Professional Documents
Culture Documents
Submitted to:
Dr. R. Jagadeesh,
Prof. SDM IMD, Mysore.
Submitted by:
Group No. 09
Sentil S. (10043)
Operation Research Term III (2010-12)
Contents
Executive summary .................................................................................. 3
Statement of the Problem/s: ................................................................... 3
Question 1: ............................................................................................... 7
Question 2 ................................................................................................ 8
Question 3:- ............................................................................................ 11
Question 4: ............................................................................................. 13
Question 5: ............................................................................................. 18
Recommendations: ................................................................................ 19
Tables and figures: ................................................................................. 20
References:............................................................................................. 22
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Executive summary
With this basic information we would like to define our problem statemets...
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1 6
10 60
10
30
4
Finished
Start
50 10 20 Product
25
2
7
15
30
Model
Picked Town House Gentle El
Fence Stream Presidente
Building 1 30 25 20 10
Building 2 60 55 50 45
Building 3 40 35 30 N/A
Building 4 95 85 See text 65
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Interpretation of table:
• If Building 1 is used to produce the Picked Fence Model- 30 such models
can be produced
• If it is used to produce the Town House Model- 25 such models can be
produced.
Table 2: Transportation cost and time from El cajon route to Distribution centers
Shipping Routes
No. of
From To Days Cost/Day
Truck Routes
El Cajon Phoenix 1 $375
El Cajon Dallas 3 $300
Phoenix Rapid City 2 $250
Phoenix Oklahoma City 2 $175
Dallas New Orleans 1 $300
Rapid City Chicago 3 $325
Rapid City Oklahoma City 2 $250
Rapid City Nashville 4 $200
Chicago Nashville 2 $300
Chicago Raleigh 3 $375
Oklahoma City New Orleans 3 $225
Oklahoma City Nashville 4 $300
Oklahoma City Raleigh 5 $200
Nashville Miami 3 $350
Raleigh Miami 4 $250
Rail Routes
El Cajon Phoenix 2 $250
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QUESTION 1:
Maximum production capacity of Gentle stream model at building 4 in El
Cajon.
The plant is being reconfigured and the building 4 depends on the sub-assemblies
in order to execute the production process. Now the sub-assembly process has
different production routes. The various production lines for sub-assembly are as
following:-
1 6
10 60
10
30
4
Finished
Start
50 10 20 Product
25
2
7
15
30
In the above assembly setting there are two lines emerging out of the initial point.
Now the line to node one has the capacity of 30 units and further the 20 units can
move to node 3 and 10 units to node 4. This is because in case we move all the 30
Report On: GSA Industries Case Study
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Operation Research Term III (2010-12)
units to node 3, there will be production congestion as the capacity to node 6 is just
20. So we move the maximum 20 units to node 3 and 10 to node 4. After this the
units will move to the final node easily as the capacity is double than we need.
For the second line of production of sub-assembly, we can only move 25 units to
node 2. This is because the capacity of the lines to node 4 and 5 is only 10 and 15
only. So, 10 units will move from node 4 to node 7 and 15 units from node 5 to
node 7. This will cause the output of 15 units from line 2.
So the total number of units that can be produced from the sub-assembly is 55
Question 2
Which Building should produce which model at the El Cajon plant in order to
maximize gross profit. (Ignore transportation costs in this analysis and discuss why
this is probably valid with particular set of data. Discuss how the model would
change if it were not valid)?
ANSWER:- (A)
In the previous question we determined from the network diagram of gentle stream
in building 4 that we can produce 55 units of gentle stream in that building. We
recreate the table below with this figure.
The table shows how much of each product that could be manufactured in the
respective buildings B1, B2, B3 and B4. For example GSA can produce 30 units of
picket fence in building B1, or 60 units in B2 and so on. We need to maximize the
gross profit given the above table. It is also given that each building will produce
only one product. Hence, we face an assignment problem and with the following
Report On: GSA Industries Case Study
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Operation Research Term III (2010-12)
given gross profit table we can find an optimum solution to assign a building to a
particular product.
By multiplying the figures in Table 3 by the respective gross profit values we get
the following table:-
Using Vogel’s method for maximization, the maximum gross profit we get is $
2,707,200 and the assignments are highlighted in the table above. We summarize
the assignments as follows:
We have obtained the above solution using the solver on excel as well and have
obtained the same solution.
