DMM PROJECT:

REAL LIFE CASE ON

PRODUCTION MIX AND
TRANSPORTATION
PROBLEM OF GOYAL RIM
AND AXLE

SUBMITTED To: Dr. Hitesh Arora

 ABSTRACT
This project targets on the real life application of Production mix and Transportation problem on Goyal
Rim and Axle Company, which manufactures Rims and Axles.

Linear programming (LP) is a widely used mathematical technique designed to help operations
managers plan and make the decisions necessary to allocate resources.

REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

All LP problems have four properties in common:
1. LP problems seek to maximize or minimize some quantity (usually profit or cost). We refer to this
property as the objective function of an LP problem. The major objective of a typical firm is to maximize
dollar profits in the long run. In the case of a trucking or airline distribution system, the objective might
be to minimize shipping costs.
2. The presence of restrictions, or constraints, limits the degree to which we can pursue our objective. For
example, deciding how many units of each product in a firms product line to manufacture is restricted by
available labor and machinery. We want, therefore, to maximize or minimize a quantity (the objective
function) subject to limited resources (the constraints).
3. There must be alternative courses of action to choose from. For example, if a company produces three
different products, management may use LP to decide how to allocate among them its limited production
resources (of labor, machinery, and so on). If there were no alternatives to select from, we would not need
LP.
4. The objective and constraints in linear programming problems must be expressed in terms of linear
equations or inequalities

Transportation modeling finds the least-cost means of shipping supplies from several origins to several
destinations. Origin points (or sources) can be factories, warehouses, car rental agencies like Avis, or any
other points from which goods are shipped. Destinations are any points that receive goods. To use the
transportation model, we need to know the following:
1. The origin points and the capacity or supply per period at each.
2. The destination points and the demand per period at each.
3. The cost of shipping one unit from each origin to each destination.

There are mainly two types of transshipment Problems:

1. Transshipment problem with sources and destinations acting as Transient Nodes.
2. Transshipment Problem with some transient nodes between sources and destinations.
3.
There are three methods to find a feasible solution to the transportation problem
1. North- West Corner method
2. Lowest Cost Method
3. Vogels Approximation Method

Now since we have got our solution then we check whether the solution is optimal or not, we check it by
two methods:
1. Modified Distribution Method (MODI Method).
2. Stepping Stone Method
Goyal Rim and Axle is a company that manufactures Rim and Axle. The profit and resource requirements
for both the products are different. The market demand for different products is different and is such that
number of Rims produced should be atleast twice the number of Axles produced.

Now after manufacturing company transports the products to its warehouse situated in Delhi and
Ghaziabad and also to 6 market places situated in Saharanpur, Amritsar, Ludhiana, Bhopal, Indore and
Mumbai from its 3 factories located at Baraut, Meerut and Hapur. The cost of transferring one unit of
Axle from different factories to different warehouse and markets is provided and cost of transferring two
units of Rim from different factories to different warehouse and markets is provided.

OBJECTIVE
Optimum production mix needs to be calculated that will satisfy all the constraints and will yield
maximum profit to the company and Allocation or transfer vehicles from factories to different warehouse
and markets in such a way that the demand of all the markets are met and the cost of transportation is
minimum for the company.

METHODOLOGY
Personal Interview Schedule
Personal Interview Schedule was conducted for the purpose of collecting information. The
respondent was Shri Rajesh Kumar Jain Accountant Goyal Rim and Axle Limited.

He could provide all the information regarding the different production units which were in
Baraut, Meerut and Hapur and about the warehouse situated in Delhi and Ghaziabad. Capacity of
different production unit was provided.

He threw light on distribution system of Rim and Axle and the production capacity of different factories
and demand from different cities.

Resources of Information
Inspection in the Manufacturing Unit:
Shri Rajesh Kumar Jain was able to give only rough idea on the resource required for production.
He was not able to provide precise data on resource constraints of the machines and resource
required for 1 unit production of RIM and AXLE. Since it is my real uncles factory I got a
chance to talk to the Union Leader Mr. Anand Singh after which average value was calculated
for the time required for every phase of production in all the three manufacturing units. Thus the
data on the resource constraint is average not exact and precise.
 PROBLEM
Profit on Different Products:
Goyal Rim and Axle, produces 2 products i.e. Rim and Axle. The profit per unit product sold is
different. The table below summarizes the profit per unit of product sold.

