Decision Sciences 2

Gartland Case Submission

Under the guidance of Prof. Ishwar Murthy

Section A Group 10

Submitted by:

Chinmay Gokhale 2111022

Shikhar Mahajan 2111055

T Kalyan Kumar 2111062

Aprajita Tewari 2111063

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 Table of Contents

Introduction .................................................................................................................................................. 3
Problem Definition ........................................................................................................................................ 3
Methodology................................................................................................................................................. 4
Linear Program Formulation ......................................................................................................................... 5
Analysis ......................................................................................................................................................... 7

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 Introduction
Gartland Steel is a steel manufacturer based in the US, with 9 plants in the country as of 1978. The
company has always focused on product innovation and an efficient methodology, making it the fourth-
largest steel manufacturer in the US and third in terms of Sales. In recent times, the Clean Air Act of 1970
has induced a new pollution control measure that has led to Gartland pondering over its manufacturing
process and how it could be optimized further to reduce pollution. The Environmental Protection Agency
has set standards for six pollutants, hence forcing companies to implement changes to become compliant
with those new changes. The existing method to analyze pollution during manufacturing involves the use
of the stack-by-stack method, which quantifies pollution from each manufacturing step, and attempts to
reduce the same. The cons of this method is that it takes a high time and cost to implement the process-
wise analysis. Hence, to implement the core objective, two more ways have been explored:

1. The Offset Policy: Firms can trade rights for pollution within non-attainable regions, by either
buying rights, or reducing pollution somewhere. Essentially, firms can use this as a bank to earn
pollution credits and use it wherever they see useful.
2. The Bubble Policy: This approach views manufacturing facilities as a bubble and limits the total
pollution levels as against each process. This measure allows setups to internally vary processes
and work out a combination to both achieve the pollution standards and their production levels.

Meanwhile, there are few small measures and techniques that Gartland is exploring to further drive down
the pollution levels. They are:

1. Changing the mix in some of the open-hearth furnaces will allow Gartland to reduce the operating
cost and the pollution level.
2. Convincing EPA to include the coal and ore yard pollution under the current bubble, hence making
it easier for Gartland to reduce the pollution by the required 6.6% very easily.
3. Buying the Rubber company factory for $750,000 and shutting it down to receive a 250,000
pound/year pollution offset.

Problem Definition

The challenge faced by Gartland is to implement changes to bring the pollution levels down to the required
levels, while maximizing their profits.

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 Methodology
First, we formulate the viable options that Gartland has, and the changes involved in production. This will
give us the possible cases that can be explored. We assume that at every step, Gartland focuses on
maximizing profits by meeting all required standards. The cases being analyzed are:

1. Idealistic case: Profit maximization with all constraints in place except pollution level limit.
2. Bubble method
a. Profit maximization at current levels of production with the constrains as in place for
5,525,000 tones of pollution (B-Init)
b. Profit maximization by including coal and ore yards in the bubble and not implementing
the open-hearth changes, with pollution constrain of 5163000 tonnes, using the rubber
company offset policy. (B-Cn0-R)
c. Profit maximization by including coal and ore yards in the bubble and not implementing
the open-hearth changes, with pollution constrain of 5163000 tonnes, not using the
rubber company offset policy. (B-CnO)
d. Profit maximization by including coal and ore yards in the bubble and implementing the
open-hearth changes, with pollution constraint of 5163000 tonnes, using the rubber
company offset policy. (B-CnO-H-R)
e. Profit maximization by including coal and ore yards in the bubble and implementing the
open-hearth changes, with pollution constrain of 5163000 tonnes, not using the rubbers
company offset policy. (B-CnO-H)
f. Profit maximization not including coal and ore yards in the bubble and not implementing
the open-hearth changes, with pollution constrain of 5163000 tonnes, using the rubber
company offset policy. (B-R)
g. Profit maximization not including coal and ore yards in the bubble and not implementing
the open-hearth changes, with pollution constrain of 5163000 tonnes, not using the
rubber company offset policy. (B)
h. Profit maximization by not including coal and ore yards in the bubble and implementing
the open-hearth changes, with pollution constrain of 5163000 tonnes, using the rubber
company offset policy. (B-H-R)
i. Profit maximization by not including coal and ore yards in the bubble and implementing
the open-hearth changes, with pollution constrain of 5163000 tonnes, not using the
rubber company offset policy. (B-H)
3. Stack-by-stack method (Costs $9 million)
a. Profit Maximization by not implementing open-hearth changes, and an individual
pollution reduction of 6.6%, not using the rubber company offset policy. (S)
b. Profit Maximization by implementing open-hearth changes, and an individual pollution
reduction of 6.6%, not using the rubber company offset policy. (S-H)
c. Profit Maximization by not implementing open-hearth changes, and an individual
pollution reduction of 6.6%, using the rubber company offset policy. (S-R)
d. Profit Maximization by implementing open-hearth changes, and an individual pollution
reduction of 6.6%, using the rubber company offset policy. (S-H-R)

