Operation&Distribution Integrated Cost Optimization In Firm AG

With the macro economy development slow down at China, the downstream customer of AG is suffering over supply situation and reducing AG’s product consumption accordingly. Those AG plant’s utilization rate is impacted due to the lower demand, plants have to run at lower loading upon the required product volume. The unit production cost will change along with the loading of the plant, and different plants just have different unit production cost due to various producing process. At the same business operations unit, AG has customers in different distance to production plants. Hence at the business operating unit level, AG has to make decision on which customer should be delivered by which plant to have optimized integrated unit production cost and distribution cost. In that case, we shall establish and develop a model or tool helping AG business operating units to optimize their overall production and distribution cost.In this report, lean six sigma management methodology is used to reduce individual unit production cost and individual unit distribution cost as well, and the stability is sustained by ’variance to plan’ KPI tracking system. The regression model is used to gain unit production cost and distribution cost forecast model, then they’re input to AG’s own linear solver program (AGLSP) together with detail customer information. Finally, AGLSP provides the recommended optimizing production and distribution strategy and plan. This report and tool developed help AG business operating units to get decision making basis for optimization of overall production and distribution cost with operations cost reduction in the end.