Introduction

Northwest Clark Inc., is one of the largest producer of the Newsprint and placed
among one of the five largest forest products companies in the industry. The plants
and mills of the company are located in the United States and Canada whereas, the
sales of the company is divided into Six product lines that include newsprint,
ground wood papers, fine papers, building products and lumber .
However, in the year 1986 Northwest Clark Inc established Newsprint Inc as a
separate subsidiary due to the growing importance of newsprint in the industry
along with the responsibility for all of the Northwest Clark pulp and paper
operations. The pulp and paper operations of the company are utilized around 85%
of the capacity. By the year 1990, it was indicated that some products of the
company were made by efficiently using the available resources as compared to
other products. The highly efficient use of the available capacity is important in
order to achieve the profitability in the highly competitive and capital sensitive
market conditions.
Problem statement
Northwest Newsprint is recently facing the challenges in order to identify the ways
that help them to reduce the cost of their business operations (Cost saving). The
company is concerned about the appropriate options that will be useful in differing
demand conditions.
Case Analysis
The topics that are covered in the report include:

Recommendation on the specific delivery swaps arrangements that help

Northwest to improve its bottom line.

Recommendation on conversion of newsprint machine at Naomee Mills into

ground wood specialties.

Formulation of the problem as a linear program and its benefits.

Part A
Question1
Northwest Newsprint should supply the delivery of Newsprint to the suppliers that
charge the minimum cost for it. In addition to this, the company needs to sign a
contract with those suppliers in order to meet the demand of the customers that

costs around 0.45 per tonne for the Spruce Mills whereas, 0.43 per tonne for
Naomee Mills and Duchesne each. However, it will allow Northwest Newsprint to
achieve the minimum cost for the production of the Newsprint per tonne. However,
this SWAP arrangement will help Northwest Newsprint to improve its bottom line at
cost effective manner.
Question 2
At present, it is not significant for Northwest Newsprint to convert the 58,000
tonnes per year machine at Naomee Mills into ground wood specialties. Currently,
the ground wood papers operation of the company is utilizing its maximizing
capacity so it is not possible to utilize the capacity more than its given limitations. In
addition to this, the Northwest Newsprint capacity utilization of the ground wood
papers operations is at 96.4% of the annual production, since the ground wood
papers business of the company is operating at its full capability.
Part B
Question 1
How does the solution differ from the original allocation?

Problem Formulation Model

Equation

Subject
to:

MinZ: 390X+415Y+415Z
variables

X1

X2

X3

Coefficients

390

415

415

solution

0.45

0.43

0.43

minimum cost
value

533.66

constraints 1

462

constraints 2

756

constraints 2

737

LHS

RHS

constraints 1

206

166,320

constraints 2

328

272,340

constraints 3

320

265,077

<=

<=
<=

166,32
0
272,34
0
265077

constraints 1=

462X+0Y+0

X1=

Spruce
Mills

constraints 2=

0X+756Y+0

X2=

Naomee
Mills

constraints 3=

0X+0Y+737

X3=

Duchesne

This solution is different from the original allocation of the newsprint per tonne due
to several factors. Firstly, it includes the objective to overcome the existing
problems of the company. Secondly, it includes the constraints for achieving the
objective that is not considered in the original allocation. However, the objective

equation of the solution is MinZ: 390X1+415X2+415X3 that includes the coefficients

where X1 represents the Spruce Mills, X2 represents Naomee Mills and X3 denotes
the Duchesne. The main purpose of this model is to allocate the supplies among
the different distribution channels in a way that results in the cost
saving