Florida Glass Company (a)

9 Pages Posted: 23 Jun 2009

See all articles by Sherwood C. Frey

Sherwood C. Frey

University of Virginia - Darden School of Business

Abstract

The materials manager of the Florida Glass Company noticed that the monthly run of the Energy Planning Model was scheduled for that day. This model calculated the optimal mix of products for the coming month and the quantities of energy (electricity and distillate fuel oil) required. In the past, when the manager had received the results of the model, he had simply placed an order for the recommended quantity of distillate fuel oil. But now he decided to question his perfunctory monthly ordering of distillate as the model made calculations on a monthly basis, and as a result, it ignored the opportunity to purchase more than one month's supply of distillate, even though ample storage capacity was available. During the past few years of oil price volatility, he had never taken advantage of a relatively low price, and the current situation in October 1982 seemed an ideal time to address the policy of single-month purchases.

Excerpt

UVA-QA-0315

Rev. Mar. 7, 2012

Florida Glass Company (A)

As Oscar Paik, materials manager of the Florida Glass Company, reviewed his day planner, he noted that the monthly run of the Energy Planning Model was scheduled for today. This model calculated the optimal mix of products for the coming month, October 1982, and the quantities of energy (electricity and distillate fuel oil) required. In the past, when Paik had received the results of the model, he had simply placed an order for the recommended quantity of distillate fuel oil. On this particular occasion, however, he decided to take the time to question his perfunctory monthly ordering of distillate.

The model made calculations on a monthly basis, and as a result, it ignored the opportunity to purchase more than one month's supply of distillate, even though ample storage capacity was available. During the past few years of oil price volatility, Paik had never taken advantage of a relatively low price, even when he firmly believed that prices would rise in the subsequent month. The current situation was another of these opportunities. Paik was convinced that the price he now faced at the end of September (93.66 cents per gallon) marked a temporary low in distillate prices. He believed that the price at the end of October (the next time he would normally purchase distillate) would be 94.5 cents or even 98 cents. This seemed an ideal time to address the policy of single-month purchases.

The Flat-Glass Industry

. . .

Keywords: quantitative analysis, model evaluation

Suggested Citation

Frey, Sherwood C., Florida Glass Company (a). Darden Case No. UVA-QA-0315. Available at SSRN: https://ssrn.com/abstract=1422915

Sherwood C. Frey (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/faculty/frey.htm

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