Model Profit per unit

Rim 350
Axle 590

Manufacturing Process:

Goyal Rim and Axle manufacture the products at three locations i.e. at Baraut, Meerut and Hapur
on its own. It has a list of 27 vendors from which it gathers the raw material.
Firstly Iron Rod is cut from the raw material and welded, and then finishing is done to the
welded part. After this holes are formed and inspection is done. After inspection, if the piece is
perfect then nuts and bolts are fixed. In the end, finished product is painted and pasted with
stickers.

Resource Requirement and Total Availability:

The resources required for the production of both the products are different. The table below
summarizes the resource requirement for producing the products and the total resources available
with the company.

Resources Resources used Resources used Maximum

to produce 1 to produce 1 unit Available
unit of Rim in of Axle in time in
Minutes Minutes Minutes
Iron Rod Cutting time 3 4 43400
Welding time 2 4 42000
Finishing time 6 8 43000
Hole formation time 4 2 43725
Inspection time 5 2 43740
Nut and Bolt fixing 3 1 43740
Painting time in minutes 2 3 43700
Pasting stickers 1 1 43740

Restrictions on Quantity for the two products produced:

Since the demand is approximate and because of rusting problem, stocking cannot be done and
moreover if the company will produce less then it will drastically hurt its sales and image of the
company, so there is the minimum quantity associated with the products that needs to be
produced. The table below summarizes the constraints of the company on production quantity of
different models.

units of the Constraint constraint Reasons for constrained

model produced value value
Rim >= 3000 Rim should be produced
atleast 3000 otherwise it
will hurt the sales and
image of the company.
Axle >= 1500 Goyal Rim and Axle cant
allow shortage in this
product. They have to meet
the market demand. Thus
the minimum no of units it
has to produce is 1500.

Now according to the conditions and restrictions mentioned above we need to formulate the problem and
tell the quantity of different products that Goyal Rim and Axle Company produce in order to maximize
the profit.

PROBLEM FORMULATION
Decision Variables:
Let the number of units of different products i.e. Rim and Axle be x1, x2 as shown in the table
below.

Model Let no. of units of model Profit per unit

produced be
Rim x1 350
Axle x2 590

Objective Function:

Max z= 350x1+590x2

Constraints:

Rim x1 >= 3000 Rim should be produced atleast 3000 otherwise it will hurt the sales and
image of the company.
Axle x2 >= 1500 Goyal Rim and Axle cant allow shortage in this product. They have to
meet the market demand. Thus the minimum no of units it has to
produce is 1500.

The constraints related to the various resources required to production of two products and the
total resources available with the company are summarized below:

3x1+4x243400
2x1+4x242000
6x1+8x243000
4x1+2x243725
5x1+2x243740
3x1+x243740
2x1+3x243700
1x1+1x243740
1x1-2x20
x1 and x20

Rim x1 >= 0 and int Non Negative and Integer constraint

Axle x2 >= 0 and int Non Negative and Integer constraint

SOLUTION BY SOLVER
 Before Applying Solver:
Rim Axle
x1 x2
Number 0 0 Z(Objective
Function)
Profit per unit 350 590 0

Constraints Total Time Constrain Available Time in Left

used t Minutes Over/Slack
Iron Rod Cutting 3 4 0 <= 43400 43400
time
Welding time 2 4 0 <= 42000 42000
Finishing time 6 8 0 <= 43000 43000
Hole formation 4 2 0 <= 43725 43725
time
Inspection time 5 2 0 <= 43740 43740
Nut and Bolt 3 1 0 <= 43740 43740
fixing
Painting time in 2 3 0 <= 43700 43700
minutes
Pasting stickers 1 1 0 <= 43740 43740
Market 0 0 0 >= 0 0
Constraint

After Applying Solver:

 Rim Axle
x1 x2
Number 4300 2150 Z(Objective
Function)
Profit per unit 350 590 2773500

Constraints Total Time Constrain Available Time in Left

used t Minutes Over/Slack
Iron Rod Cutting 3 4 21500 <= 43400 21900
time
Welding time 2 4 17200 <= 42000 24800
Finishing time 6 8 43000 <= 43000 0
Hole formation 4 2 21500 <= 43725 22225
time
Inspection time 5 2 25800 <= 43740 17940
Nut and Bolt 3 1 15050 <= 43740 28690
fixing
Painting time in 2 3 15050 <= 43700 28650
minutes
Pasting stickers 1 1 6450 <= 43740 37290
Market 4300 2150 0 >= 0 0
Constraint

