IRON MBA’SBUCKEYE POWER & LIGHT

COMPANY

NOVEMBER 18, 2008

Net Akarapongpisak

Chris Serio

Velvet Voelz

Jia Xu

Approach

Our approach was to gain a better understanding of the purveyors, the coal they can provide, and then to match the data to the individual requirements of each plant.

Goals

Meet Btu demand at the lowest cost while still fulfilling your quality needs and contractual obligations to purveyors

Constraints

Need to stay within limits on moisture, ash and sulfur content

Need to maintain minimum contracts Only have so many tons available from

each vendor Must purchase 120% of demand in Btu’s

Vendor Contracts

Btu Demand Needs

Ash Constraints

Tons Available

Sulfur Constraints

Moisture Constraints

Decision Support System

Procurement Plan

Price

Optimal Solution

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0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2,500

8,000

227 0

14,513

16035.9846185269

1486.83604733771

0

2277.38808439905

12920.9104834966

3964.0153815027

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7664.01538149891

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2700 2300

Steubensville Zanesville Athens

To

ns

Total Cost $3,165,119

Lower-Cost Alternative Available? This plan provides the lowest cost

available given the offerings and current needs

If we are able to negotiate price and quantity available, then we could work to lower our costs and maintain plant needs for quality

Long-Term Contracts

Western and Foster & Hughes are the only vendors that currently service all three plants

These plants are very similar

Cancel contract with Foster & Hughes

Contract Negotiations

Increase your long-term contract with both Western and Monon. by 10,000 tons per month

In exchange negotiate a 10% discount in price

Impact

These three moves will save your company:

$230,000

Future Use - What Can Change Vendor monthly offers BTU requirements for each plant Moisture and ash percentages as set

by plant management Long-term contracts with vendors

Future Use – Modification for Junior Analyst

The model is conveniently designed for an analyst to not only use but also alter with only a modest amount of effort required

Will provide clear and concise instructions

Questions?

Appendix A

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Cresc

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0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Quality

Moisture Ash

Sulfur

Per

cen

tag

e

Appendix B

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Vall

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Cresc

ent R

ock

0

5000

10000

15000

20000

25000

30000

35000

Same Price, Unlimited Quantity, No Contracts

Steubensville

Zanesville

Athens

To

ns

Appendix C

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Cresc

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10,000

10,500

11,000

11,500

12,000

12,500

13,000

Btu's Per Pound