 $378 $2,189 $171,518 $72,455 $79,902 $298 $417 $2,415 $155,487 $77,630 $85,609 $307 $430 $2,490 $166,468 $77,630 $85,609 $326 $457 $2,641 $166,663 $87,981 $97,024 $317 $444 $2,566 $188,331

$113,858 $125,560 $307 $430 $2,490 $242,646 $116,446 $128,414 $317 $444 $2,566 $248,185 $111,270 $122,706 $289 $404 $2,339 $237,009 $113,858 $125,560 $261 $365 $2,113 $242,157

$2,695,414 $2,972,442 $9,647 $13,506 $161,320 $5,852,330 $89,847 $99,081 $322 $450 $5,377 $195,078

September Total Production Cost # days / month = 30 $2,695,414 $2,972,442 $9,647 $13,506 $161,320 $5,852,330

October Total Production Cost # days / month = 31 $2,785,261 $3,071,523 $9,969 $13,956 $166,698 $6,047,407

November Total Production Cost # days / month = 30 $2,695,414 $2,972,442 $9,647 $13,506 $161,320 $5,852,330

3-month Total Production Cost total # days = 91 $8,176,089 $9,016,407 $29,263 $40,968 $489,338 $17,752,067

Baseline Cost Analysis:• Cost structure based off

September TL Demand (adjusted for 31st day in Oct.)

• .1175 EPI per wet pound WSR

• EPI Material Cost AS-IS: $0.97/ pound

• Total Sparkle® Production cost AS-IS for 3 month period: $17,752,067

T/L Demand

A B C Total8 10 8 26

11 8 10 2910 7 9 269 8 7 247 9 10 26

12 11 10 337 10 11 28

11 9 14 3414 11 9 3410 13 12 359 12 13 34

12 12 12 368 11 11 309 12 10 31

11 9 9 2912 9 11 3211 10 12 3310 13 12 358 13 13 34

10 11 12 3311 12 11 3413 7 11 319 10 9 28

12 10 8 3011 9 10 3010 13 11 3416 13 15 4417 15 13 4517 12 14 4315 14 15 44

330 323 332 98511 10.8 11.1 32.8

PROBLEM STATEMENT

Sept. 1st, 2015 GP’s primary supplier of EPI encountered an unexpected & significant maintenance issue

There will be no product available for short-term requirements Objectives:

1. Develop a short-term plan to ensure production of Sparkle® does not stop2. Develop a long-term plan in case the original supplier must declare force

majeure

SHORT-TERM SOLUTION

Opportunities• No “Lead time for testing”

required.• No drop in production or inventory

with new supplier turnover• 15,870 lbs. of existing EPI

Inventory buildup allows for some room for error with new EPI supply

Risks• Risk that the primary supplier is

unable to resolve maintenance problem in timely manner

• Supplier 2 unable to complete orders in such short notice

• Supplier Safety Rating B

Purchase EPI on “spot buy” to solve immediate requirements. Starting September 1st, place daily “spot buy” orders with Supplier 2 until the Primary Supplier

determines maintenance solution, declares Force Majeure, or it is time to implement the Long Term Solution.

The cost of EPI (per wet pound WSR) will be $0.99 when placing spot buy orders with Supplier 2.

SHORT-TERM SOLUTION BACK UP PLAN

Purchase EPI on “spot buy” with Supplier 4. Continue to implement this solution until the Primary Supplier either restarts production,

declares Force Majeure, or it is time to implement the Long Term Solution. The cost of EPI (per wet pound WSR) will be $1.00 when placing spot buy orders with

Supplier 4.

Opportunities• Mitigate risk of supplier 2 failing.• Same Opportunities as the short

term solution.

Risks• Same Risks as the

original short term solution.

• Supplier 4 is more risky due to higher cost per EPI.

LONG-TERM SOLUTION

Only implement Long-Term Solution, if the Primary Supplier declares Force Majeure, OR if they have not come up with a solution after three weeks.

Establish a new strategic relationship with EPI Supplier 5. For October, the cost of EPI (per wet pound WSR) will be $0.97 under a contract with supplier 5. For November, the price will go down to $0.94. Risks

• 2 week lead time could lead to supply problems.

