Optimising quarry production and delivery

Boral CMG SA Ltd

Boral is using a mathematical model of their quarry operations to assist in decision making that will reduce their production and transport costs.

The model has shown, for example, that Boral should downgrade production at some quarries at certain times, and should review the charging system it uses to allocate the costs of operating its transport fleet.

Boral operates seven quarries which supply 160 different stone products to the Adelaide metropolitan area. Until recently each quarry was independent in terms of production and sales, and had its own staff and equipment. Now the seven quarries are managed as a portfolio, resulting in greater efficiency and a reduction of staff and equipment. However, with all quarries still in production, customers are generally supplied from the closest quarry. Is there a better way?

Boral presented their problem to the 2000 Mathematics-in-Industry Study Group (MISG) workshop. They needed a modelling tool that would help them maximise their profits from their quarry portfolio. Boral hoped the model would be able to assist in decision making on strategic matters, such as appropriate cost structures for production and delivery, or whether it would be profitable to suspend production at some quarries.

In three days, the MISG team showed that such a model was feasible and built a prototype model for production and transport costs. The model confirmed that Boral should downgrade production at some quarries at certain times, and showed that Boral should analyse the internal charging system they use to allocate the costs of operating their transport fleet.

Boral was very happy with the MISG process and its outcomes, especially with the prototype models. The unblinkered view of the MISG team was very useful. We learned a lot from it. Things we hadn't considered before will now be taken into account.

Danielle Hughes
Boral

The problem was complex:

• 160 products,
• seven quarries,
• production rates varying from 40 to 500 tonnes per hour,
• a wide range of costs, including staff, equipment, delivery and asset management.

Company data on filling orders were used to determine the cost of producing each product at each of the quarries. Delivery costs were then taken into account to build maps that showed the delivered cost of a product from each quarry. By comparing these maps it became clear that for some products the closest quarry was not always the most cost-effective. This provided a strong argument for suspending production from some quarries.

Boral's quarry model can be used to calculate the regions over which each quarry gives the maximum profit for a given product type, order size and selling price.

If the cost of producing a product at a quarry is more than the cost of delivering from another quarry, production should be suspended.