Omya Hustadmarmor Optimizes

Its Supply Chain for Delivering

CaCO3 Slurry to European Paper
Manufacturers

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 Introduction
Omya Hustadmarmor produces CaCO3 slurry used in
European papermaking industry.
Yearly production > 3 million metric tons
Production of 16 slurry variants
Transportation (major part of the total production costs):
◦ vessels from plant to the first-tier tank farms
 capacity - 2,400-16,000 metric ton
 direct single destination shipping
 Lead time – 2-5 days in summer, ~6 days in winter
◦ smaller barges, rail, or truck: first-tier to second-tier and tank farms to the
paper mills
Profitability  Larger vessels are more economical
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Operational Challenges
 Uncertainty on both the demand side and the supply side
 Planners decide which vessel should depart on which day for which
tank farm
 What mix of products each vessel should carry
 Tank farms to maintain high safety stock.
 Constraints on transportation quantities – min 60% by volume and max
acc to their weight capacities
 Interdependencies of vessels – choice of product mix
 Only one quay – loading time 5 -15 hrs
 Distribution plan & production plan - Not in sync
 Problem : INVENTORY ROUTING PROBLEM

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Traditional Method

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Problems with traditional Method

 Informal process
 Increased complexity due to Continuous investments
 Use of small vessels created a financial burden
 Reduced profitability due to increased costs for electricity, fuel,
raw materials, etc.
 Stress at different levels and within different functions

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Using large vessels
Increased
production

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Modelling the Inventory Routing
Problem
 Optimized the problem as a LP using a solver.
 Vessels deliver products only to a single destination.

 However, some characteristics make it difficult-

◦ Discrete(choice of route and vehicles) and

Continuous(Shipment quantities and inventory levels)
variables
◦ Multiple products and their mix to be managed– 16
variants
◦ Time varying demands of various products
◦ Heterogeneous fleet of vehicles – optimization of shipment
quantity as well as vessels.
◦ Linear objective function – leading to suboptimal
solutions.
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 One of the top 5 finalists to compete for Franz Edelman
Award for Achievement in Operations Research.
 Existing solutions:

◦ Single homogeneous product

◦ Multiple products but separate planning shipments from
scheduling vessels.
 Optimization through DSS on a metaheuristic algorithm:

◦ Greedy heuristic - For a given order of tank farms, find the

transportation costs of each farm
◦ Local Search Algo - Swap tank farms in the fix order to
strictly improve the solution
 Several versions of the heuristic lead to improved
performance (speed and quality).

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The Decision Support System

• Optimizer engine in C++

• User Interface
- load inventory level : current, maximum level, safety stock
- demand: per product, destination, per day
- transportation costs
- travel time
- loading capacity at the factory
- vessel data
• Output
 shipping company: planned routes
 tank farm managers: planned future inventory
 vessel schedules
 Production manager- product loading each day
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 Use of DSS
 Planning horizon of 28 days – with maximum use of large vessels
 Distribution plan can be reoptimized
 Cost of change – feasibility issue
 Decision power – centralized with DISTRIBUTION

Benefits
 Savings in production costs- stabilized production, reduced changes
 Predictability increased
 Product quality improved
 Volume shipped in large vessels – inc from 39% to 65% - EOS
 Improved utilization of existing storage capacity
 Improved supply chain reactivity and control

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 Conclusion
 The analysis can be extended to similar industries like oil
and gas.
 In competitive industries, the demand for synchronising
transportation also increases.
 Significant cost savings can be achieved through inventory
routing
Recommendations:
 Production planning should be changed from manual to
DSS
 In fact, integrated approach to plan production and
distribution will be more beneficial

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Modelling

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