SUPPLY CHAIN MANAGEMENT

Assignment-2
Bio Pharma

Submitted by: Modi Udit Jigneshkumar

2022PGP237 (Section: G)

 A leading manufacturer of bulk chemicals for the pharmaceutical sector is Biopharma,

Inc. Two compounds, internally referred to as Highcal and Relax, have patents held
by the corporation. The business's pharmaceutical division uses these bulk compounds
internally.
 There are particular chemical requirements that must be satisfied in various global
regions. Yet, all facilities are now configured so that they can manufacture both
compounds for any location in the world. BIOPHARMA transports the chemicals in
specialized containers by sea and in specialized trucks on land.

 The fixed cost includes depreciation, utilities, and the salaries and fringe benefits of
employees involved in general management, scheduling, expediting accounting,
maintenance, and so forth.
 The variable production cost of each chemical consists of two components: raw
materials and productions costs. The variable production cost is incurred in proportion
to the quantity of chemical produced and includes direct labor and scrap.

 For its study, the task committee is taking a number of ideas into consideration. One
choice is to maintain the global network in its present form and functionality. Another
possibility is to shut down some factories so that just one chemical is produced. All
variable expenses are eliminated when a plant is shut down, and 80% of yearly fixed
costs are saved (the remaining 20% is used to cover expenditures associated with the
plant shutdown).
 Similar to this, a factory that can only produce one chemical saves 80% of the fixed
cost related to the other chemical. Closing the Japanese factory and restricting the
German plant to a single chemical are the two possibilities that are being given
significant consideration.
 SOLUTION
Option 1: Minimizing cost with existing set up

Cost: 1498.87
This was a generic option where the goal was to reduce total cost while keeping everything
else the same. The best course of action under this strategy is to stop production at the
Japanese factory, keep it closed, and stop manufacturing of Highcal at the US unit.

Option 2(A) : German plant producing only Relax

Cost: 1492.40
The best course of action was to shut down and idle the Japanese factory because there was
no Highcal manufacturing at the German plant.

Option 2(B) : German plant producing only Highcal

Cost: 1488.16
The best course of action was to stop producing Highcal at the German facility, idle the
Japanese factory, stop producing Highcal there, and stop producing Highcal at the US plant.

Option 3 : Shutting down the Japanese plant

Cost: 1475.67
The best outcome came from shutting down the Japanese factory, where all other plants—
aside from the US—produced both compounds, but the US produced just Relax.

Conclusion: The shutting down of the Japanese facility is the best course of action. The
German facility could manufacture solely Highcal, leaving the Japanese plant idle, but
considering that the Japanese plant is a technical leader in terms of its capacity to
manage legal and environmental challenges, this is the next best option.