CASE: LUMBER
REMANUFACTURING
A
California-based
remanufacturing
operation hired Optware Solutions to help them optimize their business and
improve profitability. The cut-stock business involves purchasing lumber
components and sawing them into small blocks of specific sizes and grades for
particular end uses. There are literally thousands of potential conversion
options in the procurement and processing of components. In this case the
client desired to include a representation of company-owned sawmills to allow
company-wide optimization of resources. The basic questions to answer were:
"What logs should I buy?", "What lumber should I saw",
"What lumber should I buy from outside sources?", "How should
the lumber be remanufactured?", "What products are most
profitable?".
The application of optimization
technology included the following model contents:
-
Numerous potential shift
configuration options: A given shift configuration will typically have
different hours available for the various machine centers, as well as
different semi-fixed costs. ‘Departmental’ fixed costs also vary by
shift configuration. All the equipment functionally linked to the same
department must run the same shift configuration option (mixed integer) .
The optimization model has become an
integral part of this client’s business culture. Use of the system has the
strong support of top management. The model is used in tandem with the company’s
annual business planning/budgeting to keep the plan "alive and
working" during the year as significant changes in the business
environment take place.
The client has experienced a number of
benefits from the use of optimization including: improved fiber utilization,
improved machine utilization, Improved product mix, reduced inventories,
reduced manufacturing costs, improved coordination between business units and
personnel, and improved profits by some $500,000 per year.
