ASSIGNMENT 2 – SUPPLY CHAIN ANALYTICS (OPS 910) – TRIMESTER 2 2021 Samarco S

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ASSIGNMENT 2 – SUPPLY CHAIN ANALYTICS (OPS 910) – TRIMESTER 2 2021 Samarco S.A. Corporation [Managerial report to be submitted into the Moodle site before the due date] Samarco Mineiração SA is a Brazilian multinational corporation engaged in metals and mining and one of the largest producer of iron ore and nickel in the World. One of the cities where Samarco operates is Ouro Preto. Ouro Preto has grown and thrived along with Samarco, which now is the largest employer in the city. Therefore, the population has always supported the company. Nevertheless, a new generation has emerged in the city. Youth is aware that Samarco’s production process is posing a risk to the population’s health, damaging the environment, and impacting the looks of Ouro Preto. A recent students’ demonstration caused the election of a new board of directors for Samarco in Ouro Preto. The new board is more environmental concern than the previous one, and then willing to change some of the policies of the company so that some of the impacts that Samarco is causing in Ouro Preto are diminished. The new directors have had meetings with Ouro Preto council officers and a youth’s group, to discuss about one of the worst environmental impacts caused by Samarco in Ouro Preto: water pollution. Together they have agreed upon setting water quality standards for Ouro Preto. Samarco contributes to water pollution through mainly three types of mining tailings: type 1, type 2 and type 3. The types of water pollutants discharged by Samarco in Ouro Preto are sulphuric acid (H2SO4), arsenic acid (H3AsO4) and cyanide (CN-). According to the news standards, Samarco must reduce its annual water pollutants (H2SO4, H3AsO4, CN-) by at least the extends presented in Table 1. Table 1: New clean water standards for Samarco S.A. in Ouro Preto Pollutant Minimum required reduction in annual pollutant emission rate (millions of litters) H2SO4 50 H3AsO4 100 CN- 75 Management has been requested by the board of directors to determine how to accomplish these reductions at minimum cost. Management found out that there are three types of reduction techniques: adopting recycling, building a water storage facility and implementing a water management system. Each of these techniques has a technological limit (maximum capacity) and can be used at a fraction of its technological limit. Once one of these techniques is implemented, the amount of water pollutants produced decreases. Table 2 displays the water pollutant reduction by adopting a reduction technique to its full technological limit. For purposes of analysis, it is assumed that each method also can be used less fully to achieve any fraction of the reductions shown in Table 2. The emission reduction achieved by each method is not substantially affected by whether the other methods are also used. Table 2: Reduction (in millions of litters per year) from the maximum feasible use of a reduction technique Pollutant Recycling Water storage facility Water management system H2SO4 12 25 13 H3AsO4 35 18 49 CN- 37 28 20 Once these data were created, management realized that no single reduction technique by itself could accomplish all the necessary reductions. On the other hand, implementing all the three techniques at full capacity (technological limit) would be very expensive and much more than the adequate. Accordingly, management figured that the best approach is to use some combination of the reduction techniques (fractional capacities) based upon the relative total annual costs. The total annual cost of a reduction technique consists of operating, maintenance and initial capital costs together with reduced profit due to any decrease in the performance of the production process caused by the reduction technique. Operating, maintenance and initial capital costs and reduced profit are presented in Table 3. This study also determined that the total annual cost of a technique being adopted at a lower capacity level is proportional to the fraction being used. Table 3: Costs and reduced profis from the maximum feasible use of a reduction technique for Samarco S.A in Ouro Preto ($ millions) Reduction technique Operating, Maintenance and initial capital costs Reduced profit Recycling 9 7 10 4 17 5 Water storage facility Water management system Now, Samarco wants to create a plan for the reduction of water pollutant. This plan must specify which reduction techniques will be used and at what fractions of their capacities. Due to the nature of the problem, the linear programming technique must be used to create this plan. Since Samarco S.A. does not have much priori experience with the presented water pollution reduction techniques, the estimated total annual costs of each technique could easily be off by as much as 15% in either direction. Samarco then needs to understand the effect of an inaccuracy in estimating each total annual costs. Moreover, Ouro Preto City Council decided to reduce Samarco’s tax payment to the city by $2.5 million for a reduction of 25% on the required reduction of arsenic acid (H3AsO4). Samarco S.A. thus wants to know if a decrement of 25% on the required reduction of arsenic acid yields a reduction plan more attractive. Business Report 1. Define the business problem 2. Formulate a linear programming model for the problem 3. Find the optimal solution for the problem 4. Discuss the sensitivity analysis Formatting Requirements For proper business communication, your report should also conform to the following requirements. • Submit a pdf file • Use a structured report format for your submission. It should consist of sections one would expect from business reports (e.g., Executive Summary, Introduction, Conclusions, etc.) and you should use section/subsection headings that are meaningful to the topic under discussion • Use appropriate English and punctuation • Keep your report length to no more than 1,500 words (including title page and tables and figures). A good business report is a concise and precise report • Use diagrams and tables if needed. Make sure they are aligned and centred • Take a screenshot of the Excel file (with the model and sensitivity analysis) and include it in the Appendix (do not send the Excel file by email) • Make sure that figures/screenshots are aligned and centred • Do not include references. This is a business report not an academic paper