MODEL-BASED OPTIMIZATION OF SCRAP STEEL PURCHASING

Scrap steel and iron ore are important feed stocks in the production of steel. Scrap steel is available on the open market as a commodity from various suppliers. The price and quality of scrap steel fluctuate and therefore require the periodic determination of the relative usage rate for each batch of steel made in a particular period of time. The determination of the usage rate results in an optimization programming problem that seeks to minimize scrap purchase costs. The solution of the programming problem should indicate which scrap supplier to purchase from, what scrap type to use, and in what lot quantities, in order to fill customer orders and to maintain desired inventory levels for the steel producer.