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Dofasco Fuel Management

Essay by   •  March 7, 2012  •  Research Paper  •  1,570 Words (7 Pages)  •  1,820 Views

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Table of Contents

Table of Contents .................................................................................................................................................... 1 List of Tables ............................................................................................................................................................ 1 List of Exhibits......................................................................................................................................................... 1 Abbreviations used .................................................................................................................................................. 1

Exeutive Summary ....................................................................................................................................................... 2

Our Goal........................................................................................................................................................................ 4

Current Situation .......................................................................................................................................................... 4

Enhanced Situation ...................................................................................................................................................... 5

Sensitivity Analysis ....................................................................................................................................................... 7

How to use the model in the future .......................................................................................................................... 8

Further suggestions for Dofasco ............................................................................................................................. 10

Methodology behind the model ............................................................................................................................... 11

Assumptions................................................................................................................................................................ 12 Exhibits...............................................................................................................13

List of Tables

Table 1: optimal fuel allocation .................................................................................................................................. 5 Table 2: fuel prices per mio BTU .............................................................................................................................. 5 Table 3: optimal allocation.......................................................................................................................................... 6 Table 4: screenshot of model: input .......................................................................................................................... 8 Table 5: screenshot of model: output 1............................................................................9 Table 6: screenshot of model: output 2: Internal costs.........................................................10 Table 7: screenshot of model: output 2: Purchases required...................................................10 Table 8: screenshot of model: output 2: Total fuel cost.........................................................10

List of Exhibits

Exhibit 1: current fuel allocation ............................................................................................................................. 13 Exhibit 2: possible fuel allocation ............................................................................................................................ 13

Abbreviations used

BFG Blast Furnace Gas COG Coke Oven Gas FO Fuel Oil

NG Natural Gas

Executive Summary

Objective

* Optimize the allocation of fuels for the different plants in the light of the complexity of the company and the expected rocketing of external fuel prices.

Results

* Final costs for your company can be reduced with 2.2mio$ annually, by balancing the cost of internally produced BFG and COG with the cost of external purchase of FO and NG.

* Modification of machines can reduce the final costs with an additional 114k$ annually

Future

With the model we constructed, your company is able to just give in the forecasted production data for any given month, as well as the fuel prices. With this input, the model will

* generate the allocation of all fuels

* signal the quantities of external fuels that need to be bought

* determine the final total fuel cost will be for your company for any given month.

Additionally

We have calculated the optimal fuel allocation for DOFASCO at this moment. In doing so, we can eradicate the need for external oil and reduce the need for Natural Gasses tremendously at the same time. Finally, a sensitivity analysis discusses the impact of certain future decisions by your company and some long-term strategic recommendations are provided.

Improved monthly cost

Monthly savings

Annual savings without further modifications

Extra potential modifications

Extra monthly cost reductions Extra potential annual savings

Total potential annual savings

$57,362 $185,006 $2,220,072

$9,528 $114,342

$2,334,414

15 January Decision Sciences

Group 1 2

"Contentment consist not in adding more fuel, but in taking away some fire."

- Thomas Fuller

15 January Decision Sciences Group 1 3



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