CASE STUDY: BIOPHARMA, INC.
Lisa Borgese
School of Business, Liberty University
BUSI740: Managing the Supply Chain
Dr. Thomas Spotts
September 7th, 2025
Case Study: BioPharma, Inc.
How should BioPharma have used its production network in 2013? Should any of the plants
have been idled? What is the annual cost of your proposal, including import duties?
In 2013, BioPharma should have been able to meet the worldwide demand for Highcal
and Relax by idling their Japan factory and utilizing more efficiently their other facilities. They
should have also avoided wasteful expenditures by operating the underused their Japan
location, the yearly production plan would have been $1,267 million, which included import
tariffs. From the data provided, BioPharm should have avoided relying on their Japan factory,
since it concentrated on HighCal manufacturing in Mexico, India and the United States, whereas
most of the manufacturing of Relax was produced in the United States and Germany, the
capacity at the facility in Japan was superfluous (Nagatani et al., 2020). Furthermore,
BioPharma missed the opportunity to reallocate production to their other factories within their
network, which would have been a better use for overhead costs. According to Christopher, “it
BioPharma, Inc. 1
is suggested that Japan be left on idle and that Mexico and India increase their production of
HighCal for the Asia and
Latin America markets, while the United States produces the product for the North American
and European markets” (Christopher, 2018). Furthermore, the United States and Germany can
provide Relax to the North American and European markets, in an ideal world (UNIDO, 2018).
Because of the effective reallocation, the Japan factory became superfluous. BioPharm could
have save money by idling the Japanese factory, since it had met the global demand for HighCal
and Relax.
It is suggested that the U.S., Mexico, and India facilities should have been high-tech
manufacturing locations. To meet the demands of Asia and Latin America, the Mexico and India
factories could have increased production, while the U.S. plant had the capacity to meet the
demands of North America and Europe. To produce Relax, the U.S. and German plants could
have met the needs of the North American and European markets, while the India plant met
the needs of Asia. Based on the data provided by the streamline production schedule, the
factory in Japan should been put in idle in 2013, due to the loss of capacity and operation
expenses (Nagatani et al., 2020). My calculations indicate that if the other six factories were
operation efficiently, the Japan factory would not need to be operating. The total costs to
operate this network are under $1,267 million annually, which includes the import tariffs to ship
the product to various global markets.
Therefore, by continuing the operation at the Japanese factory in 2013, BioPharma
wasted funds on this factory while also not fulfilling the global needs for HighCal and Relax.
The company needs to restructure their production of these products in other regions.
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Highcal Quantity Shipped From / To
From / To
Latin
America Europe
Asia w/o
Japan Japan Mexico U.S.
Brazil 7.0 4.0 0.0 0.0 0.0 0.0
Germany 0.0 0.0 0.0 0.0 0.0 0.0
India 0.0 0.0 5.0 7.0 0.0 0.0
Japan 0.0 0.0 0.0 0.0 0.0 0.0
Mexico 0.0 11.0 0.0 0.0 3.0 13.0
U.S. 0.0 0.0 0.0 0.0 0.0 5.0
Relax Quantity Shipped From / To
From / To
Latin
America Europe
Asia w/o
Japan Japan Mexico U.S.
Brazil 7.0 0.0 0.0 0.0 0.0 0.0
Germany 0.0 12.0 0.0 5.0 0.0 0.0
India 0.0 0.0 3.0 3.0 0.0 0.0
Japan 0.0 0.0 0.0 0.0 0.0 0.0
Mexico 0.0 0.0 0.0 0.0 3.0 0.0
U.S. 0.0 0.0 0.0 0.0 0.0 17.0
Total Plant Output
Plant Output
Brazil 18
Germany 17
India 18
Japan 0
Mexico 30
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U.S. 22
How should Landgraf structure his global production network? Assume that the past is a
reasonable indicator of the future regarding exchange rates.