• International Supplier Risks

Opportunities• Establish a new strategic

relationship with a supplier• Drive overall cost of production

down. • Supplier Safety Rating A

ACTION PLAN Tuesday, September 1: Georgia-Pacific will

begin placing “Spot Buy” orders with Supplier 2. Continue placing orders until September 30th.

Wednesday, September 16: Test Supplier 5 for product quality and wait for approval (3 business days)

Monday, September 21: Set up contract with supplier 5 to supply EPI for months of October and November.

Wednesday, September 30: Make last spot buy order with supplier 2 (expect last delivery October 7th)

Once contract is in place, provide new supplier with the expected shipment schedule so that shipments will begin arriving in time to fulfill demand for October production.

Sparkle Customer Shipment Schedule

Sparkle Manufacturin

g Cost

Wood Pulp material cost

($)

WSR Interplant Freight Cost

WSR Manufacturing

Cost

WSR Material Cost

($)

Sparkle Production

Total Cost (Supplier 2)

Sparkle Production

Total Cost (AS-IS)

Begin A B C TotalTuesday, September 01, 2015 8 10 8 26 121,634$ 134,136$ 516$ 722$ 45,773$ 302,781$ 302,781$

Wednesday, September 02, 2015 11 8 10 29 121,634$ 134,136$ 324$ 453$ 2,620$ 259,167$ 259,167$ Thursday, September 03, 2015 10 7 9 26 112,882$ 124,484$ 324$ 453$ 2,620$ 240,763$ 240,763$

Friday, September 04, 2015 9 8 7 24 62,104$ 68,487$ 324$ 453$ 2,620$ 133,989$ 133,989$ Saturday, September 05, 2015 7 9 10 26 67,280$ 74,195$ 324$ 453$ 2,620$ 144,871$ 144,871$ Sunday, September 06, 2015 12 11 10 33 85,393$ 94,170$ 324$ 453$ 2,620$ 182,960$ 182,960$ Monday, September 07, 2015 7 10 11 28 72,455$ 79,902$ 324$ 453$ 2,620$ 155,754$ 155,754$ % change per dayTuesday, September 08, 2015 11 9 14 34 87,981$ 97,024$ 438$ 613$ 3,568$ 189,623$ 189,603$ 0.01%

Wednesday, September 09, 2015 14 11 9 34 87,981$ 97,024$ 438$ 613$ 3,568$ 189,623$ 189,603$ 0.01%Thursday, September 10, 2015 10 13 12 35 90,569$ 99,877$ 406$ 569$ 3,311$ 194,733$ 194,714$ 0.01%

Friday, September 11, 2015 9 12 13 34 87,981$ 97,024$ 224$ 313$ 1,822$ 187,363$ 187,353$ 0.01%Saturday, September 12, 2015 12 12 12 36 93,156$ 102,731$ 242$ 339$ 1,973$ 198,442$ 198,431$ 0.01%Sunday, September 13, 2015 8 11 11 30 77,630$ 85,609$ 307$ 430$ 2,505$ 166,482$ 166,468$ 0.01%Monday, September 14, 2015 9 12 10 31 80,218$ 88,463$ 261$ 365$ 2,125$ 171,432$ 171,420$ 0.01%Tuesday, September 15, 2015 11 9 9 29 75,043$ 82,755$ 317$ 444$ 2,581$ 161,139$ 161,124$ 0.01%





Wednesday, September 30, 2015 15 14 15 44 113,858$ 125,560$ 261$ 365$ 2,125$ 242,169$ 242,157$ 0.01%

T/L Demand

IMPACT OF RECOMMENDATION

Short-term Supply Solution:

• Each day spot buy order is placed total cost to produce Sparkle will increase due to the $0.02 increase in EPI material cost.

• If orders are placed all the way through 9/30, there will be a 0.006% cost increase to overall Sparkle production.

Long-Term Supply Solution:

• For October, there will be no positive/negative impact to Sparkle production. (Supplier 5 offers same price as supplier 1)

• For November, the baseline cost to produce Sparkle will decrease by 0.012%.

Risk Mitigation Plan:

• Each day spot buy order is placed total cost to produce Sparkle will increase due to the $0.03 increase in EPI material cost.

• If orders are placed all the way through 9/30, there will be a 0.01% cost increase to overall Sparkle production.

QUESTIONS

We would like to take this time to thank you for the opportunity to present our project. We will take any questions that you may have.

Documents

Georgia Pacific—Case Competition