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Graduate Case Study Format Running head: NAME OF CASE STUDY 1 NAME OF CASE STUDY 2 Name of Case Study Internet Case - Agri-Chem Corporation Agri-Chem Corporation In June 1980, Harry Sinclair, General Manager of the Texas Division of Agri-Chem Corporation, received notification from Ben Elliot of Enerco that natural gas supplies were being rapidly depleted. In the event of a shortage, Enerco, the main producer and distributor of natural gas in the Gulf South region, would allocate gas to its customers under the following provisions established by the Federal Power Commission: First Priority: Residential and commercial heating and cooling Second Priority: Commercial and industrial firms that use natural gas as a source of raw material Third Priority: Industrial firms that use natural gas as a boiler fuel Elliot related to Sinclair that most of Agri-Chem's uses were in the second and third priority classifications. Hence, Agri-Chem would probably be subjected to "rolling brownouts", temporary and periodic curtailments of natural gas supplies. Enerco planned to monitor its pipeline pressures and order reductions to maintain minimum levels. Elliot preferred that Enerco's customers initiate the reduction process to minimize the effect on their industrial processes. Enerco was authorized, however, to curtail supplies unilaterally if pipeline pressure fell below minimum levels. The natural gas shortage was created by the unprecedented heat wave of the summer of 1980. Electrical generating plants were operating at capacity to supply electricity to operate air conditioning and refrigeration units. Although long-range plans called for these utility companies to convert to coal, oil, or nuclear fuel, natural gas remained the dominant boiler fuel. CURTAILMENT PLAN Agri-Chem's problem was to determine which of its complexes would be least affected by a gas curtailment. Its Texas Division is located in the greater Houston area; plants are located in the suburbs of Deer Park and Battleground. Both of these areas would be included in the curtailment region in the event of a brownout. Except for Agri-Chem's ammonia operations, all gas purchased was used as boiler fuel. In its ammonia plant, gas was used as a source of raw materials. (The manufacture of ammonia uses natural gas in the steam reforming process.) In a detailed discussion with Elliot, Sinclair learned that Enerco would not specify the products to be curtailed. The curtailment procedure would be based primarily on a customer's usage pattern. Hence, Agri-Chem had the flexibility to absorb curtailments where they would have minimum impact on profits. Based on this information, Sinclair called a staff meeting to discuss a contingency plan for allocation of natural gas among the firm's products if curtailments became a reality. The specific objective was to minimize the impact on profits/overhead contribution. After a week of study, the information in Tables 1 and 2 was presented to Sinclair. TABLE 1 Contribution to profit and overhead Product $/Ton Ammonia 80 Ammonium phosphate 120 Ammonium nitrate 140 Urea 140 Hydrofluoric acid 90 Chlorine 70 Caustic soda 60 Vinyl chloride monomer 90 TABLE 2 Operational data Product Capacity (tons/day) Production Rate (% of capacity Natural Gas Consumption (1,000 cu. ft./ton) Ammonia 1,500 80 8.0 Ammonium phosphate 600 90 10.0 Ammonium nitrate 700 70 12.0 Urea 200 80 12.0 Hydrofluoric acid 800 70 7.0 Chlorine 1,500 80 18.0 Caustic soda 1,600 80 20.0 Vinyl chloride monomer 1,400 60 14.0 Agri-Chem's contract with Enerco specified a maximum of 90,000 cu.ft. X 103 per day for its complexes. However, curtailments are projected to be based on actual usage rather than contractual maximums. The current natural gas usage is 85,680 cu. ft. x 103 per day. Enerco projects curtailments in the range of 20 to 40 percent. 1. Which of Agri-Chem's complexes would be least affected by a gas curtailment? 2. outline the case using the CASE FORMAT to structure a comprehensive analysis. Assignment Outcomes Evaluate various inventory control methods to maximize effectiveness for production and profit. Appraise the effectiveness of graphic models in management decision making. Format Introduction The introduction of the case problem is the essential first step and requires a succinct problem statement and scope problem definition with a concise summary of the critical decision issues to be addressed in the case presentation. A paragraph of no more that 100 words is adequate. Analysis The analysis of the case problem requires a thorough review of the critical elements of the case and provides a clear set of facts that on their own merit offers an in depth review of the essential issues to solve the problem statement. The analysis section should be approximately 300 words. Solution The solution section of the case study presents the recommended way to solve the problem statement and addresses the main points outlined in the analysis. The solution section is a description of the recommended problem application including details as to application and references specific to solving the problem definition. The solution section must also cite specific text materials in support of the recommended course(s) of action. No more that 300 words should be used for the solution statements. Justification The justification provides the overall reasons why the selected solution recommended course(s) of action are correct and fit the case problem. The justification section of the case sells the solution and offers reasons to implement the course of action and substantiates the methods of solving the problem statement. Justification should be in a bullet list format and be no more than 200 words. Summary The Summary is a 100 word final set of key points on the problem analysis, solution and justification of the problem scope. References