Given a volatile market from 2006-2013, it would not be wise to depend solely on the
German factory for European manufacturing. While the Euro was stronger than the U.S. dollar
from 2009-2013, it would have been wise for the German factory to focus on producing Relax.
Furthermore, it would have been more practical for the U.S. factories to serve European
markets, during 2006-2008 when the Euro was weak. Meanwhile, during this time frame, 2006-
2008, the Yen was strong, and the Japanese factory increased their production, and decreased
their production when the Yen was weak, 2009-2013.
Regularly, Landgraf adjusted the manufacturing at the various factories to increase
efficiency and profitability, during the changes in the financial markets. Due to the volatility of
the financial markets, Landgraf needs to be flexible in BioPharma’s global supply chain to ensure
a quick response to the volatile exchange rates. Aligning BioPharma’s production planning with
exchange rate and currency trends, by analyzing the broad historical patterns, may be beneficial
for the company (Nagatani et al., 2020).
Is there any plant for which it may be worth adding a million kilograms of additional
capacity at a fixed cost of $3 million annually?
Based on the data provided, increasing each unit by one million kilograms at a fixed
annual cost of $3 million would not be a reasonable investment. Currently, the India, Mexico,
Brazil, and United States plants are operating at 100% capacity. Even after increasing the
capacity, the total supply chain costs would remain the same, because each factory has already
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met the demand to a sufficient level, resulting in waste if any more capacity was added. An
increase in yearly fixed costs is unjustifiable because there is nothing suggesting that there will
be an increase in demand and there is no indication that adding more capacity, it will be
utilized. Increasing fixed costs by $3 million annually would add a million kilograms of unutilized
capacity, which would not be cost efficient for any of BioPharma’s factories because all the
facilities are currently operating at sufficient levels to meet their demands. Adding extra
capacity would be a waste (Christopher, 2018).
Therefore, increasing the capacity of any of the plants is a great idea, but only if the
demand is high enough to justify the increase in the fixed costs.
How are your recommendations affected by the reduction of duties?
By utilizing a solver, the following outcomes could be achieved for 2013, resulting in
ideal networks, free from duties and updating duties to assume no tariffs.
Highcal Quantity Shipped From / To
From /
To
Latin
America Europe
Asia
w/o
Japan Japan Mexico U.S.
Brazil 0.0 4.0 0.0 0.0 0.0 0.0
Germany 0.0 0.0 0.0 0.0 0.0 0.0
India 0.0 6.0 5.0 7.0 0.0 0.0
Japan 0.0 0.0 0.0 0.0 0.0 0.0
Mexico 7.0 9.0 0.0 0.0 3.0 11.0
U.S. 0.0 0.0 0.0 0.0 0.0 7.0
BioPharma, Inc. 5
Relax Quantity Shipped From / To
From /
To
Latin
America Europe
Asia
w/o
Japan Japan Mexico U.S.
Brazil 0.0 0.0 0.0 0.0 0.0 0.0
Germany 7.0 12.0 3.0 8.0 3.0 2.0
India 0.0 0.0 0.0 0.0 0.0 0.0
Japan 0.0 0.0 0.0 0.0 0.0 0.0
Mexico 0.0 0.0 0.0 0.0 0.0 0.0
U.S. 0.0 0.0 0.0 0.0 0.0 15.0
Reductions in import tariffs can really change international manufacturing networks and
supply chains. With lower tariffs, companies have more options in deciding where they can
obtain their resources and produce goods and optimize their supply chains based on efficiency,
quality, and cost, resulting in globalization being more streamlined and connected. With no
tariffs, regional production change drastically, for instance, Mexico can export more goods to
the United States and Asia and Europe import more goods from India (Kesik-Brodacka, 2019).
Lower tariffs permit companies to establish global supply chains that are connected and
operate efficiently, which is good for everyone, where the customer gets cheaper pricing and
the company receives reduced expenses. Lower tariffs increase global commerce and a strong
coordinated global supply chain.
