PROVE THE VALUE
Optimizing Raw Material Shipments at Omya Hustadmarmor
The financial success of Omya Hustadmarmor, an international supplier of calcium carbonate slurry products to paper manufacturers throughout Europe, depends heavily upon its ability to ship its product efficiently throughout Europe from a Norwegian facility. With rising costs and intensifying competition, the company needed an accurate, systematic methodology to schedule production and shipments to customers with minimum waste and shipping vessel down time.
In particular, Omya Hustadmarmor needed to maximize its use of large shipping vessels to transport its products to distribution terminals, from which they are transferred to smaller barges, trains, and trucks to reach paper manufacturers. Large shipping vessels provide significant economies of scale but have less scheduling flexibility than smaller vessels. In addition, vessels owned by the company are leased to other shippers when not needed to transport Hustadmarmor’s product; keeping them in constant use yields essential revenue. The company shipping department’s challenge: Determine optimal departure dates, destinations, and quantities of each product type for each vessel. In addition, the company needs to schedule production to coordinate with the shipping schedule to avoid excess inventories or insufficient supplies to meet customer requirements.
The O.R. Solution
Operations research experts at Molde University, the Norwegian School of Management and the School of Mines of Saint-Étienne (France), working with the company, devised a full decision-support system (DSS) to meet the challenge. The system is set up so that managers at Omya Hustadmarmor input basic variables, including customer demand for each product, vessel availability, cost-per-vessel, terminal destinations, transport times, and inventory levels. The DSS system optimizes various outcomes running through multiple scenarios using a “greedy heuristic” analytical approach. Initial solutions are re-tested with modified parameters, including the prospect of schedule changes due to vessel delays.
System outputs include vessel routing, inventories for each product at each transportation hub, and shipping costs. Shipping cost data can guide company managers in determining, for example, whether revenue opportunities for leasing company vessels could more than offset costs under particular shipping scenarios. On a broader scale, the DSS helps Omya Hustadmarmor determine when it can come out ahead by investing in additional shipping vessels.
Omya Hustadmarmor has saved several million dollars since deploying the DSS in 2004. Savings have been achieved by maximizing the use of large vessels (resulting in more than a 10% reduction in oil consumption) and by maintaining a more stable production schedule, improving capacity utilization. In addition, optimized scheduling of shipping vessels has enabled the company to increase revenue from shipping products for other shippers when company vessels were not needed. Finally, the OR-based system has improved supply chain reactivity and control, reducing time required for adjusting schedules when shipping delays, machine breakdowns, or other sudden interruptions occur.