Esso Standard Oil Company

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Esso Standard Oil Company The Esso Standard Oil Company is an international producer, refiner, transporter and distributor of oil, gasoline and petrochemicals. Esso Standard Oil (hence forth referred to as Esso Oil) is a holding company with subsidiary operating companies that are wholly or partially owned. A major problem for Esso Oil is to coordinate the actions of these various subsidiaries into an overall corporate plan, while at the same time maintaining a reasonable amount of operating autonomy for the subsidiary companies. To deal with this dilemma, the logistics department at Esso Oil Headquarters develops an annual corporate-wide plan which details the pattern of shipments among the various subsidiaries. The plan is not rigid but provides general guidelines and the plan is revised periodically to reflect changing conditions. Within the framework of this plan, the operating companies can make their own decisions and plans. This corporate-wide plan is presently done on a trial and error basis. There are two problems with this approach. First, the management of the subsidiaries often complains that the plan does not reflect properly the operating conditions under which the subsidiary operates. The plan sometimes calls for operations or distribution plans that are impossible to accomplish. And secondly, corporate management is concerned that the plan does not optimize for the total company. The technique of linear programming seems a possible approach to aid in the annual planning process that will be able to answer at least in part, the two objections above. In addition the building of such a model will make it possible to make changes in plans quickly when the need arises. Before embarking on the development of a world-wide model, Esso Oil asks you to build a model of the Far Eastern operations for the coming year. Far Eastern Operations The details of the

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