RESULTS

The optimum production mix and maximum profit at this production mix for Goyal Rim and
Axle Company is as follows and is summarized in the table below:

Let no.
of units Optimum
of model Profit Quantity that
produced per should be
Model be unit produced
Rim x1 350 4300
Axle x2 590 2150
Total Profit 2773500

Microsoft Excel 12.0 Answer Report

Worksheet: [DMM_Production.xlsx]Sheet1
Report Created: 9/12/2012 7:55:16 PM

Target Cell (Max)

Original
Cell Name Value Final Value
$D$4 Profit per unit Z(Objective Function) 0 2773500

Adjustable Cells
Original
Cell Name Value Final Value
$B$3 Number x1 0 4300
$C$3 Number x2 0 2150

Constraints
Cell Name Cell Value Formula Status Slack
Not
$D$7 Iron Rod Cutting time Total Time used 21500 $D$7<=$F$7 Binding 21900
Not
$D$8 Welding time Total Time used 17200 $D$8<=$F$8 Binding 24800
$D$9 Finishing time Total Time used 43000 $D$9<=$F$9 Binding 0
$D$1 $D$10<=$F$1 Not
0 Hole formation time Total Time used 21500 0 Binding 22225
Not
$D$11 Inspection time Total Time used 25800 $D$11<=$F$11 Binding 17940
$D$1 $D$12<=$F$1 Not
2 Nut and Bolt fixing Total Time used 15050 2 Binding 28690
$D$1 $D$13<=$F$1 Not
3 Painting time in minutes Total Time used 15050 3 Binding 28650
$D$1 $D$14<=$F$1 Not
4 Pasting stickers Total Time used 6450 4 Binding 37290
$D$1 $D$15>=$F$1
5 Market Constraint Total Time used 0 5 Binding 0
Not
$B$3 Number x1 4300 $B$3>=3000 Binding 1300
Not
$C$3 Number x2 2150 $C$3>=1500 Binding 650
 Microsoft Excel 12.0 Sensitivity
Report
Worksheet: [DMM_Production.xlsx]Sheet1
Report Created: 9/12/2012 7:55:16
PM

Adjustable Cells
Reduce
Final d Objective Allowable Allowable
Valu Coefficie
Cell Name e Cost nt Increase Decrease
$B$3 Number x1 4300 0 350 92.5 645
123.333333
$C$3 Number x2 2150 0 590 1E+30 3

Constraints
Constrai
Final Shadow nt Allowable Allowable
Valu
Cell Name e Price R.H. Side Increase Decrease
Iron Rod Cutting time Total Time 2150
$D$7 used 0 0 43400 1E+30 21900
1720
$D$8 Welding time Total Time used 0 0 42000 1E+30 24800
4300
$D$9 Finishing time Total Time used 0 64.5 43000 29900 13000
$D$1 2150
0 Hole formation time Total Time used 0 0 43725 1E+30 22225
$D$1 2580
1 Inspection time Total Time used 0 0 43740 1E+30 17940
$D$1 1505
2 Nut and Bolt fixing Total Time used 0 0 43740 1E+30 28690
$D$1 Painting time in minutes Total Time 1505
3 used 0 0 43700 1E+30 28650
$D$1
4 Pasting stickers Total Time used 6450 0 43740 1E+30 37290
$D$1 2166.66666
5 Market Constraint Total Time used 0 -37 0 7 3250
Microsoft Excel 12.0 Limits Report
Worksheet: [DMM_Production.xlsx]Limits Report 1
Report Created: 9/12/2012 7:55:16 PM

Target
Cell Name Value
$D$ 277350
4 Profit per unit Z(Objective Function) 0

Adjustable Lower Target Upper Target

Cell Name Value Limit Result Limit Result
277350
$B$3 Number x1 4300 4300 0 4300 2773500
239000
$C$3 Number x2 2150 1500 0 2150 2773500
 TRANSPORTATION OPTIMIZATION OF GOYAL RIM and
AXLE
Goyal Rim and Axle Company has established 2 warehouses so as to reduce the cost of
transportation but they are optimizing the transportation cost as they supply to the market as per
demand and availability of resources, for e.g. if demand comes from Saharanpur and they have
stock available in warehouse based in Delhi so they will transfer the product from Delhi.

