Oil Factory (with By-Products)
A company acquires sunflower
oil factories in Russia and Ukraine to merge their supply chains.
The maximum monthly throughput of each factory constitutes
of sunflower seeds.
These are zero waste factories producing sunflower husk and
cake as by-products.
First, the sunflower seeds are de-husked, which leaves us
The sunflower grain is further processed to receive:
- Sunflower oil – 40%
- Pressed cake – 60%
Factories produce two types of sunflower oil:
The supply chain comprises:
- 80 customers in Russia, Ukraine, Turkey
- One factory in Russia and one in Ukraine
- Two suppliers in Ukraine and one in
- Four ports: in Russia, Ukraine, Turkey
We want to choose optimal locations for:
- Three distribution centers in Russia
- Two distribution centers in Ukraine
- One distribution center in Turkey
- One distribution center in Egypt
Products are delivered to Turkey and Egypt by sea through
Odessa (Ukraine) and Novorossiysk (Russia).
The by-products (husk and pressed cake) are also processed:
- Husk is pressed into briquettes and is
sold as fuel
- Pressed cake is sold as animal food
Demand differs for each product:
Demand for sunflower oil and its by-products changes during the
modeling period of three years:
- Sunflower oil – the total annual demand constitutes 12
liters per capita. If we analyze it by the type of oil, then we will
get the following figures: refined oil – 70%, unrefined – 30%.
- Pressed cake – the average demand constitutes 54.6 tons per
week per customer.
- Husk – the average demand constitutes 35 tons per week per
- It is constant during the first year for all products
- It increases for Oil by 30% in August and September
during the second and the third years
- It decreases for Pressed cake by 30% from April to
October during the third year
Find optimal locations (from the list of available locations)
for the required number of distribution centers.
Analyze the data within the three years on:
- Demand fulfillment
- Production utilization
Results offer us several supply chain configurations with
detailed statistics, which show that:
- During the first year demand for
sunflower oil was completely satisfied, while the demand for the
by-products was partially satisfied. If we had produced additional
to fully satisfy demand for the by-products, we would have created a
glut of the main product, thus making the supply chain less profitable.
- During the second year demand for oil increased in
August and September. Part of the demand in these months was not
satisfied. Alongside this, the level of satisfied demand for the
by-products increased, since more oil was produced.
- During the third year the level of satisfied
demand decreased and remained low from April to October). In August and
September demand satisfaction dropped even lower because the
increase in demand for sunflower oil coincided with the decrease in
demand for pressed cake.
the NO experiment