Publication Date
Authored by
David Cheung, Ross Pieper
Topic(s) Covered:
  • Optimization

A multinational chemical company is looking to include duties and duty credits as consideration factors in its production planning. This undertaking requires understanding of not only domestic trading laws but also international trading laws and how trading blocs can affect them. The company’s products are manufactured and shipped across different regions of the world. In almost every stage of its supply chain, it is exposed to some form of tariffs and credits. In this paper, the researchers present a mathematical optimization model that aims to help the company to achieve production efficiency for one of its agricultural business units while accounting for duties and duty credits. Analysis includes scenario simulations to test different rates of duties, different locations of production facilities, and different sourcing countries. The results suggest that depending on the circumstances mentioned, duties and duty credits can become significant parts of total production costs.