Goyal Rim and Axle Company transports the products to its warehouse situated in Delhi and
Ghaziabad and also to 6 market places situated in Saharanpur, Amritsar, Ludhiana, Bhopal, Indore and
Mumbai from its 3 factories located at Baraut, Meerut and Hapur .

The supply of different manufacturing units of Goyal Rim and Axle Company and demand of
different markets along with the cost of transfer of Two Units of Axle in rupees from factory to
market and warehouse is summarized in the table below:

Firstly we will solve for Rims and then for Axle as the production is different from different
manufacturing unit.

RIM Saharanpur Amritsa Ludhian Bhopa Indore Mumba Delh Ghaziaba Supply
r a l i i d
Baraut 7 17.5 15.5 12 15 18 2 2.25 1100
Meerut 8 16.5 14 17 17.5 20 3 2.75 650
Hapur 9 17 16 18 16 19 2.5 3.25 250
Delhi 11 15 13 19 18 21 0 1.5 ----
Ghaziaba 10 15.5 13.5 18.5 17.5 20.5 1.5 0 ----
d
Demand 150 600 400 250 350 250 ---- ---- 2000
 SOLUTION BY SOLVER
Before Applying Solver:
RIM Saharanp Amrits Ludhia Bhop Indor Mumb Del Ghaziaba Suppl Constrai
ur ar na al e ai hi d y nt
Baraut 1100 0
Meerut 650 0
Hapur 250 0
Delhi 2000 0
Ghaziaba 2000
d 0
Demand 150 600 400 250 350 250 200 2000 6000
0
Constrai
nt 0 0 0 0 0 0 0 0

RIM Saharanp Amrits Ludhia Bhop Indor Mumb Del Ghaziaba Suppl
ur ar na al e ai hi d y
Baraut 7 17.5 15.5 12 15 18 2 2.25 1100
Meerut 8 16.5 14 17 17.5 20 3 2.75 650
Hapur 9 17 16 18 16 19 2.5 3.25 250
Delhi 11 15 13 19 18 21 0 1.5 2000
Ghaziaba 10 15.5 13.5 18.5 17.5 20.5 1.5 0 2000
d
Demand 150 600 400 250 350 250 200 2000 6000
0

0
 After Applying Solver:
RIM Saharanp Amrits Ludhia Bhop Indor Mumb Del Ghaziaba Suppl Constrai
ur ar na al e ai hi d y nt
Baraut 0 100 400 0 350 250 0 0 1100 1100
Meerut 150 500 0 0 0 0 0 0 650 650
Hapur 0 0 0 250 0 0 0 0 250 250
Delhi 0 0 0 0 0 0 200 0 2000
0 2000
Ghaziaba 0 0 0 0 0 0 0 2000 2000
d 2000
Demand 150 600 400 250 350 250 200 2000 6000
0
Constrai 200
nt 150 600 400 250 350 250 0 2000

RIM Saharanp Amrits Ludhia Bhop Indor Mumb Del Ghaziaba Suppl
ur ar na al e ai hi d y
Baraut 7 17.5 15.5 12 15 18 2 2.25 1100
Meerut 8 16.5 14 17 17.5 20 3 2.75 650
Hapur 9 17 16 18 16 19 2.5 3.25 250
Delhi 11 15 13 19 18 21 0 1.5 2000
Ghaziaba 10 15.5 13.5 18.5 17.5 20.5 1.5 0 2000
d
Demand 150 600 400 250 350 250 200 2000 6000
0
 3165
0

Result:
Cost of transferring 4000 units of Rims in pairs comes out to be Rs. 31650.

FOR AXLE
Cost of producing per unit of Axle from manufacturing unit to warehouse and market in Rs is
given below.

