Design of an added plan with social responsibility

Suesca Rozo, Kathya Alexandra; Santos Hernández, Andrés Felipe Conference Paper Design of an added plan with social responsibility Provided in Cooperation with: Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management Suggested Citation: Suesca Rozo, Kathya Alexandra; Santos Hernández, Andrés Felipe (2018) : Design of an added plan with social responsibility, In: Kersten, Wolfgang Blecker, Thorsten Ringle, Christian M. (Ed.): The Road to a Digitalized Supply Chain Management: Smart and Digital Solutions for Supply Chain Management. Proceedings of the Hamburg International Conference of Logistics (HICL), Vol. 25, ISBN 978-3-7467-6535-8, epubli GmbH, Berlin, pp. 171-194, https://doi.org/10.15480/882.1870 This Version is available at: https://hdl.handle.net/10419/209349 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-sa/4.0/ Design of an Added Plan with Social Responsibility Kathya Alexandra Suesca Rozo1, Andrés Felipe Santos Hernández1 1 – Escuela Colombiana de Ingeniería ”Julio Garavito” For decades and worldwide, steel has been one of the most important commodity in the development of the industry due to its multiple uses. At present, the offer of steel in Colombia is too low compared to the sector’s demand. This has caused market speculation and a low added value regarding all products made with steel. In such a competitive market, the organizations involved have been developing strategiesto improve their incomes, some of these are developedin the operations area, where the planning is the most important part regarding the cost reduction, minimize the rate of rotation of the personal in the operations area and increment in the effectivity of the supplies chain. Having this need and tendency created, the investigation group designed an added planning model, based on the case of an enterprise that transforms steel in cloves. Using this model in the enterprise will guarantee decrease the shortage in posterior periods and as consequence lower the costs and wastes caused by shortfalls, the costs of keeping an inventory and costs due to high lead time to market. Furthermore, the model will minimize the rate of rotation of the personal in the operations area, this will result encouraging social responsibility which contribute to the organization’s productivity. Keywords: Steel transformation; Added planning; Optimization; Social responsibility First recieved: 30.May.2018 Revised: 09.Jul.2018 Accepted: 16.Jul.2018 171 Design of an Added Plan with Social Responsibility 1 Introduction Since the start of the 50’s, steel in Colombia has become a resource quite relevant regarding development of the industry and the country’s infrastructure. 500.000 tons of steel are expected to be the demand in the projects of infrastructure, such as the routes 4G (El Espectador, 2017). Nowadays, according to Camacero (Cámara Colombiana del Acero), Colombia produces 1.2 million tons of steel and consumes 3.6 million tons, this shows ashortfall in theprimary supply chain of the sector. Therefore, the producers and marketers must import around 2.4 million tons per year, so the demand can be satisfied (Portafolio, 2017). Production of this sector represents 7% of the national industrial GDP and even though it creates more than 40.000 jobs, it still shows problems in reducing the production and logistics costs. This is a consequence of the lack of knowledge regarding the practices in the supply chain and exterior facts, such as the increment of imports in lower prices (Dinero, 2017). Keeping in mind the late technological and industrial tendencies in the world, China has shown to be the asiatic country with the highest production of steel, with around 800 tons per year, provides about 50% of the global demand (El nuevo siglo, 2016). Their companies are owned by the state, so they are highly subsidized and are not governed by market rules (Alacero, 2017). For this reason, their prices are lower than the market, which is known as dumping (El español, 2016). This has generated an oversupply of this product and a drop in international prices (Portafolio, 2017). Not to mention the technical stoppages and closures of steel plants that the overproduction of this asiatic giant has generated (Alacero, 2017). Consequently, the Chinese government has hardworking to close those companies that produce low quality steel made of scrap. Same, with the objective to reduce its production capacity by more than 50 million tons, increment their prices and minimize environmental impacts (Infoacero, 2018). In addition, these decisions are part of the government’s goal of changing its economic model, with less