Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE credits
Holmen Paper is one of Sweden’s leading manufacturer of paper, with two Swedish production facilities located in Norrköping and Hallstavik. The European continent constitutes the company’s largest customer base which makes the company’s distribution system an integral part of the business. Historically, much of the produced paper has been transported by vessels, as vessels allow large volumes of goods and deliveries to markets which are difficult to reach with other modes of transportation. On the first of January 2015, a new EU directive enters into force which regulates the allowed fuels for vessel transports. This directive leads to an increase in cost for vessel transports due to more expensive fuels needing to be used to comply with the new rules. Therefore, Holmen Paper is interested in evaluating alternatives to the distribution system used today, focusing on the product flow between the Swedish production facilities. Thereof, the purpose of this study is to evaluate four predetermined scenarios regarding the distribution system from a capacity and cost perspective.
The first scenario is based on the same distribution system Holmen Paper is using today, which does not include a product flow between the Swedish production facilities. The other three scenarios, in contrast to the first, do include a production flow between Hallstavik and Norrköping. For these scenarios a particular volume of the produced paper in Hallstavik will firstly be transported to Norrköping, then be placed in the warehouse of finished goods and lastly be loaded on new modes of transportation. For the second scenario, the production flow between Hallstavik and Norrköping is based on a combination between rail and road transports. The third scenario is based on only road transports and the last scenario is based on vessel transports between Hallstavik and Norrköping.
To perform an evaluation of each scenario, the authors designed a study-specific course of action whose structure is based on four different steps. The first step was a mapping of the operations at the facilities’ warehouses for finished products. The second step was to use the mapping results to calculate the available capacity in the warehouses. The third step was an estimation of the capacity demand which would arise in each scenario, depending on the design of the product flow. The last step of the course of action is to calculate the cost for providing the necessary capacities which was calculated in the previous step. The costs were based on three theoretically chosen logistic costs, called warehousing cost, inventory cost and transportation cost.
After a total of 16 days of time measuring at the production facilities, the authors were able to combine the measurement results with the 2015 projected production volumes and for each scenario calculate a capacity need along with the associated costs.
The first scenario meant a capacity need below the available capacity and the lowest yearly cost in a comparison with the other scenarios.
The calculations for the second scenario also resulted in a capacity need below the available capacity along with the highest yearly cost.
The third scenario’s capacity need exceeded the available capacity. This was regarding loading docks and forklift trucks for lorry loading in Hallstavik, as well as personnel in Norrköping. The costs needed to manage this scenario, which meant an increase in personnel in Norrköping, reached the second highest yearly cost.
The calculated capacity need for the fourth scenario was below the current available capacity. The cost for this scenario was calculated as the second lowest.
To validate the result, the authors performed sensitivity analyzes where the effects of some of the assumptions and simplifications which has been made to produce the result were tested. The sensitivity analyzes showed that some of the assumptions affected the end result but the authors still deem that the relationship regarding capacity need between the scenarios show a representative image of reality.
2014. , 48 p.