But there are also dangers with reducing duties and tariffs. Government programs,
initiatives, and finances could be affected by lower income from tariffs. The increase in cheaper
imports could force domestic companies to close, which results in job losses. Furthermore,
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governments need to ensure safeguards for important industries and influence trade deals via
levies. There are economic advantages to global supply chains, however, it also comes with
increasing systemic risk because a disconnect or failure with one link could have far-reaching
consequences (Eibl & Eibl, 2019). Some may say that global supply chains exploit countries with
less restrictive labor and environmental laws and regulations and cheaper labor. Therefore, it is
essential that governments weigh the pros and cons of lowering import taxes. A reduction in
tariffs may foster the global economy, however, there needs to be consideration when it comes
to the effects on regional economies, national objectives, and employment.
The analysis has assumed that each plant has a 100 percent yield (percent output of 10
acceptable quality). How would you modify your analysis to account for yield differences
across plants?
Scrap Percentage must be utilized for each plant to modify the permissible production
quantity, helping to account for discrepancies in output between plants. The scrap percentage
replicates each plant’s historical proportion of productions that do not meet quality criteria. For
example, let us assume that historically, Mexico had a 90% yield. To reduce the country’s
adequate capacity by 10%, a 10% scrap percentage would be applied. After adjusting capacity
amounts for scrap loss, the demand fulfillment analysis will be utilized to ensure that the most
efficient distribution of output. “Utilizing the scrap adjustment technique, the model can
include relative yield changes without altering the basic assumption of facility capacity” (Eibl &
Eibl, 2019). As more accurate data becomes available, scrap percentages can be adjusted
according.
What other factors should be accounted for when making your recommendations?
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As one knows, the supply chain network is vulnerable to risks outside of manufacturing
prices, tariffs, and currency fluctuations, such as labor disputes or shortages, health crisis,
supply chain interruptions, inaccurate demand forecasts, natural catastrophes, and supply chain
interruptions. The probability of dangers occurring and utilizing strategies to lessen the impact
should be carefully considered. My recommendation would be to reduce dependence on just
one single plant by utilizing two separate sources for producing goods. According to UNIDO,
“Increased buffer stock levels may protect against fluctuations in demand or interruptions in
supply” (UNIDO, 2018). Furthermore, backing up system infrastructures is imperative to reduce
disruptions that could cause system failures. Therefore, after considering the risks and
mitigation costs, an ideal supply chain may have to change.
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References
Christopher, M. (2018). Corporate Partnership Board CPB The Mitigation of Risk in Resilient
Supply Chains Discussion Paper.
https://www.itf-oecd.org/sites/default/files/docs/risk mitigation-supply-chains.pdf
Eibl, R., & Eibl, D. (2019). Single-Use Technology in Biopharmaceutical Manufacture. In
Google Books. John Wiley & Sons. DOI:10.1002/9781119477891
Kesik Brodacka, M. (2019). Progress in biopharmaceutical development. Biotechnology and ‐
Applied Biochemistry, 65(3), 306–322. https://doi.org/10.1002/bab.1617
Nagatani, T., Raviscioni, M., & Sugahara, A. (2020). Change in the Japanese pharma industry
McKinsey. https://www.mckinsey.com/industries/life-sciences/our%20insights/change in-
the-japanese-pharmaceutical-market-cradle-of-innovation-or-grave-of
%20corporate profits
Rinaldi, M., Murino, T., Gebennini, E., Morea, D., & Bottani, E. (2022). A literature review on
quantitative supply chain risk management models: Can they be applied to pandemic
disruptions? Computers & Industrial Engineering, 170, 108329.
https://doi.org/10.1016/j.cie.2022.108329
UNIDO. (2018). Global Value Chains and Industrial Development: Lessons from China, South
East and South Asia.
https://www.unido.org/sites/default/files/files/2018-06/EBOOK_GVC.pdf