dependence of the industry and more focalized on new technologies (Angencia EFE, 2018). Regarding this inconvenient, the sector must know that it will continue to fight with the price against this rival, since the asiatic country will continue to produce steel at very competitive prices. For this reason, the national companies of sector 172 1 Introduction should implement best practices throughout the supply chain, specifically in the primary chain and the planning of its production, to guarantee the supply of this product at a competitive cost. Given the fact that this product is a commodity, the enterprises involved with this supply chains have had to deal with the prices, and therefore the organizations are concerned and have worked slowly in reducing the operational costs with the purpose of improving their opportunities and therefore their oncomes. Even though detecting the wasting and overspends along the process is relevant (Nave, 2002), this practice does not reduce the costs significantly in comparison to an adequate planning in its supply chain. As Chopra (2008) says, an adequate plan will guarantee the focalization of the resources along the chain so that an emerging market can be handled, even more if there are high lead time to market, uncontrolled product portfolios, over-stock, low service quality, lost sales, and unsatisfied customers. However, the arrival of enterprises such as Gerdau, Votorantim and Techint has improved the sectors know how and its technology level. This, marked by the demand of competitiveness, requires that the customer service and the attention tothemarketdemand anexpansionintheinvestmentsoftheinformationsystems and adequate planning in the supply chain (Munar, 2008). By identifying this need in the sector, the research group has built a model of added planning, through the application of linear programming, for an enterprise located in Bogotá (Colombia) that works in the transformation of steel in construction products, such as rod, mesh, cloves, picks, and other products. The model’s aim is to lower the costs of the planning in the supply chain, the costs are the inversions made with the expectations of getting benefits in the future, but also in the present. How we try to impact in the enterprise is to generate benefits along the whole chain so that we can accomplish a balance between the demand and the offer of cloves. To meet this end, a model has been developed so that the effectivity and the productivity of the resources is improved. A model like this is a representation of reality using linear mathematic expressions, in which we can know with certainty the parameters and by giving it a solution, the model proposes which should be thedecisionstomakeinoneormoretimeperiods(BohórquezQuiroga,Sarmiento Lepesqueur, & Jaimes Suárez, 2013). 173 Design of an Added Plan with Social Responsibility 2 Added Planning Models There are many methods of added planning which can be divided in three groups according to Boiteux, these are: comparative alternatives, use of decision rules and based in models of linear programming (Boiteux, 2007). The linear programming models are the most used nowadays. There are some authors that have developed applications, in this sector, there is Cañas (2013), who planned the production of an industry that belong at the metallurgical industry so that he could maximize utilities by introducing multiphase, multi period, multiproduct models of linear programming and by the development of a constructive heuristic based on the principles of the restrictions theory. Chavez (2014), designed a model of linear programing with the purpose of resolving a problem of added planning in production for Huachipato metallurgical company, considering the restrictions concerning inventory, demand, and capacity. Zurito (2010), made a model of linear programming to minimize the lacks in the inventory and therefore the associated costs. Gholamian & Tavakkoli & Nezam (2015), developed an entire mixed model of linear programming with a multi objective approach, to minimize the total production cost, improve the service quality, minimize fluctuations in the rates of change of the work force and maximize sales. 3 Case Study 3.1 Company and Process Background The enterprise to be analyzed is part of the labor union Camacero (Cámara colombiana del acero), which was created in 2014 with the objective of gathering more than 40 national enterprises dedicated to the production, transformation, and commercializing of steel. This with the purpose of generating solutions in the value chain (El Espectador, 2014). Nowadays, the labor union counts with more than 400 producers registered. In Latin-American, Colombia is stablished as the fourth steel producer after Brazil, México, and Argentina (Alacero, 2017). Nevertheless, Colombia must work to increase its production and improve its competitiveness. 