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 Linear Program Formulation

The variables being used for the analysis are as follows:

coal scrappurchase ingots

coke scrap slabs
ore1 scrap1 ingots1
sinter scrap2 ingots2
ore2 steel1 slabs1
pigiron steel2 slabs2
pi1 steel3 slabs3
pi2 steel4 coils
pi3 steel5

1. Process Constrains

Here, we incorporate all machine and process diagram level constraints, which includes machine input
and output balancing, and junction balancing for nodes.

The machine level constraints are:

Coal-1.43 coke =0 ( Cooking)

ore1- 0.52 sinter=0 (Sinter)

coke-0.65pigiron >=0 (Blast Furnace)

ore2- 1.12pigiron>=0 (Blast Furnace)

sinter- 0.47 pigiron>=0 (Blast Furnace)

pi1-0.14steel1 >=0 (Open Hearth furnace)

scrap1-1.08 steel1>=0 (Open hearth Furnace)

scrap2-0.32 steel2 >=0 (Basic oxygen Furnace)

pi2-0.8steel2>=o (Basic Oxygen Furnace)

steel1+steel3-steel5=0 (Steel junction)

steel2 – steel3-steel4=0 (Steel junction)

steel5-1.02ingots=0 (Ingots caster)

steel4-1.06slabs1=0(Continuous caster)

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ingots1-1.2slabs2=0 (Pri-break Down Mill)

slabs3-1.04 coils=0 ( Hot Strip Mill)

Since most intermediate materials get consumed through the process, there are material level
constraints:

steel1+steel3-steel5=0 (Steel junction)

steel2 – steel3-steel4=0 (Steel junction)

0.01pigiron – scrap+0.02steel1+0.02steel2 +0.02ingots+0.04slabs+0.18slabs + 0.04coils=0 (scrap)

ingots-ingots1-ingots2=0 (ingots)

pigiron – pi1-pi2+pi3=0 (scrap)

slabs-slabs1+slabs2-slabs3=0 (slabs)

2. Production Capacity Constrains

pigiron<= 1404000 (Blast Furnace)

steel1 <= 1740000 (Open Hearth)

scrap2<= 2700000 (basic Oxygen Furnace)

ingots<= 3408000 (ingots casting)

slabs<=720000 (continuous casting)

coils <= 3480000 (hot strip unit)

3. Pollution constraints

For the initial case, the pollution is left unconstrained, while for the current case, the pollution is
restricted to 5,525,000 tonnes. Furthermore, the pollution is restricted to 5,163,000 tonnes.

4. Objective Function

- 47.59coal - 34.35coke - 36.2ore1 - 18.77sinter-36.2ore2 – 57.66pigiron - 191.1pi3 - 98.48scrappurchase

- 52.82xsteel1-27.97steel2-4.22ingots-31.86slabs+200ingots2+250slabs1 – 16.31slabs2+ 296.69coils

Further, some specific cost constraints are included in the calculations

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 Analysis

Table 1: Result cases for 6 initial bubble cases (in 1000s)

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Table 2: Result cases for 2 bubble cases and 4 stack cases (in 1000s)

Table 3: Sensitivity Ranges for Variable Cells

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 Table 4: Sensitivity Ranges for Constrains

From the tables, we can analyze the situation based on two metrics, profits, and sensitivity. The best cases
are:

1. Profit maximization not including coal and ore yards in the bubble and not implementing the
open-hearth changes, with pollution constrain of 5163000 tonnes, using the rubber company
offset policy (B-R). This case has a profit of $161,689,000, with relatively high sensitivity ranges,
which accommodates any variation in demand or supply flexibly.
2. Profit maximization not including coal and ore yards in the bubble and not implementing the
open-hearth changes, with pollution constrain of 5163000 tonnes, not using the rubber company
offset policy (B). This case has a profit of $161,396,500, with very low sensitivity ranges, creating
uncertain ability to get through variations in demand and supply.
3. Profit maximization by including coal and ore yards in the bubble and not implementing the open-
hearth changes, with pollution constrain of 5163000 tonnes, using the rubber company offset
policy (B-Cn0-R), with a $159,993,000, and a very high sensitivity range.

Now, if the sole intention of Gartland is profit maximization, they should proceed with a priority order of
B-R > B > B-CnO-R. But if flexibility and the demand-supply estimation must also be incorporated, then
the order qualitatively becomes B-R > B-CnO-R > B. Thus, in a practical situation, it depends on the
priorities of the firm at the given point in time, on which approach to go with.