CHAPTER SIX
BioPharma Case Questions
1. How should BioPharma have used its production network in 2013? 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 spreadsheet bio-pharma solution. The results
are obtained in the worksheet solution-2013 and are displayed below. Note that
Highcal Production
From /
To
Latin
America
Europe
Asia
w/o
Japan
Japan
Mexico
U.S.
Brazil
7.0
4.0
0.0
0.0
0.0
0.0
Germany
0.0
0.0
0.0
0.0
0.0
0.0
India
0.0
0.0
5.0
7.0
0.0
0.0
Japan
0.0
0.0
0.0
0.0
0.0
0.0
Mexico
0.0
11.0
0.0
0.0
3.0
13.0
U.S.
0.0
0.0
0.0
0.0
0.0
5.0
Relax Production
From /
To
Latin
America
Europe
Asia
w/o
Japan
Japan
Mexico
U.S.
Brazil
7.0
0.0
0.0
0.0
0.0
0.0
Germany
0.0
12.0
0.0
5.0
0.0
0.0
India
0.0
0.0
3.0
3.0
0.0
0.0
Japan
0.0
0.0
0.0
0.0
0.0
0.0
Mexico
0.0
0.0
0.0
0.0
3.0
0.0
U.S.
0.0
0.0
0.0
0.0
0.0
17.0
Total Plant Output
Plant
Total
Brazil
18
Germany
17
India
18
Japan
0
Mexico
30
U.S.
22
2. How should Landgraf structure his global production network? Assume that the
past is a reasonable indicator of the future in terms of exchange rates.
Landgraf should note that the exchange rates have been fairly volatile over the
period from 2006 to 2013. Whereas the Japanese plant is recommended shut for
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 solution shown in Question 1. The plants that
are at capacity in part 1 are Brazil, India, Mexico, and the United States; adding a
4. How are your recommendations affected by the reduction of duties?
A reduction in duties is likely to make trade across regions more attractive. As a
result, production is more likely to be concentrated. Change the Cells A47:F47 in
Highcal Production
From /
To
Latin
America
Europe
Asia
w/o
Japan
Japan
Mexico
U.S.
Brazil
0.0
0.0
0.0
0.0
0.0
0.0
Germany
0.0
0.0
0.0
0.0
0.0
0.0
India
0.0
6.0
5.0
7.0
0.0
0.0
Japan
0.0
0.0
0.0
0.0
0.0
0.0
Mexico
7.0
9.0
0.0
0.0
3.0
11.0
U.S.
0.0
0.0
0.0
0.0
0.0
7.0
Relax Production
From /
To
Latin
America
Europe
Asia
w/o
Japan
Japan
Mexico
U.S.
Brazil
0.0
0.0
0.0
0.0
0.0
0.0
Germany
7.0
12.0
3.0
8.0
3.0
2.0
India
0.0
0.0
0.0
0.0
0.0
0.0
Japan
0.0
0.0
0.0
0.0
0.0
0.0
Mexico
0.0
0.0
0.0
0.0
0.0
0.0
U.S.
0.0
0.0
0.0
0.0
0.0
15.0
Observe that the solution matrix is far less sparse than the case with duties. Both
5. The analysis has assumed that each plant has a100 percent yield (percent output
of acceptable quality). How would you modify your analysis to account for yield
differences across plants?
6. What other factors should be accounted for when making your recommendations?
This global supply chain is exposed to a variety of risks as enumerated below.
Supply chain decisions should be made after careful assessment of the likelihood
of these events and the effectiveness of possible mitigation plans.