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NO Sunflower 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 20000 tons of sunflower seeds.

These are zero waste factories producing sunflower husk and pressed cake as by-products.

First, the sunflower seeds are de-husked, which leaves us with:

  • Husk – 20%
  • Grain – 80%

The sunflower grain is further processed to receive:

  • Sunflower oil – 40%
  • Pressed cake – 60%

Factories produce two types of sunflower oil:

  • Unrefined
  • Refined

The supply chain comprises:

  • 80 customers in Russia, Ukraine, Turkey and Egypt
  • One factory in Russia and one in Ukraine
  • Two suppliers in Ukraine and one in Russia
  • Four ports: in Russia, Ukraine, Turkey and Egypt

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 ports in 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
Import tariffs
Country/Product Oil Husk Pressed Cake
Russia 15% 5% 5%
Ukraine 8,30% 20% 20%
Turkey 23% 5% 5%
Egypt 20.50% 5% 5%
Demand

Demand differs for each product:

  • 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 82 tons per week per customer.
  • Husk – the average demand constitutes 49 tons per week per customer.

Demand for sunflower oil and its by-products changes during the modeling period of three years:

  • 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
Goal

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
Result

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 batches 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.

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