INDIAN INSTITUTE OF MANAGEMENT, UDAIPUR

GARTLAND STEEL COMPANY

GROUP 7 ASSIGNMENT IN OPERATIONS RESEARCH
9/14/2011

ANUPAM BARA 111008 JASDEEP SINGH 111018 P SWETHA 111030 PRITESH 111037 VAIBHAV BAWEJA - 111056

EXECUTIVE SUMMARY About Gartland Steel Gartland Steel is an integrated steel plant which was founded in 1901. In a span of 78 years, it had come up with 7 more units in US. Gartland Steel was the countrys fourth largest steel maker and third largest in sales. Gartland Steel emphasized more towards method and product innovations. Gartland Steel had always been concerned and sensitive to the environmental pollution level due the running of their plants. Gartland used to spend over $300 million on pollution control, which placed them above all the other major steel firms. Environmental Protection Agency (EPA) in response to the Clean Air Act of 1970, set up National Ambient Air Quality Standards (NAAQS) for six airborne pollutants. The pollution level has to be kept under the permissible limits by every firm. Stack By stack method was used by most of the firms to comply with the pollution standards. But the stack by stack method was resulting to be very expensive for most of the firms to survive in the industry. This resulted in the introduction of Offset policy. Offset policy allowed firms to trade pollution rights within non-attainment regions. Dan Crossan, director of Environmental Engineering at Gartlands Salem Ohio steel mill keeping the rising cost in mind was planning to implement the bubble method of determining air pollution emission compliance for industrial plants. In Bubble method, a variation of Offset policy, allows the firms to vary the pollution levels at various steps independently keeping the total pollution level same or less than that in the previous case. Problem Definition To operate profitably within the pollution level standards set by Environmental Policy Agency (EPA). The current level of pollution for the Salem Plant was 5525 thousand pounds per year. According to the standards, the plant had to bring down the pollution level by 6.6% per year. Solution approach The objective is to maximize the profit keeping the pollution levels within the standards specified by EPA, keeping the various constraints of input output combination at every stage of the process in mind. The solution approach started with formulating the initial process being used by Gartland and calculating the profit. Then various methods that can be used to decrease the pollution levels while maximizing the profit were considered and analysed to get the best possible solution having maximum profit along with the pollution levels within the specified limits. Problem Cases The problem can be analysed in about 15 cases, while taking into consideration the cases of bubble method and stack by stack method of reducing pollution, changes in the mix of the open hearth, and while considering or not considering the pollution from coal and ore yards. Also, a case is considered when 250,000 pounds of pollution are offset by buying the rubber factory and the remaining pollution is reduced by reducing output.

Recommendations
Considering and analysing the various 15 options that are available for Gartland Steel in order to maximize the profit along with minimizing the pollution levels according to the standards set by EPA, following 4 the optimum solutions are available: 1. Bubble method with pollution from coal yard and ore yard considered and offset by buying and shutting the plant also taken into account. This is the best solution but it depends upon the following assumptions: a. EPA approves for the Bubble policy. b. EPA approves to consider the coal yard and ore yard pollution levels with the process. c. Offset policy can be used along with Bubble method. 2. Bubble method with pollution from coal yard and ore yard considered. This is the second best solution and can be implemented if: a. EPA approves for the Bubble policy. b. EPA approves to consider the coal yard and ore yard pollution levels with the process. c. Offset policy cannot be used along with Bubble method. 3. Bubble method without considering the pollution from coal yard and ore yard. This is the third best solution and can be implemented if: a. EPA approves the Bubble policy b. EPA refuses to consider the coal yard and ore yard pollution levels with the process. c. Offset policy cannot be used along with Bubble method. 4. Stack by Stack method with offset from buying and shutting the plant, without considering the pollution from coal yard and ore yard. This is the fourth best solution but the safest solution as: a. It does not depend upon the approvals of EPA regarding the Bubble method b. No approval is required from EPA regarding consideration of pollution from coal yard and ore yard. c. It only involves the use of Offset policy along with Stack by Stack policy which is currently according to the standards of EPA.