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PART (B):-
Now the question clearly mentions that while formulating the model we have to
ignore the transportation costs. Now for the given set of data of Gross profit, we
can ensure the validity of the model of the allocation of various types of housing
units to different buildings on the basis of the L.P.P method. Now the validity can
change if the figures go beyond the allowable increase/decrease, as shown in the
below sensitivity report. For example, in case of Picket fence, it has been allocated
to building 1 and the allowable increase is infinity so in case the Gross profit figure
exceed the given amount up to infinity then the model will still hold good but since
the allowable decrease is $19200 which means that if the figure of gross profit falls
below this limit then the model validity will be lost and new model will have to be
formulated.
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QUESTION 3:-
The minimal total transportation costs from El Cajon to each of the
distribution cities. (Discuss any time implications of your recommendations).
In case of El Cajon plant of the GSA industry, the case mentions various routes
that are available and the modes alternatives. There are three modes available:
Truck, rail and boat.
Below is the diagrammatic representation of the routes. The cost and time for the
same is produced in the table 2.1 in problem statement:
(The green colored routes are selected as per minimum cost allocation.)
Now on the basis of the above mentioned routes and modes we have the following
alternatives available to transport the goods from El Cajon to Phoenix, Nashville
and Miami. We will choose the route from plant to the distribution center which
will produce the minimum cost:-
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Figure 4: All the routes cost calculation )El Cajon to Distribution centers
3. Miami 2625
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Question 4:
The allocation of each housing model from each production city to each
distribution city.
Transportation cost for the as per our calculations mentioned in previous question.
For El Cajon Plant (As per our calculation after allocating the models to buildings):
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Model
Picket Town Gentle El
Fence House Stream Presidente
Phoenix 50 60 60 90
Nasville 80 60 30 20
Miami 75 90 85 90
Demand 205 210 175 200
As per the table, we can see that company is in supply deficit for all the four
products (models) so for solving it as a transportation problem we need to add
dummy supplier in all the cases.
Picket Fence
dummy
supplier 99999 99999 99999 75
Demand 50 80 75 205
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As mentioned above we have created dummy supplier here which will supply 75
units. We put cost for that supplier very high so as to avoid it from the solution.
El Cajon 30 0 0 30 30
Dummy supplier 75 0
Demand 50 80 75 205
Allocated 50 80 0
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Town House:
Elkhart 15 60 0 75 75
El Cajon 35 0 0 35 35
Demand 60 60 90 210
Allocation 50 60 0
Gentle Stream:
Elkhart 10 30 35 75 75
El Cajon 50 0 0 50 50
Dummy supplier 50 0
Demand 60 30 85 175
Allocated 60 30 35
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El Presidente:
El Cajon 65 0 0 65 65
Dummy supplier 15 0
Demand 90 20 90 200
Allocated 90 20 75
Elkhart El Cajon
Picket Fence 20 80 0 30 0 0
Town House 15 60 0 35 0 0
Gentle Stream 10 30 35 50 0 0
El Presidente 25 20 75 65 0 0
Total Units
transported 70 190 110 180 0 0
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Question 5:
Net profit of GSA for the year:
The following statement consolidates all the costs and revenues for the year from
which we can
Model total gross total gross
determine units profit profit in $ the net
profits. in $
Picket Fence 130 9,600 1,248,000
Table 17:Net
Town House 110 11,520 1,267,200
profit Gentle Stream 125 15,360 1,920,000 calculation
for the El Presidente 185 19,200 3,552,000 year(after
fixed cost and
overheads) Total Revenue 7,987,200
Transportation 581,750
cost
Fixed cost 3,000,000
Over heads 2,000,000
Since it is given that whatever is produced by the firm will be sold because of
favorable economic conditions, our revenues will be close to $ 8 million.
The transportation cost is as calculated in the previous question. The fixed costs
and overheads are given.
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Recommendations:
If we meet the total demand by the distribution centers i.e.
Phoenix – 260
Nashville – 190
Miami – 340
Our major constraint would of course be building additional capacity. There are
two factors that we would need to consider. One is the cost of building and the
other is time. The cost of building may not be that much of a hindrance as we have
$2.4 million in profits and we would be able to raise additional funds because of
our strong finances.
The other factor, time, will be more of an issue in our case. As no one can predict
the future, we may not have an indication of the future economic conditions which
could affect our predictions of the demand being as high as it currently is.
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Figures:
Tables:
Table 2: Transportation cost and time from El Cajon route to Distribution centers
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Table 17:Net profit calculation for the year(after fixed cost and overheads)
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References:
Stevenson, William J and Ozgur, Ceyhun. Introduction to Management Science with
Spreadsheets. Tata McGraw-Hill
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