AXLE Saharanpu Amritsa Ludhian Bhopa Indor Mumba Delh Ghaziaba Supply
r r a l e i i d
Baraut 4 10 9 7 8 10 1.5 1.25 875
Meerut 5 9.5 8 9 10 11 2 1.5 325
Hapur 6 9 8.5 10 9 10 1.75 1.75 600
Delhi 8 8 7 11 10.5 12 0 1 ----
Ghaziabad 7 8.5 7.5 10.5 10 11.5 1 0 ----
Demand 150 650 550 50 250 150 ---- ---- 1800

SOLUTION BY SOLVER
Before Applying Solver:

AXLE Saharanp Amrits Ludhia Bhop Indor Mumb Del Ghaziaba Suppl Constrai
ur ar na al e ai hi d y nt
Baraut 875 0
Meerut 325 0
Hapur 600 0
Delhi 1800 0
Ghaziaba 1800
d 0
Demand 150 650 550 50 250 150 180 1800 5400
0
Constrai
nt 0 0 0 0 0 0 0 0

AXLE Saharanp Amrits Ludhia Bhop Indor Mumb Del Ghaziaba Suppl
 ur ar na al e ai hi d y
Baraut 4 10 9 7 8 10 1.5 1.25 875
Meerut 5 9.5 8 9 10 11 2 1.5 325
Hapur 6 9 8.5 10 9 10 1.75 1.75 600
Delhi 8 8 7 11 10.5 12 0 1 1800
Ghaziaba 7 8.5 7.5 10.5 10 11.5 1 0 1800
d
Demand 150 650 550 50 250 150 180 1800 5400
0

After Applying Solver:

AXLE Saharanp Amrits Ludhia Bhop Indor Mumb Del Ghaziaba Suppl Constrai
ur ar na al e ai hi d y nt
Baraut 0 0 425 50 250 150 0 0 875 875
Meerut 0 200 125 0 0 0 0 0 325 325
Hapur 150 450 0 0 0 0 0 0 600 600
Delhi 0 0 0 0 0 0 180 0 1800
0 1800
Ghaziaba 0 0 0 0 0 0 0 1800 1800
d 1800
Demand 150 650 550 50 250 150 180 1800 5400
0
Constrai 180
nt 150 650 550 50 250 150 0 1800
 AXLE Saharanp Amrits Ludhia Bhop Indor Mumb Del Ghaziaba Suppl
ur ar na al e ai hi d y
Baraut 4 10 9 7 8 10 1.5 1.25 875
Meerut 5 9.5 8 9 10 11 2 1.5 325
Hapur 6 9 8.5 10 9 10 1.75 1.75 600
Delhi 8 8 7 11 10.5 12 0 1 1800
Ghaziaba 7 8.5 7.5 10.5 10 11.5 1 0 1800
d
Demand 150 650 550 50 250 150 180 1800 5400
0

1552
5

Result:
Cost of transferring 4000 units of Rims in pairs comes out to be Rs. 15525

So Total cost of transportation = Rs. 31650 + Rs. 15525 = 47175

Recommendation:
1. Goyal Rim and Axle Company has a potential of manufacturing more Rims and Axles as per the
resources. As we can see that, optimal numbers of Rims that can be produced according to our
calculation is 4300 and as per the market only 4000 are produced, since market share can be
increased so they must go for more production. Same case is with Axles as optimal numbers of
Axles that can be produced according to our calculation is 2150 and as per the market only 1800
 are produced. So What Goyal Rims and Axles can do is tap an untouched market and increase its
profit.
2. Since workers are happy now as they have to produce more, so they can increase production by
100 in the first month then 200 in the second month and so on.
3. Since according to the given constraints the production cannot go beyond 4300 for Rims and
2150 for Axles but if they can hire more labor for Finishing the product after welding, their
production can increase but Goyal Rim and Axle Company should only give maximum of Rs.
64.5 per minute otherwise they will incur loss.
4. Since Goyal Rim and Axle Company knows the market demand they must go through the
transportation mix given above so as to minimize the total cost incurred in transporting the
product.

References
- Notes provided by Dr. Hitesh Arora, Faculty Quantitative Techniques and
Operations, FORE School of Management, Delhi.
- http://wps.prenhall.com/wps/media/objects/2234/2288589/ModC.pdf
- http://wps.prenhall.com/wps/media/objects/1159/1186960/cdrom_modules/module_b
.pdf
- Chapter 10: Transportation and Assignment Models
- Books:
Introduction to Operations Research by Frederick S. Hillier, Gerald J. Lieberman,
Bodhibrata Nag and Preetam Basu.
Introduction to Operational Research by Kothari C.R.