Problem Definition Without pollution from coal and ore yard: We first determine the output mix for maximum profit yield without considering pollution from coal and ore yard. This is considered as the initial case. Bubble Method: Using bubble method, determine new output for 6.6% reduction in the pollution, which is 5163 pounds. Using bubble method, determine the output for maximum profit for changed mix in the open hearth. Using bubble method, determine the output for obtaining the profit of 5163 pounds for changed mix with open hearth. Using bubble method, determine the output for obtaining the profit in case Gartland chooses to buy the rubber plant and sell it for getting 250,000 pounds offset, considering the original mix of hearth (as it is later determined that the change in hearth is in fact reducing profit. Stack by Stack Method In this method, as different types of pollution cannot be interchanged, it is understood that the reduction in pollution as required should be done in every stage of the process. Therefore, we reduce the pollution as a percentage, 6.6% through each of the processes. This gives additional constraints of pollution limits. The following cases thus arise Using stack by stack method, determine new output for 6.6% reduction in the pollution, which is 5163 pounds. Using stack by stack method, determine the output for maximum profit for changed mix in the open hearth. Using stack by stack method, determine the output for obtaining the profit of 5163 pounds for changed mix with open hearth. Using stack by stack method, determine the output for obtaining the profit in case Gartland chooses to buy the rubber plant and sell it for getting 250,000 pounds offset, considering the original mix of hearth (as it is later determined that the change in hearth is in fact reducing profit.

Similarly, we Include pollution from coal and ore yard and repeat the above cases, thus yielding a total of 15 cases.

Linear Program Formulation: The linear program was formulated using the following rules obtained from the case data. The ratio of inputs to outputs at any processing unit (such as coking plant, blast furnace etc..) shall be in the ratio as per the requirement and output given in the table. Ex: Consider the table given below Sinter Plant 1 ton of outputs Sinter Produces scrap (tons) -Produces particulate 0.777 pollution (pounds) Requires (tons) 0.52 Ore Blast Furnace Pig Iron 0.01 0.474 1.12 Ore 0.65 Coke 0.47 Sinter $57.82 $40.54 $0.16

Operating Costs $18.77 Coast of coal and ore $18.82 used Energy Credits $0.00

Under Sinter Plant, it shows that for producing 1 ton of Sinter, it takes 0.52 ton of ore. Representing the same in the form of an equation, we obtain the following equation

This equation can be further reduced to the following to make it easier to use with excel solver.

So the coefficients of the variables xsinter and xore will be 0.52 and -1 respectively and the constraint equation will be equated to 0. A similar process is followed throughout

Coke Ore2 Sinter

Blast Furnace

Pig Iron

In the case of multiple inputs into a single process simultaneously, we consider the minimum of the variables. Ex: For the Blast Furnace, 1.12 tons of Ore, 0.65 tons of coke and .47 tons of Sinter will produce 1 ton of Pig Iron. Xcoke>=0.65 XPigIron Xore2>=1.12 XPigIron XSinter >= 0.47 XPigIron From the above, we will get the Minimum value of the Pig Iron. Balancing at nodes is done so as to keep the sum total of the items going into a node is equal to the items coming out of the node.

Input Variables: Xcoal xcoke xore1 xsinter xore2 xpigiron xpi1 xpi2 xpi3 xscrappurchase Xscrap xscrap1 xscrap2 xsteel1 xsteel2 xsteel3 xsteel4 xsteel5 xingots xslabs xingots1 xingots2 xslabs1 xslabs2 xslabs3 xcoils

Constraints: Xcoal--1.43 xcoke =0 ( Coking) xore1- 0.52 xsinter=0 (Sinter) Xcoke-0.65xpigIron >=0 (Blast Furnace) Xore2- 1.12xpigiron>=0 (Blast Furnace)

