CHE 140: Process Analysis

Fall 2012
Market Game Design Project

Goal:

This project will simulate a real market arena with different companies competing for
market share. The goal of this project is to have the highest cumulative profit at the end
of the fifth year.

Synopsis:

In companies made up of 4 to 5 students, you will design a reactor to produce a product,
D. This product will be sold in a simulated free market in which 11 to 12 companies
compete for market share over a period of five years. Because of the size of the class, 35
companies will be divided into 3 groups and compete in 3 independent free markets. In
your cost analysis, not only should you consider mass balances and profit optimization
when you design your reactor, you must also decide what portion of the market you can
get over the five-year period by anticipating demand and what other companies will try to
get. Once you have designed your reactor, you cannot change its volume. You must meet
market demand simply by adjusting the flow rate to the reactor. Costs arise from the
capital cost of the reactor and the operational cost of the process.

Game Information:

Reaction / Reactor
The reaction, A D, takes place in a CSTR operated for 350 days/year and 24 hr/day.
The reaction is first order in A with rate constant, k =0.005 min
-1
.

Costs
The reactant A is supplied at 0.2 mol/L for a market price of $0.30/mol during
the five year period.
The cost of operating your reactor is proportional to the volume of the reactor, with a
proportionality constant of $45/(L*year). This cost includes depreciated capital cost and
maintenance costs.
Unsold product must be stored at a cost of $0.25/(mol*year). (See "Market
Share/Unsold Product" section below)

Selling Price / Market Demand
A forecast of the market demand over the five-year period is posted in the appendix of
this handout. This is ONLY A FORECAST, and actual market demand and price may
vary by 20% above or below the anticipated level. The amount of variation will be
determined by a random number generator. One random number each is generated for
price and demand.


Market Share/Unsold Product

Each company's market share is determined in one of two ways, depending on whether or
not the total amount of product put on the market (i.e. the sum of all companies'
production and storage from previous years) is greater than the actual demand:

a) If the total amount of product is LESS than actual demand, each company's market
share is simply its fraction of total production.

b) For years two through five, if the total amount of product is MORE than actual
demand, each company's market share is determined by the following formula:
market share =0.80*(fraction of total production) +0.20*(market share of the previous
year)
Companies can only sell their share of the actual demand. Their remaining product must
be stored at a cost of $0.25/mol year and put on the market again the following year.

c) During year one, if the total amount of product is MORE than actual demand, each
companys market share is equal to its fraction of total production.

Bankruptcy
A company will be declared bankrupt when its cumulative profit drops below -$2 million.
Once a company is declared bankrupt, it will be eliminated from the game, and the
market shares of the surviving companies is renormalized to calculate the new market
share for subsequent years.

Winner
The company with the highest cumulative profit in each group after the five-year period
is the winner. This group will receive certificate from Prof. Reimer.

Logistics:
Companies
The GSIs will assign you to a company prior to the start of the game. Each team will
receive an email with the names and emails of their teammates.

Submissions
Below is the schedule for the submission of variable values and posting of results. You
must be punctual, if you are more than 10 minutes late in submission, your production
will be set at zero for that year and it will count against your participation grade in the
game.
Data submission must be done via a form that will be emailed out to everyone.

Monday, Oct. 8
12:30 p.m
5:00 p.m
Year 1 Data Submission
Year 1 Results Posting
Tuesday, Oct. 9
12:30 p.m
5:00 p.m
Year 2 Data Submission
Year 2 Results Posting
Wednesday, Oct. 10 12:30 p.m Year 3 Data Submission
5:00 p.m Year 3 Results Posting
Thursday, Oct. 11
12:30 p.m
5:00 p.m
Year 4 Data Submission
Year 4 Results Posting
Friday, Oct. 12
12:30 p.m.
5:00 p.m.
Year 5 Data Submission
Year 5 Results Posting
Monday, Oct. 15 8:10 a.m. Design Report Submission


Each data submission during the game represents your companys production for one
year. The first year, you will submit the name of your company, the volume of your
reactor (in liters) along with the volumetric flow rate (L/min) and the concentration of
product D (mol/L). After that (years 2-5), you will submit only the volumetric flow rate
(L/min) and concentration of product D (mol/L).
Submissions will be made by having one representative from each company fill out an
online form. A link to the form will be sent by the GSI before Monday, October 8
th
.
The GSI will respond by 1 pm with a brief message indicating receipt of your
information. If you do not receive this brief message, you should contact your GSI as
soon as possible (ASAP).

A WRITTEN REPORT is due the Monday, Oct. 15 at the beginning of lecture. EACH
STUDENT SHOULD SUBMIT HIS OR HER OWN REPORT. However, we certainly
expect that company members will have worked together and that their reports will
contain similar material. Include in this report all calculations along with a brief
summary of your company's strategy for the game and observations you made. More
details for the report are given below. Your grade for the project is based on this report,
not on how well your company did in the game.

Results
GSIs will calculate the results from each year and email the results for all companies to
everyone in the class by the post time.

Students will be supplied with the following information:

PUO: This is the Production Unit Output and is the sum of qC
D
and any
inventory that has accumulated.

Market Demand: This is the mol D per year determined by the equation for
the curve and the random shift.

Price: This is the dollars per mol D determined by the equation for the curve and
the random shift.

Market Share: This is the percentage of the total demand that your company
has earned. Each company's market share is determined as described above.

Sales Volume: The teams can only sell as much as their market share allows. This
number in mol D per year is the product of the market share times the demand.

Inventory: This is the production unit output minus the sales volume.

Profit: Profit equals the sales minus the costs. Profit is calculated as follows:

Yearly Profit =Income from Sales for Year X - Cost of A - Capital/Operating Costs
Inventory Cost

Cumulative Profit. This is the profit for Year X plus the profit from previous
years.

Report Suggestions and Problem Solving Approach

List all members in your company along with the team/company name.

The report consists of two parts: a first part outlining your calculations and a second part
explaining your strategy and reflecting on the games outcome. The first part should be 2
pages at most and the second part 1 page at most.

Define the system and all constants and variables necessary for this problem. Write
component balances for A and D. Write an overall expression for annual profit. Derive
an equation from the material balance equations that gives V as a function of C
D
and the
parameters q, k, and C
AF
. Eliminate V in your profit equation in favor of q, C
A
and C
D
.

The idea is to optimize your process such that your profit is a maximum. Because you
cannot know the price or market share and therefore the amount of unsold product, you
should try to minimize costs for a given D production, qC
D
. Using only terms which
apply to operating costs (but not storage), write a cost equation, and substitute conversion
of A (conversion of A, X =1 - C
A
/C
AF
), where appropriate. Now take the derivative with
respect to the appropriate variable to find the operating condition which will minimize
cost. Solve analytically and/or use a computer for this part.

Remember that this does not account for inventory costs and your market share (which
determines your revenue relative to others). Applying this condition does not necessarily
guarantee that your company wins.

Next, determine your reactor volume. Clearly define what led you to choose this volume
(eg., why did you pick a large or small reactor?). Examine the sales demand and selling
price graph given. You should use this as a guide to determine what fraction of the
market demand you want to meet and then determine the corresponding volume of your
reactor.

You will specify a desired C
D
and q in subsequent years. The values you submit will have
to satisfy your mass balance equations. Make sure that q, C
AF
and C
D
satisfy your mass
balance equation. Check that C
D
is less than 0.2 mol/L. Why is this the maximum
concentration? We will check to make sure your inputs are valid. If not, we will take your
q value, calculate the correct C
D
and proceed (and this will be reflected in your report
grading).

Conclude with general strategies and observations. What did your company do right so
that you ended up with good profits? What went wrong if your earnings are poor? What
caused you to go bankrupt?

At the end of your report, you will include a teammate evaluation form in which you will
rate the performance of each team member.

Appendix:
Table I. Projected market demand/price of D

Year Projected Demand (mol x 10
7
/y) Projected Price ($/mol)
1 2.52 $1.11
2 2.72 $1.08
3 3.12 $1.02
4 3.58 $0.98
5 3.78 $0.96