174 3 Case Study AccordingtotheANDI(AsociaciónnacionaldeempresariosdeColombia)between 2007 and 2016 the sector grew 13% (Andi, 2018), despite the hard situation that it has been facing. Given this need and considering the shortage of raw material, the strong competence with foreign enterprises, a model of added planning is proposed so that it determines the ideal production, capacity inventory, stock-out and out-sourcing levels required to satisfy the cloves demand, the product that was chosen to this case of study (Sunil Chopra, 2008). Nevertheless, if the organizations in addition to making a correct planning would add practices of social responsibility, they would assure not only the decrease of costs, but also will assure an improve in their competitiveness. It is also necessary to identify the stage in which the workers are about the learning curve, this means to know if they are beginners, medium or advanced. If enterprises reduce the rotation of their advanced personnel, they could assure not only quality but also the flux in production. We know this because the workers with more experience have a more efficient handling of the resources and guarantee the improvement of the production. 3.2 The Process The fabrication process of the 3”x 24 -kilogram galvanized clove has 5 steps. The rawmaterialforthis productis 5-milligramSAE1023 1 steelwhichcomesinapproximately 2-metric ton rolls. The supplying of this material is made with forklifts, leaving 2 rolls per round in two reelings. These feed two drawing machines, the koch 1 and koch 2. These machines are automatic, the operator handling is needed during the time of charge and discharge. The drawing is the plastic conformation of a material through tensile continuous stresses, through rows, it is possible it’s thinning (Boca, 2017). In this case, a diameter of 5.5-milligram was thinned to a diameter of 3.8-milligram. This wire is deposited in coils of up to 900-kilogram., which are transported by the forklift to the area of hot galvanizing. On each route, the vehicle can carry up to four coils. In the hot galvanizing line, usually 2 lines are programmed for this type of product. 1 Itisaqualityoflowcarbonsteelthatcanbeusedincold. Ithashightenacityandlowmechanical resistance. 175 Design of an Added Plan with Social Responsibility Figure 1: Galvanized 3”x 24-kilogram clove process 176 3 Case Study The entire line has 50 threads, but only two lines are programmed for this type of clove; these coils are unrolled at a slow pace, going through a process of hot galvanizing, which is a surface treatment in a zinc vat at high temperatures that allows the wire to be protected from corrosion, so that later, the galvanized wire is winded at the end of the line, also, with up to 900-kilogram (Berto, 2017). This material is taken by the forklift to the cloves ship, where 4 wafios equipment are programmed. These machines turn the wire into cloves, temporarily storing them in baskets of up to 300-kilogram. Using a bridge crane, in the same ship, the baskets are taken to the polishing area, where 4 drums that turn with sawdust, clean, and polish the clove. These polished cloves are deposited again in the same baskets and loaded by the bridge crane to the packing section. Generally, 4 packers are scheduled for the packing of this material. Each packer manually weighs about 600-grams with a tolerance of 10-grams. In each pack, and each one of these, the packer deposits the clove in a cardboard box of 24-kilogram. As they finish each carton they stack it in a stowage, until completing 54 cartons. The operator that is completing the stacking, packs the stowage with stretch film 2 . 2Vinipel, translucid plastic film with a high resistence. 177 Design of an Added Plan with Social Responsibility Table 7: Decisions can be taken Variable Description Bt Number of employee’s beginner for packing at the beginning of month t. Mdt Number of employee’s medium for packing at the beginning of month t. At Numberofemployee’sadvanced forpackingatthe beginningof month t. Dt Numberof employees dismissed forpackingatthe beginningof month t. CtNumber of employees hired for packing at the beginning of month t. FtAmount of kilogram produced in drawing in month t. PtAmount of kilogram produced in dicing in month t. GtAmount of kilogram produced in galvanizing in month t. UtAmount of kilogram produced in polishing in month t. MtAmount of kilogram of finished product in packing in month t. EBt Number of extra hours of beginner hired for packing at the beginning of month t. EMdt Number of extra hours of medium hired for packing at the beginning of month t. EAt Number of extra hours of advanced hired for packing at the beginning of month t. IFtInventory of drawing at the end of month t. IGtInventory of galvanizing at the end of month t. IPtInventory of dicing at the end of month t. IUtInventory of polishing at the end of month t. IMtInventory of finish product at the end of month t. StNumber of pending units in month t. SCtNumber of subcontracted units in month t. 184 4 Methodology 4.3 Objective function: Minimize the total cost of the organization during the time of the planning, in this case its 6 months. Min Z = 6 X t=1 225 ∗Ct+ 6 X t=1 315 ∗Dt+ 6 X t=1 1532 ∗Bt+ 6 X t=1 1532 ∗Mt+ 6 X t=1 1532 ∗At+ 6 X t=1 14.3∗(EBt+EMt+EAt) + 6 X t=1 0.01 ∗Ft+ 6 X t=1 0.03 ∗Gt+ 6 X t=1 0.01 ∗Pt+ 6 X t=1 0.01 ∗Ut+ 6 X t=1 1.4∗IMt+ 6 X t=1 1.8∗St+ 6 X t=1 60 ∗SCt+ 6 X t=1 11 ∗Ft (8) 4.4 Subject a: The size of the work force : the size of the work force, which is the total of the hired workers in the month t, considering the actual workers (beginner, medium and advanced), but not the dismissed ones. Bt+Mdt+At=Bt−1+Mdt−1+At−1+Ct−Dt(9) Extra hour : a worker (beginner, medium and advanced) can work until 10 extra hours in the month t (Gerencie, 2017). EBt≤10 ∗Bt(10) EMdt≤10 ∗Mdt(11) 185 Design of an Added Plan with Social Responsibility EAt≤10 ∗At(12) Packing capacity : the amount of kilogram cloves produced should not be above the available capacity of the packer (beginner, medium and advanced). 1turn ∗7.5hours 1turn ∗25 days 1month ∗24 −kilogram hour ∗Bt+ 24 −kilogram hour ∗EBt≥Mt (13) 1turn ∗7.5hours 1turn ∗25 days 1month ∗28 −kilogram hour ∗Mdt+ 28 −kilogram hour ∗EMdt≥Mt (14) 1turn ∗7.5hours 1turn ∗25 days 1month ∗37 −kilogram hour ∗At+ 37 −kilogram hour ∗EAt≥Mt (15) Machine capacity : the production capacity of the machines must be greater than the production required in the drawing, galvanizing, dicing and polishing operations. 1turn ∗7.5hours 1turn ∗25 days 1month ∗2790 −kilogram hour ≥Ft(16) 1turn ∗7.5hours 1turn ∗25 days 1month ∗2205 −kilogram hour ≥Gt(17) 1turn ∗7.5hours 1turn ∗25 days 1month ∗3805 −kilogram hour ≥Pt(18) 186 4 Methodology 1turn ∗7.5hours 1turn ∗25 days 1month ∗2425 −kilogram hour ≥Ut(19) Inventory : the inventory in each operation must be equal to the inventory in the immediately previous period, plus the production carried out in that period, minustheproductionrequiredinthenextseason,minustheinventorythatshould remain in the operation; to guarantee the flow of production. IMt=IMt−1+Mt+SCt−St+1 +St−demand(t)(20) IFt=IFt−1+Ft−Gt(21) IGt=IGt−1+Gt−Pt(22) IPt=IPt−1+Pt−Ut(23) IUt=IUt−1+Ut−Mt(24) Constrain positive: ensure that the variables take positive values. Bt, Mdt, At, Ct, Dt, EBt, EMdt, EAt, Ft, Gt, Pt, Ut, Mt, IFt, IGt, IPt, IUt, IMt, St, SCt≥0(25) On the other hand, it must be guaranteed that the out-sourcedunitsdo not exceed 250 units and that the inventory policies established are equal to the inventory of each operation in each month. 187 Design of an Added Plan with Social Responsibility 5 Results The total cost with the proposed model is 1.51 M €. The Tables 8, 9, 10, 11, 12, and13 shown the results. This Table shows the production that is required in each operation, drawing, galvanizing, dicing, polishing and final product to satisfy the demand of claves. These tables show the inventory that each operation should have according to the corresponding inventory policies. As can be observed, the only month with shortage in units is November. Table 8: Production during the planning horizon (2017) Month Production drawing (kilogram) Production galvanizing (kilogram) Production dicing (kilogram) Production polishing (kilogram) Final product (kilogram) June 38600 32000 33100 29800 25400 July 10290 11370 11190 11730 12450 August 12190 12470 12423 12563 12750 September 25405 23265 23622 22552 21125 October 18485 18479 18480 18477 18473 November 20929 20457 20536 20300 19985 Table 9: Inventory WIP (2017) Month Drawing inventory (kilogram) Galvanizing inventory (kilogram) Dicing inventory (kilogram) Polishing inventory (kilogram) Final product inventory (kilogram) June 5500 2200 3300 4400 8250 July 4600 1840 2760 3680 6900 August 4367 1747 2620 3493 6550 September 6150 2460 3690 4920 9225 October 6155 2462 3693 4924 9233 November 6548 2619 3929 5239 9823 188 5 Results Table 10: Policies of Stock-out and Outsourcing Month Stock-out (kilogram) November 250 Table 11: Work force required for each period Month Worker Force June 15 July 8 August 8 September 12 October 11 November 12 The number of workers after the month of August is regular. The distribution according to the time horizon is shown in Table 12. Table 12: Distribution of work force Month Hiring cost Dismissal cost Beginner Medium Advanced December 4 June 11 6 5 4 July 7 3 3 2 August 3 3 2 September 4 5 4 3 October 1 4 4 3 November 1 5 4 3 Table 13 shows distribution of costs according to the type and time period such as the total costs of hiring, dismissal and extra hours. 