Xsinter- .47 xpigiron>=0 (Blast Furnace) Xpi1-0.14xsteel1 >=0 (Open Hearth furnace) Xscrap1-1.08 xsteel1>=0 (Open hearth Furnace) Xscrap2-0.32 xsteel2 >=0 (Basic oxygen Furnace) Xpi2-0.8xsteel2>=o (Basic Oxygen Furnace) Xsteel1+xsteel3-xsteel5=0 (Steel division) Xsteel2 xsteel3-xsteel4=0 (Steel division) Xsteel5-1.02xingots=0 (Ingots caster) Xsteel4-1.06xslabs=0(Continuous caster) Xingots1-1.2xslabs=0 (Pri-break Down Mill) Xslabs3-1.04 xcoils=0 ( Hot Strip Mill) Capacity Constraints: Xpigiron<= 1404000 (Blast Furnace) Xsteel1 <= 1740000 (Open Hearth) Xscrap2<= 2700000 (basic Oxygen Furnace) Xingots<= 3408000 (ingots casting) Xslabs<=720000 (continuous casting) Xcoils <= 3480000 (hot strip unit) Other constraints: 0.01xpigiron xscrap+0.02xsteel1+0.02 xsteel2 +0.02xingots+0.04 xslabs+0.18 xslabs + 0.04xcoils=0 (scrap)

Xingots-xingots1-xingots2=0 (ingots) Xpigiron xpi1-xpi2+xpi3=0 (scrap) Xslabs-xslabs1+xslabs2-xslabs3=0 (slabs)

Pollution constraint is considered in some of the above cases. Otherwise, the same is not considered. Objective Function:

- 47.59xcoal - 34.35xcoke - 36.2 xore1 - 18.77 xsinter-36.2 xore2 57.66xpigiron - 191.1xpi3 98.48xscrappurchase - 52.82xsteel1-27.97xsteel2-4.22xingots-31.86xslabs+200xingots2+250xslabs1 16.31xslabs2+ 296.69xcoils

Output Mix obtained from solver

Without Pollution from Coal and Ore Yard Bubble With Open hearth mix and 5163 pounds pollution 1,166 815 306 589 1,404 1,254 435 2,024 1,205 1,610 842 1,653 800 1,740 2,499 1,736 763 3,476 3,408 720 3,408 0 0 2,840 3,560 3,423 Stack by Stack 6.6% reduction in each stage 1,219 852 320 616 1,469 1,311 228 1,891 807 1,720 782 1,755 747 1,625 2,334 1,571 763 3,196 3,134 720 3,134 0 0 2,611 3,331 3,203 Stack by Stack With open hearth and pollution =5163 1,246 871 328 630 1,501 1,341 415 1,933 1,008 1,540 802 1,578 764 1,661 2,386 1,623 763 3,285 3,220 720 3,220 0 0 2,684 3,404 3,273 Stack by Stack with 250 from rubber and rest here 1,276 893 336 645 1,538 1,373 238 1,980 845 1,797 823 1,838 782 1,702 2,444 1,681 763 3,383 3,317 720 3,317 0 0 2,764 3,484 3,350

Variable Initial Scenario Xcoal 1,305 Xcoke 913 xore1 343 Xsinter 660 xore2 1,572 Xpigiron 1,404 xpi1 244 xpi2 2,024 xpi3 864 xscrappurchase 1,835 Xscrap 844 xscrap1 1,879 xscrap2 800 xsteel1 1,740 xsteel2 2,499 xsteel3 1,736 xsteel4 763 xsteel5 3,476 Xingots 3,408 Xslabs 720 xingots1 3,408 xingots2 0 xslabs1 0 xslabs2 2,840 xslabs3 3,560 Xcoils 3,423

Bubble Bubble With Open Reduced by hearth mix 6.6% changed 1,140 1,305 797 913 300 343 577 660 1,374 1,572 1,227 1,404 244 435 2,024 2,024 1,041 1,055 1,837 1,609 842 844 1,879 1,653 800 800 1,740 1,740 2,499 2,499 1,736 1,736 763 763 3,476 3,476 3,408 3,408 720 720 3,408 3,408 0 0 0 0 2,840 2,840 3,560 3,560 3,423 3,423

