Information & industrial

engineering
Production system management lab
Prof. Bongju, Jeong
Team : B team
2010311671 seunghee, Sohn
2011311680 seungmin, Hong
Date of submission : 2011.04.11

CASE: Cook Composites and Polymers Co.

CCP faces three options for addressing its rinse styrene waste stream:
(a) Continue with business-as-usual, sending its rinse styrene to cement kilns;
(b) Sell its rinse styrene on a waste exchange;
(c) Proceed with developing the concrete coating that uses its rinse styrene (BPS).

 Assumptions
1) Keep the current level of quality under the assumption that the problem should be solved.
2) Do not consider the capacity(production time) of CCP Process
3) Exchange transportation costs based on CER(Certified Emission Reductions) trading scheme will
increase each year. (question 3)

Process

Contents *Preparation: *Mixing: Materials are *Gel coat: qualities *Filling:

Occupies the position of mixed following the goods Tested and approved
the batch mixing vessels “recipe”. products are moving the
originating from the *Off-spec: If there is a Drum.
previous confirmed that *Testing: After the potential market, that is
residues well removed mixing was completed, considered offspec, so *Rinsing: Drums are
inspector tested a sample they are moving odd rinsing using the styrene.
against specifications. lotwarehouse.

*Scrap: If there isn’t a

potential market, that is
considered scrap so they
ar disposal
Time 30min Mixing: 90min Filling +Testing: 30min
Testing: 30min

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  CCP Process Problem

 Business as usual (Gel coat)

CCP Company has rinsing a vessel using styrene.
Styrene purchase cost is $0.7/ lb.
Waste disposal cost is $0.2/lb.

 Waste exchange
After rinsing with styrene waste is transported to other companies(ex. Cement company - disposal
styrene can be used by as a raw material in other processes) incurred only for purchase of Styrene and
waste disposal costs will not incur.

 BPS (Make concrete coating business)

CCP Company starts new business that making concrete coating business using styrene.
Then, they are needed start-up cost $3million.
But they don’t have waste sales capacity.

[Q1[1] What criteria should Mike Gromacki be considering when deciding whether to pursue the
waste exchange or concrete coating by-product? If you’re Mike Gromacki, what would
you recommend to management to address its rinse styrene waste stream?

Exchange products or directly using for invest concrete business must decide. That is decide point of
what is more cost- effective. The following information should be considered.

● Production
Production capacity (vessel volume) 550 gal * 15 = 8250 gal
Production cost: (=invest) $α/ lb $α* β
# of product β
Sales cost : 2003 $825 (million)
2004 $965 (million)
2005 $1104 (million)
2006 $1138 (million)
2007 $1071 (million)

 1lb = 0.4536kg
 1gal = 3.7854l, (550gal = 2081.98l)
 8hr/3rotation, 5/weeks, rest 2weeks.
 ( 24hr * 5days * 50weeks = 6000hr/ yr)

● Rinse styrene
Amount of Rinse styrene ?
Rinse styrene buying cost $0.7/ lb

● Waste
Amount of waste ?
Waste disposal cost $0.2/ lb Increasing 5%/ yr

● Exchange
Amount of exchange ?
Exchange cost $0.2/ lb

● CO2

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 Amount of CO2 emissions Production + Transportation + disposal
CO2 emission cost $0.2/ lb
CO2 emission at Gel coat mfg. 2.5 CO2 /styrene lb
CO2 emission 0.25 CO2 /cement lb
at cement mfg. (Styrene) 0.19 CO2 /cement lb
CO2 emission 21.4 CO2/ cement lb
at concrete coating mfg. (Styrene) 14.1 CO2 /cement lb

[Q2[2] Compared to business-as-usual, how would selling its rinse styrene to a waste exchange or
producing the concrete coating by-product affect the production of gel coats? Assume that
the gel coat production process is operating at capacity.

Answer: The processing of waste being discharged about fundamental solution is reducing amount of
waste, but it concerns the quality problem without rinse styrene. CCP has to decide how to dispose waste
as the following 3-type of alternatives. First, waste is just disposed. Second, start a new business. Third,
exchanging waste to 3rd party company for using waste as a raw material.

Returning to the question, selling of rinse styrene does not affect gel coat production. Transferring to 3rd party
company is just satisfied a required condition about amount of waste styrene. Therefore waste exchange or
producing the concrete coating by-product does not affect, because these are subordinate relationship by amount of
waste.

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[Q33] Compared to business-as-usual, what are the financial implications of selling its rinse
styrene to a waste exchange or of producing the concrete coating by-product (BPS)?

