# Bio Pharma

Topics: Costs, Total cost, Variable cost Pages: 4 (992 words) Published: March 6, 2011
Bio Pharma
Case Analysis

Question 1
How should BioPharma have used its production network in 2009? Should any of the plants have been idled? What is the annual cost of your proposal, including import duties?

As Landgraf’s objective is to design a more cost-effective network (cost minimization problem subject to various capacity constraints), the following production network in 2009 should have been used by BioPharma: *All numbers below are in millions

*Total Transportation Cost=SUMPRODUCT of each plant’s Highcal production with corresponding transportation costs (TABLE 6-23) plus the SUMPRODUCT of each plant’s Relax production with corresponding transportation costs (TABLE 6-23)

Recommendation:
According to the solver table above, Brazil should have produced 18 unites of both Highcal and Relax, with 7 units of Highcal delivered to Latin America and 1.23 units delivered to Asia w/o Japan; 7 units of Relax delivered to Latin America and 2.77 units delivered to Japan. Other countries’ productions follow the same logic as above. We notice that the Germany and Japan plants should have produced no Relax product to achieve a more cost-effective production network, thus their Relax part of plants has been idled.

*Logic test was used in Excel to determine whether certain fixed costs are applied to each plant in order to calculate the total production cost. For example, as a result of the production network produced in the chart above, German and Japan should have zero production in Relax, therefore no fixed costs are applied to these two plants.

Therefore, the annual cost of my proposal including import duties is \$24.85+\$1268.31+\$195.151=\$1488.311 million.

Question 2
How should Phil structure his global production network? Assume that the past is a reasonable indicator of the future in terms of exchange rates.

If we assume that past is the reasonable indicator of the future in terms of exchange rates, Phil should understand that both Peso and...