Biopharma Case Study

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#1. In 2009, BioPharma Inc. experienced a significant decline in profits with high costs of production around the world. Due to a stable demand with little room for increased profitability, cutting costs was a top priority for the coming year. Changing and adapting BioPharma’s global production network was thus a priority in order to be successful and eliminate wasteful surplus. BioPharma should have used their production network differently in 2009 in order to be as efficient as possible. Presented first will be how the structure of the current distribution network leads to room for improvement, followed by how exactly BioPharma should go about structuring their distribution network in order to maximize economic surplus.…show more content…
Figure 1-3 Limiting German Plant Current CostsProposed CostsFixed Costs$72$58Variable Costs $185.3$185.3Transportation Costs$3.8$3.8 Cost Savings for BioPharma: $14 million The import duties of this new proposal must also be considered now with more goods being imported into Japan. With the 2 million kg being imported from Japan, the import duties to Japan are now as follows: $135.25 x .06 = $8.115 This brings us to the final cost of the proposed distribution network Total Cost of Proposal $1252.65+ $16.869 (import tariffs) = $1269.519 million #2. Phil Landgraf, the company’s president for worldwide operations, should structure BioPharma’s distribution network to eliminate inefficiencies at all levels, yet still be flexible to face uncontrollable factors such as fluctuating exchange rates. As shown earlier in the report, certain actions like shutting down the Japanese plant and limiting the German plant to only one chemical are neccessary in order to cut costs. Those two actions alone will save the company millions annually. Also, adjusting the production levels of certain plants in order to most efficiently meet the demand around the world is needed, such as the German plant producing an additional 2 million kg of HighCal to help meet the Japanese demand because it is the only plant with excess capacity and the
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