Gartland Steel Case Analysis

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Gartland Steel Case Analysis

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The Gartland Steel is a fully integrated steel producer . It is the fourth largest producer of steel by volume and third largest company in terms of sales. It has nine plants in USA. The Company has always been a pioneer on issues related to environmental pollution, and was placed first by the Council of economic priorities concerning pollution in steel industry. Currently, the company is concerned with maximizing the profit and reducing the pollution emission.

The Clean Air act of 1970 created the Environmental Protection Agency(EPA) to enforce standards for air quality. EPA was basically concerned with control of water pollution and solid wastes. It also set up NAAQS for six air borne pollutants. The emission set standards were maintained through following the stack by stack method wherein the level of pollution for different pollutants were measured separately. Often the ‘air quality regions’ were divided into “clean” and “ non attainment” , which meant that NAAQS standards of atleast one pollutant was not met.The stack by stack method often proved too costly for the industry .

This led to the introduction of the offset policy-

*Firms could add a pollution source if they reduce pollution by a greater amount somewhere within the air quality region

* By buying controls of another firm

*By adding controls to its own operations

*By shutting down one of its present sources

The bubble policy was proposed by EPA, it is a conceptual relative of offset policy, under bubble policy a firm is free to decide how to bring the net level of pollution of the entire plant within the regular standard.

Gartland basically sells three types of steel products ie ingots, slabs and coils. It uses ingots and slabs for production purposes as well. The basic raw material used are coal, ore, sinter, and coke, which produces pig iron in blast furnace which further is used to produce steel.

The objective of this report is to develop a Linear Programming model to maximise the profits under three cases, while complying with the pollution requirements. This objective is to be achieved by changing the production mix or cutting down production, such that the profits generated by sale of output and scrap is maximised, while on the other hand the pollution remains under limit. The model has been solved using Solver and the output obtained is given in the Appendix along with details of variable used and basic definitions.

Problem Statement: