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Capacity Management and Contract Engineering
IFOR Events
Seminar:
'Optimization & Applications'
(see information & program)
Feb 20 - May 28, 2012
IFOR Mitteilungen
This booklet informs about ongoing projects and future events at the IFOR and appears once at the end of the year.
| Author | Philippe Schiltknecht |
| Abstract |
For the last few years, traditional markets have been affected by rising competition and increasing dynamics. This trend exposes many companies to new uncertainties and risks. To deal with these challenges it is necessary to increase adaptiveness and reactivity and to act proactively. This «mobility» in general is referred to as flexibility. The dissertation at hand focuses on the identification, valuation and comparison of different flexibilities for the business sector Exclusive Synthesis at Lonza Group Ltd. (LES) and discusses their dependencies and interactions. The market of exclusive synthesis is specialized in customized services related to research, development and the manufacturing of chemicals, intermediates and active pharmaceutical ingredients from preclinical to commercial quantities. The market of exclusive synthesis is characterized by a small number of customers and an according «exclusivity» of contracts (make-to-order). Contracts are negotiated individually (contract engineering) and usually feature a high degree of customer flexibility in terms of demand quantity and delivery date. Undoubtedly this increases customers' loyalty and satisfaction but exposes the manufacturer to uncertainty with respect to production of the different products (capacity management), which may lead to capacity shortages, and require replanning and (expensive) adjustments in production. In view of the business functions «Sales & Marketing» and «Operations» this work focuses on the investigation of operational and contractual flexibilities, by which LES can react to the uncertainties and risks mentioned above. After a general discussion about the basic workflow at LES, the work will concentrate on different flexibility terms. This will be followed by a concept of how to valuate flexibility. It is shown that for a given contract portfolio and one bottleneck-plant the relevante LES problem can be formulated as a multistage decision problem. Given the multistage framework where for every point in time it has to be decided whether a product is to be produced now (1st stage) or will be produced at a later point in time (2nd stage), it is argued that the basic problem can be addressed in a 2-stage framework. The corresponding 2-stage approach is formulated as a stochastic mixed integer linear program. In particular the formulation includes a profit-maximizing modeling as well as a risk-minimizing formulation based on Conditional Value-at-Risk. It turns out in the performed case study that the contractual and operational aspects are closely related and that the value of different flexibilities is determined by both the specifications of the different contracts and the operational process. In particular it will be shown that some contractual and operational flexibilities can complement one another. In view of the optimization with respect to expected profit or risk, the investigations illustrate that the valuation of flexibility yields different results for different objectives. More precisely, flexibility is generally valued more highly under a risk perspective than under a risk neutral approach. Finally, it becomes apparent, how strong decisions may vary subject to different objectives. |
| Download | PDF, PS.gz |
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