12 Pages Posted: 21 Oct 2008
The manager of a paper plant must decide whether to buy a new electrode boiler to replace a natural gas boiler. The challenge is to cut through complexities, such as uncertainty in boiler efficiency, energy prices, financing alternatives, and supplier/competitor relationships to arrive at a first-cut analysis and decision. Although the case is rich with issues, a considered decision can be made without using the sophisticated methods available to treat these complexities. The case is designed as an introductory class in which an agenda for a course in decision analysis/management science is established.
Rev. Feb. 24, 2014
Jim Carpenter, plant manager of Palmetto Paper's Spartanburg, South Carolina, plant, anxiously skimmed Southern Power's electrode boiler pricing proposal. As a former NASCAR driver, Carpenter had a reputation for occasionally making business decisions “by the seat of his pants.” With respect to spending $ 900,000 on a new boiler, however, he knew he would have to run some numbers.
His instincts told him that the time was right to replace his old, dirty natural gas boiler with this new, 99.5% efficient electrode boiler. Natural gas prices were projected to rise, and his current natural gas boiler was costing him a lot of money to operate. He hoped Southern Power's electricity prices were low enough to justify the new boiler.
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Keywords: decision analysis
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