Biopharma Case Study

1280 Words6 Pages
Isaac Walker
BioPharma, Inc. case study
October 20, 2011

A. Set 1 Questions:

1. Discuss the financial status of BioPharma, Inc. in 2009

As of 2009, BioPharma is looking to reduce costs across the board. Profits have been steeply declining while production costs are high, especially at its German and Japanese facilities. With exception of India, demand is expected to remain relatively stable for the short-term future, so BioPharma can no longer afford its costly surplus capacity. BioPharma produces and sells two chemicals in bulk. Each plant they currently have is capable of producing both chemicals. They are willing to idle production at the Germany and Japan plants on one or both chemicals in order to reduce
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3. Is there any plant for which it may be worth adding a million kg of additional capacity at a fixed cost of $3M per year?

Yes, as it stands right now, India receives all 5 units of Highcal from its own region but due to capacity reasons, must import one unit of Relax from the US to meet its demand. Increasing their capacity by 1 unit would allow them to produce all their demand in region while reducing transportation costs and eliminating import costs for India. This savings would drop the overall cost of the global supply network to $1.301 billion annually.

4. How are your recommendations affected by the reduction of duties?

My recommendations would not be that affected by a reduction in duties. The US, Europe and Japan already have relatively low import duties, thus why they depend on imported supply from other regions. And while Latin America, India, and Mexico might be able to import more if tariffs were lowered, they still are heavily relied on for production, so transportation cost and any tariffs could be saved by utilizing the production that is already taking place in those regions. The only way this would change would be if the production costs in the those regions begins to increase to the point where it’s cheaper to produce in other regions, but this is not the case at the moment.

5. The
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