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Euronylon

Euronylon. Decisions tree. STANDARD RATE. ONLY“A”. MONOPRODUCT. REDUCED RATE. ONLY“B”. 1 cycle: A-B. Starts with “B”. MULTIPRODUCTS. 2 cycles : A-B-A-B. Starts with “A”. 3 cycles: A-B-A-B-A-B. Etc. Reduced production rate. Lack of efficiency: low contribution margin

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Euronylon

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  1. Euronylon

  2. Decisionstree STANDARD RATE ONLY“A” MONOPRODUCT REDUCED RATE ONLY“B” 1 cycle: A-B Starts with “B” MULTIPRODUCTS 2 cycles : A-B-A-B Starts with “A” 3 cycles: A-B-A-B-A-B Etc.

  3. Reduced production rate • Lack of efficiency: low contribution margin • 2500 Ton / 300 days= 8,33 Ton/day (-16,6%) • Margin becomes: • 3 - 1,82 – 0,0025 x 16,6 = 1,14 €/kg • Yearly: • 2500 x 1000 x 1,14 = 2.850.000 €

  4. Standard production rate • Margin is (3-1,82) = 1,18 €/kg (equal to 2.950.000 Euro • New start cost • (Euronylon must be ready to sell on Jan 1st) • 1,5 [days] x 10.000 [kg/day] x 1,82 [€/kg] x 0,4 = 10.920 € • Stock holding cost ? • No infrasctructure cost (excess in size of finished good warehosue)

  5. Opportunitycostof stock holding • In 250 days: • Plant produces 10 Ton/day • Demand is 8,33 Ton /day • Excess of production vs demand of 1,66 Ton/day 415 Ton 300 250

  6. Opportunitycostof stock holding • Stock holding cost is equal to: Average inventory: about 208 Ton x Variable cost 1,82 €/gg x Interest rate (models the opportunity cost of having frozen money into stock instead of keeping it available for other investments)

  7. Interest rate

  8. Optimalsolutiondependby the context (interest rate) • Reduced production rate: 2.850.000 € • Standard rate: 2.950.000 – 10.920 –stock holding cost • hypotesis “I=30%”: • Stock holding cost about 113.000 €, total result = 2.826.080 € • hypotesis “I=10%” • Stock holding cost about 37.856 €, total result = 2.901.224

  9. Multiproducts • Production of “B” in “production plan holes” • Benefits: increase margin (also “B”) • Costs: setup Riavvio 1,5 gg Lavaggio 3 gg A B Restart non differential (already accounted in monoproduct alternatve)

  10. Multiproducts • Days to produce“B”: • 50 - 3 - 1,5 - 3 - 1,5 = 41, additional margin: • 10.000 [kg/day] x (3,2 – 2,75) [€/kg] x 41 = 184.500 € • Extra costs: • Wash & clean: 2 x 15.000 € • Technicians (?): 2 x 3 [day] x 150 [€/day, expected daily cost of a technician] = 900 € • Setup cost: 1,5 [daty] x 10.000 [kg/day] x 2,75 [€/kg] x 0,4 = 16.500 € • Final benchmark: circa + 137.100 €

  11. Increasenumberofcycles • Reducioofdaysavailablesto produce “B” due to: • Wash & cleann • Restart • Reductionof stock peaks (halfing stock holding cost): Reduced stock Marginlost

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