BZAN 7320 Case #2: Chandpur Enterprises

Objectives:

 Describe the properties of non-linear models

 Explain the difference between local optima and the global optimum
 Develop a non-linear optimization model and solve it using the GRG algorithm
 Interpret the results of a non-linear optimization
 Determine ways to add value using shadow prices and reduced costs

Activities:

1. Read the case study “Chandpur Enterprises Limited, Steel Division” (UV6307).

2. Review your course notes and other class material on non-linear optimization – blending
models.

3. Your case analysis should follow the outline described in the course syllabus; however,
you may find the discussion questions below helpful in structuring your analysis. At a
minimum you should provide direct answers to all the questions below, but you should
also explore other approaches that CEL should consider in order to improve profitability.

4. Submit your case analysis via BlackBoard by the due date.

Discussion questions:

1. What is the task before Akshay Mittal? In other words, what issues are critical to him and
how should he approach them?

2. If you were making only one batch, what is the best batch you could make? What is the
profit associated with this batch?

3. Did the regulatory constraint of 4,000 kg per batch of finished product hamper your
ability to make more profit? Is it worthwhile to seek regulatory approval to increase that
limit?

4. CEL has used some amount of all seven raw materials in the past. A vendor may be
somewhat unhappy if CEL does not order a particular type of raw material. How much
profit will Akshay Mittal lose if he must use at least one unit of a raw material in a batch
given that he would otherwise choose not to use that material?

5. What implications does your optimal batch from question 1 have on monthly
contribution?

6. Do you have any further suggestions for how to improve monthly profits?