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Auto Assembly Zcxxy PDF
Auto Assembly Zcxxy PDF
Auto Assembly Zcxxy PDF
VERSION
SHSHANK
1.0
MS BUSINESS ANALYTICS
BENTLEY UNIVERSITY
Confidential
PROBLEM STRUCTURE
This problem can be tackled using Linear Programming techniques to attain the
optimum number of units to be produced to achieve maximum profits subject to
the given conditions. We can observe that the objective function for this problem
can be fairly linear as we need to maximize the profits which is a linear function of
the number of units of each model assembled.
OBJECTIVE FUNCTION
Our objective is to maximize the profit for the month. This can be formulated as
below
PROFIT (Max) = 3600*FT + 5400*CC
CONSTRAINTS
The objective function above would be subjected to the following constraints:
The constraint for labor-hours can be formulated as below
FT>=0 (since the company has not put any upper cap on number of FT
units to be assembled)
The company has a forecast for the demand of CC in the market for next
month which is 3500 units and hence this non negativity constraint is
subjected to an upper limit.
3500>= CC >=0
ANALYSIS PLAN
I propose to solve these equations using the Analytic Solver Platform provided by
Frontline for Excel using the Linear programming functionalities. The model can be
subjected to different scenarios and the optimum solution for the same could be
conveniently obtained using this platform.
Thus the plant can achieve a maximum profit of $26640000 if it assembles 3800
units of Family Thrill Seeker and 2400 units of Classy Cruiser.
B) WITH TARGETED MARKETING CAMPAIGN
According to the Marketing department a targeted marketing campaign costing
$500,000 would increase the demand for Classy Cruiser by 20%. The following
results will allow us to analyze if the marketing campaign is worth the money. This
would increase the demand of CC from 3500 to 4200
Thus we need to subject the Linear programming model to a new constraint while
rest of the constraints remain the same as follows:
4200>= CC >=0
FT CC Resour Resour
ces ces
Used availab
le
Net 261400
Max 00
Profit
Since the Net Profit after the marketing campaign for Classy Cruisers will be
$26140000 which is less than $26640000, it is not worth undertaking the
campaign.
FT CC Resour Resour
ces ces
Used availab
le
We can observe that the 3250 units of Family Thrill seeker and 3500 units of
Classy Cruiser can now be assembled which would generate a maximum profit of
$30600000.
D) MAXIMUM AFFORDABLE EXPENSE FOR LABOR
It is understood that overtime labor is an expense and it is necessary to find out
how much money can be spent for overtime labor subject to the linear model we
have designed.
The amount which can be considered as an affordable expense can be expressed
as a difference between the max profit with regular labor-hours capacity and max
profit with increased labor capacity.
For this calculation, we consider the results from Sections A and C:
Affordable Expense for Labor = Max Profit (regular capacity) - Max Profit
(increased capacity)
= 26640000 30600000
Affordable Expense for Labor = $3960000
We can observe that the Net Max Profit is $31900000 which is substantially
higher than what we have got from other scenarios. This combination will allow us
to assemble 3000 FT and 4000 CC.
F) IS 25% INCREASED PLANT CAPACITY + TARGETED MARKETING CAMPAIGN
BETTER DECISION THAN BUSINESS AS USUAL?
We know that the 25% overtime labor is going to cost us $1600000 thus to figure
out if it is a better decision than Business as usual we subtract the Overtime
expense from the max profit obtained in E.
The Resultant Max Profit = $30300000 which is greater than $26640000 and
hence we can say that decision of 25% Increased Plant Capacity with Targeted
Marketing Campaign is a better decision than Business As Usual.
FT CC Resources Resources
Used available
We can observe from the results that 1500 units of FT and 3500 units of CC need
to assembled to attain maximum profits.
Since the losses incurred are less than $2000000, we can meet the full demand for
Classy Cruiser.
J) FINAL DECISION BASED ON F, G AND H
Considering the decisions in F, G, and H we have a tabulated view of the Max Profit
and the number of units to be produced of each model as follows.