Operations Research - Application of Linear Programming in the Crushed Stone Industry

In planning modem-day mining operations, management needs to pass from the area of subjective decision-making to an area of objective decision-makirlg. Planning procedures currently being practiced by many mine managers depend primarily on common sense and trial-and-error methods which oftentimes never reach optimum solutions. For this reason, an attempt is made to provide an understanding of linear programming to solve production planning problems. More specifically, a linear programming model is proposed to solve the production scheduling problem as it was found to exist in the crushed stone industry. Optimal production scheduling is of prime concern here, since the industry has to cope with seasonal demands for its products. The solution, as determined through the application of the model, provides management not only with an optimal production schedule but also with the following information regarding the improvement of existing facilities: (I) the location of bottlenecks which limit production and profit; (2) the directions in which the company i fixed equipment should be expanded or modified; and (3) the evaluation of unused resources. Future trends in stone production will quite likely parallel those in the construction industry. Continued record expenditures for structures such as dams, highways, and buildings are the reasons for this accelerated growth. Production forecasts for the next decade are predicted to be around one billion tons with an approximate 7% annual increase. The problem of increasing production from 570 million tons in 1966 to 1 billion tons by 1976 offers no small challenge. This situation is further compounded by other problems and economic factors. Population expansion, government regulation, labor agreement, and changes in technology wd cause managers and operators to be confronted by many more complexities than characterize present-day operations. Some of these. problems and economic factors are: (1) In some metropolitan and other urban areas, easily accessible sources of stone are almost depleted. Transportation costs will be a prime concern of the industry. (2) Population growth has forced residential expansion to a point where many quarry operators must conform to urban and suburban regulations. (3) Government regulation in regard to air and water pollution, noise, and reclamation as well as zoning developments necessitate that crushed stone producers keep abreast of changing conditions and requirements. (4) The crushed stone industry operates under pressure of a highly competitive situation. Every company's objective is to retain a favorable marketing position by exercising great attention to production and marketing costs. This is rather difficult, since the crushed stone industry is one segment of modern mining which has to cope with a seasonal demand for its products. Among the problems posed here, the one of exercising great attention to production and marketing costs is of current interest to management. Under seasonal demand conditions, this problem creates further difficulties for managers who need to plan and forecast. STATEMENT OF THE PROBLEM Various methods of Operations Research have been developed to handle a problem whose genesis is explained above. It is very seldom, however, that these quantitative means are used in practice by the mining industry. This paper describes the use of Operations Research methods to solve a production planning problem when demand is seasonal. The seasonal production planning problem is an important one because of the substantial costs associated with changing production, employment, and inventory levels to adjust to seasonal sales patterns. Most companies try to operate within reasonable levels of employment changes and hold inventories within storage capacities. In general, little or no attempts were made to develop minimum cosl schedules or to provide objective means to compare various production policies. When demand varies within a fixed time period, 11:-oduction requirements may be met by following one