189 Design of an Added Plan with Social Responsibility Table 13: Total costs Month June July August September October November Hiring cost 2475 900 225 Dismissal cost 2205 315 Beginner 9281 4641 4641 7734 6187 7734 Medium 7734 4641 4641 6187 6187 6187 Advanced 6187 3094 3094 4641 4641 4641 Extra hours cost 215 391 Drawing cost 270 72 85 178 129 146 Galvanizing cost 1088 387 424 791 629 696 Dicing cost 287 97 108 205 160 178 Polish cost 155 61 65 117 96 105 Inventory cost 11137 9315 8842 12453 12464 13260 Stock-out cost 450 Outsourcing cost Material cost 405300 108045 127995 266753 194087 219755 190 6 Improvements The kilograms of the final product that the organization should produce to satisfy the demand are 110183 kilograms with the raw material unit cost estimated as 11 €, which gives a total cost of 1.2 M€ and a total cost of planning of 1.5 M€. The cost of buying raw material represents 77 % of this cost. This shows a shortage in the supply chain of this sector. 6 Improvements Aggregateplanning playsafundamentalroleinthesupplychain, becauseit allows any organization to determine the quantity of production, inventory, outsourced units, minimum of inventory shortage and capacity that it must have in a given period, to satisfy the demand. In turn, it will guarantee the reduction of costs and improve the level of service. On the other hand, performing an aggregate planning model, considering the level of learning of workers, i.e., if the worker is beginner, medium or advanced, allows the organization to classify workers according to their efficiency in each period. In this way, a fair wage could be guaranteed for them. Whit the proposed model, the organization may: — Determine the optimal level of inventory that this should have, to ensure a good level of service and incur a low cost to maintain inventory. — Identify the cost in which the organization incurs to keep the three kinds of workers. (beginners, medium and advanced) — Verify if it complies whit the established inventory policies of the organization. — Include social responsibility issues to ensure a fair wage for their employees which will depends on their efficiency. — Reduce the inventory shortage and their associated costs. — Minimize the operations personnel turnover. 191 Design of an Added Plan with Social Responsibility — Manage the variability of delivery time and demand. 7 Relevance in the Sector The combination of aggregate planning with social responsibility is essential if organizations seek to increase their productivity and consequently their competitiveness. Each one fulfills a fundamental role, in the first case it seeks to make the best decisions at the aggregate level, and in the second case, to ensure a focus on the organization’s human capital, so that a fair payment is made. One of the decisions that any organization should take when planning is to decide how many workers to hire and how many to dismiss, if the organization considers the efficiency of its workers and plans based on this, it will be able to reduce the rotation of the Operations personnel, because their workforce will be enough to supply all the demand. Consequently, their workforce would be motivated, and the organization would not have to incur costs for fired. On the other hand, being steel is one of the scarcest raw materials at the national level and with greater use, its cost of acquisition is high compared to international prices, for this reason the organizations immersed in the sector must contend at price level. 8 Conclusions The aggregate planning being more than a mathematical model, is a tactic tool that enables the determination of the inventory, production, stock-out levels as well as the workers that the organization needs to satisfy the demand in the corresponding period of time. In addition, it guarantees the optimization of cost, time and resources. The planning guarantees an organization a high level of service, reduced costs and controls the variability of demand. However, the planning should consider the social responsibility in order to ensure fair wages and level of workforce in all working periods. Finally, the organization should considers its operations within the whole supply chain. 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