An Australian gold mine in Kalgoorlie (on the west coast of Australia) is used to supply gold to ten major jewelry-manufacturing customers on the east coast of Australia. The mined raw gold must be refined prior to delivery to these customers, however. This leaves the mining company with a need to determine the optimal location for this refinery. The mining company currently has two potential locations it is considering. The question is, should the refinery be located closer to the mine or closer to the customer base? To determine this, we must model the gold as both a raw material (raw gold) and a finished good (refined gold). A bill-of-material must also be modeled in order to determine the amount of raw gold required to produce one kilo of the resultant refined gold product used to service customer demand. The base model, as well as further detailed instructions for completing this study, can be found within Australia Gold Mining Product Sourcing Study.zip file on the book web site.
a. In scenario 1, we define the BOM to mimic the fact that only 1.1 kilos of raw gold are required to produce 1 kilo of refined gold that can be used to satisfy customer demand. After reviewing the model setup, run the scenario and review the results.
i. Which refinery is selected?
ii. What is the average distance traveled from mine to refinery? Refinery to customer?
b. Let’s create a second scenario but alter the BOM. Now the raw gold has a lesser quality, and it requires 2 kilos of raw gold to produce 1 kilo of refined gold.
i. Does this change which refinery location is optimal?