Without Pollution from Coal and Ore Yard Stack by Stack With open hearth and 6.6% reduction in each stage 1,219 852 320 616 1,469 1,311 406 1,891 986 1,509 782 1,544 747 1,625 2,334 1,571 763 3,196 3,134 720 3,134 0 0 2,611 3,331 3,203 Bubble with 250 from rubber and rest from here 1,169 818 307 591 1,409 1,258 244 2,024 1,010 1,837 842 1,879 800 1,740 2,499 1,736 763 3,476 3,408 720 3,408 0 0 2,840 3,560 3,423

Initial Variable Scenario Xcoal 1,305 Xcoke 913 xore1 343 Xsinter 660 xore2 1,572 Xpigiron 1,404 xpi1 244 xpi2 2,024 xpi3 864 xscrappurchase 1,835 Xscrap 844 xscrap1 1,879 xscrap2 800 xsteel1 1,740 xsteel2 2,499 xsteel3 1,736 xsteel4 763 xsteel5 3,476 Xingots 3,408 Xslabs 720 xingots1 3,408 xingots2 0 xslabs1 0 xslabs2 2,840 xslabs3 3,560 Xcoils 3,423

Bubble 6.6% reduction in pollution 1,140 797 300 577 1,374 1,227 244 2,024 1,041 1,837 842 1,879 800 1,740 2,499 1,736 763 3,476 3,408 720 3,408 0 0 2,840 3,560 3,423

Bubble With Open hearth mix changed 1,305 913 343 660 1,572 1,404 435 2,024 1,055 1,609 844 1,653 800 1,740 2,499 1,736 763 3,476 3,408 720 3,408 0 0 2,840 3,560 3,423

Bubble With Open hearth mix and pollution at 6264 pounds 1,183 827 311 598 1,425 1,273 435 2,024 1,187 1,610 843 1,653 800 1,740 2,499 1,736 763 3,476 3,408 720 3,408 0 0 2,840 3,560 3,423

Stack by Stack 6.6% reduction in each stage 1,219 852 320 616 1,469 1,311 228 1,891 807 1,720 782 1,755 747 1,625 2,334 1,571 763 3,196 3,134 720 3,134 0 0 2,611 3,331 3,203

Stack by Stack With open hearth and pollution =6264 pounds 1,241 868 326 627 1,495 1,335 414 1,925 1,004 1,534 798 1,572 760 1,654 2,376 1,613 763 3,268 3,204 720 3,204 0 0 2,670 3,390 3,259

Observations: No Ingots or Slabs are sold in the case for obtaining maximum profit.

Assumptions: The scrap produced in the process is re-utilised in the process itself and it is not discarded or sold off. We can use the rubber factory to offset pollution even when using bubble policy.

Recommendations: Considering and analysing the various 15 options that are available for Gartland Steel in order to maximize the profit along with minimizing the pollution levels according to the standards set by EPA, following 4 the optimum solutions are available: 5. Bubble method with pollution from coal yard and ore yard considered and 6.6 % reduction in total pollution levels. This is the best solution but it depends upon the following assumptions: d. EPA approves for the Bubble policy. e. EPA approves to consider the coal yard and ore yard pollution levels with the process. 6. Bubble method without considering the pollution from coal yard and ore yard, and 6.6 % reduction in total pollution levels. This is the third best solution and can be implemented if: d. EPA approves the Bubble policy e. EPA refuses to consider the coal yard and ore yard pollution levels with the process. 7. Bubble method with pollution from coal yard and ore yard considered with offset from buying and shutting down plant. This is the second best solution and can be implemented if: d. EPA approves for the Bubble policy. e. EPA approves to consider the coal yard and ore yard pollution levels with the process. f. Offset policy can be used along with Bubble method. 8. Stack by Stack method with offset from buying and shutting the plant, without considering the pollution from coal yard and ore yard. This is the fourth best solution and depends upon following: a. It will be considered only if bubble method is not approved. b. No approval is required from EPA regarding consideration of pollution from coal yard and ore yard. c. It only involves the use of Offset policy along with Stack by Stack policy which is currently according to the standards of EPA.