Compare ① ②
Profit In section ①, it is more profitable to In section ②, it is more profitable to start a
exchange waste styrene to other company. new business. Because using amount of
But profits which are new business and styrene is increased by increasing
waste exchange become narrow toward the production of concrete coating.
end because of transportation cost of Waste
exchange. Break-even point is the time
which initial investment cost is recovered.

Compare ③ ④
Profit In section ③ for profit, business as usual is In section ④, the profit of new business is
better than new business. But profits which larger by reusing the waste. If the cost of
are new business and business as usual waste disposal is bigger than 5% per annum,
become narrow toward the end because of Section 4 of the area to further become
disposal cost of waste which increases larger so new business is more profitable for
annual. starting faster.

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Result By comparing the above results for the three alternatives, exchange waste is more profitable
than business as usual. Among three alternatives, at the time of new business profit is larger
than the profit of waste exchange, new business would be the most profitable.

CCP company, however, new business in the sales department of the current CCP company
nor the ability to sell, which causes damage to the original process of the CCP may be
concerned . Therefore, if there is support of more systematic production and operations
departments in new business for future, profit is expected to increase.

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[Q44] Compared to business-as-usual, how would you evaluate the relative environmental
impact of producing the concrete coating by-product? For this question, consider the
impact on carbon dioxide (CO2) emissions, but consider the impacts system-wide (i.e., not
just as CCP’s factory). What tradeoffs are involved? For each pound of rinse styrene
diverted from cement kilns to create concrete coatings, by how much do CO2 emissions fall
or rise? Assume that CCP’s sales of concrete coatings would substitute for sales by other
concrete coating producers (i.e., CCP’s sales would not alter the total sales quantity in the
concrete coatings market).

● CO2 emissions

Answer: Using Styrene in each business is affecting cost and CO2 emissions. In concrete coating, new business is
started by CCP, the initial investment cost of $ 3,000,000 be incurred accordingly, but the cost of
disposing of contaminated styrene does not incur. Aside from cost, there are difference CO2 emissions
between using styrene in the case and otherwise. The following is a comparison of CO2 emissions each
by business to the production of cement and concrete coating amount of styrene.

● CO2
CO2 emission 5 CO2 /20cement lb
at cement mfg. 3.8 CO2 /20cement lb(1Styrene lb)
CO2 emission 5.67 CO2/ 2concrete lb
at concrete coating mfg. 3.73 CO2 /2concrete lb(1Styrene lb)
CO2 emissions(lb)

Styrene(lb)

Result According to the styrene used by business a look at CO2 emissions, styrene due to the use
in production reduced in each business can be seen. This point of view of CO2 emissions in
a simple to use environmentally-styrene is good, but concrete coating business has to invest
$ 3,000,000 to reduce CO2 emissions so cost and CO2 emissions result in trade - off
relationship..
In the case of styrene diverted from cement kilns to create concrete coatings, CO2
emissions is slightly fallen

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 ● Opportunity cost of each business by CER(Certified Emission Reduction)

Using styrene can reduced CO2 emissions each business. So we considered the CER(Certified Emission
Reductions) trading scheme. Certified Emission Reductions (CERs) are a type of emissions unit (or carbon
credits) issued by the Clean Development Mechanism (CDM) Executive Board for emission reductions achieved
by CDM projects and verified by a DOE under the rules of the Kyoto Protocol.

The following shows the sign which is opportunity cost due to carbon trading in cement business and concrete
coating business. For concrete coating business produce 2concrete/lb per 1styrene/lb and cement business can
produce 20cement/lb per 1styrene. Thus we consider cost in case of the productions (2concrete/lb, 20cement/lb)
of CO2 emissions.

● CER(Certified Emission Reduction)

Exchange cost of CO2 emissions $24.5/ ton
= $0.0011/lb

Styrene 2Concrete 2concrete Opportunity cost of 20Cement 20cement Opportunity cost of

(lb) (lb) (Styrene/lb) concrete (lb) (Styrene/lb) cement

1 5.66 3.72 $0.0213885 5 3.8 $0.01323

2 11.32 7.44 $0.042777 10 7.6 $0.02646
3 16.98 11.16 $0.0641655 15 11.4 $0.03969
… … … … … … …
12 67.92 44.64 $0.256662 60 45.6 $0.15876
13 73.58 48.36 $0.2780505 65 49.4 $0.17199
14 79.24 52.08 $0.299439 70 53.2 $0.18522
15 84.9 55.8 $0.3208275 75 57 $0.19845

Cost($)

Styrene(lb)

Result Styrene is used in the above graph, according to the opportunity cost of each business. As
you can see concrete coating business using styrene as the width of CO2 emission is bigger
than cement business. So concrete business can get bigger profits than cement business.

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