GSA Industries

Report On:
GSA Industries Case Study

Submitted as a part of the curriculum of the course Operations Research
Submitted to:
Dr. R. Jagadeesh,
Prof. SDM IMD, Mysore.
Submitted by:
Group No. 09
Abhishek Saini (10003)
Harsh Sheth (10020)
Nargish Raman (10028)
Nikunj Patel (10029)
Sagar Bajpai (10039)
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
Report On: GSA Industries Case Study
2
Executive summary
G.S.A industries Produces four different types of prefabricated housing units at

two locations: - El Cajon, California and Elkhart, Indiana. The prefabricated units
are transported to regional distribution centers in Phoenix, Nashville and Miami.
The organization is concerned to take decisions like which of the building at El
Cajon plant should produce which model of housing unit, the optimal units to be
produced in building four keeping in consideration the sub-assemblies constraints
and the units to be transported to each of the distribution from the two production
units. These decisions are to be made so the profit can be maximized and the cost
can be minimized, as the case may be. By using the algorithm of LPP it is found
that the organization can choose to produce 55 units in building 4, allocate Picket
fence, Gentle stream, Town house and El president to building 1,2,3 and 4
respectively and transport all the units produced to three distribution centers, since
the demand is more than the production units.
Statement of the Problem/s:
As we mentioned in executive summery GSA Industries produces four models of

prefabricated housing units in each of two locations and the prefabricated housing
units are transported to regional distribution centers.
With this basic information we would like to define our problem statemets...
 How many Gentle Steam model can be produced in Building 4 of El Cajon

Plant?
These Production quantitity can be determined by analyzing the rate at which
various subassemblies can be manufactures and passes along to the next
operation.
We have to decide production capacity by using network representation given
in the case. Same is shown below.
3
Subassembly 1 Subassembly 2 Subassembly 3 Subassembly 4

3
20
40
1 6
10 60
10
30
4
Finished
Start
50 10 20 Product
25
2
7
15
30
Figure 1: Building 4 Subassembly Capacities for Gentle Stream Model
 Allocation of housing models to the buildings at El Cajon plant:

• The El Cajon plant consists of four separate buildings, each of which will
produce a different model. The number of housing units which can be
produced in a building depends on many factors, including the size and
shape of the building and the existing production facilities.
• These allocation has to be done by maximizing the gross profits per housing
model
Given table for capacity of each building is reproduced below.
Table 1: building capacity for each model
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
4
 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.
 Decide on the routes of transportation from El Cajon to distribution

centers:
• The unit transportation costs from El Cajon depend on the mode and time of
transportation
• The cost of changing modes of transportation at a city (rail to truck, truck to
rail, or track to ship) is 250 per vehicle.
Various costs are as below given in the case.
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
5
El Cajon Dallas 4 $350

Phoenix Rapid City 3 $175
Chicago Nashville 3 $200
Chicago Raleigh 4 $225
Oklahoma City Raleigh 3 $250
Raleigh Miami 3 $300
Boat Routes
New Orleans Miami 4 $400
 Transportation of units to regional distribution centers by minimizing the

transportation cost:
• Unit transportation charges are independent of the model shipped
• We need to minimize our transportation coat so as to increase our net profit
of the year.
Concluding Problem statement:
First we need to decide on the number of units can be produced in building 4 at El

Cajon plant, Based on that we need to allocate the model to buildings maximizing
gross profit. (Figure 2:Consolidated diagram for all the possess and problems:)
6
Decide on the route of transportation to the distribution centers from El Cajon

Plant and lastly solve it as a transportation problem minimizing the cost.
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:-
Subassembly 1 Subassembly 2 Subassembly 3 Subassembly 4

3
20
40
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
7
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.
Table 3: building allocation after B4 allocation
Picket Town Gentle El

Fence House Stream Presidente
B1 30 25 20 10
B2 60 55 50 45
B3 40 35 30 0
B4 95 85 55 65
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
8
given gross profit table we can find an optimum solution to assign a building to a
particular product.
Table 4: Gross profit margin for all the models
Model Gross profit/unit

Picket Fence $ 9,600
Town House $ 11,520
Gentle Stream $ 15,360
El Presidente $ 19,200
By multiplying the figures in Table 3 by the respective gross profit values we get
the following table:-
Table 5: Total gross profit

B1 288000 288000 307200 192000
B2 576000 633600 768000 864000
B3 384000 403200 460800 0
B4 912000 979200 844800 1248000
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:
Table 6: Allocation of the models to building at El Cajon Plant
Model Building Units

Picket Fence B1 30
Town House B3 35
Gentle Stream B2 50
El Presidente B4 65
We have obtained the above solution using the solver on excel as well and have
obtained the same solution.
9
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.
Table 7: Sensitivity Analysis Report
Final Reduced Objective Allowable Allowable

Cell Name Value Cost Coefficient Increase Decrease
$C$14 Fence 1 0 288000 1E+30 19200
$D$14 House 0 0 288000 19200 38400
$E$14 Stream 0 -38400 307200 38400 1E+30
$F$14 Presidente 0 -249600 192000 249600 1E+30
$C$15 Fence 0 -134400 576000 134400 1E+30
$D$15 House 0 -76800 633600 76800 1E+30
$E$15 Stream 1 0 768000 249600 76800
$F$15 Presidente 0 0 864000 115200 249600
$C$16 Fence 0 -19200 384000 19200 1E+30
$D$16 House 1 0 403200 38400 19200
$E$16 Stream 0 0 460800 76800 38400
$F$16 Presidente 0 -556800 0 556800 1E+30
$C$17 Fence 0 -182400 912000 182400 1E+30
$D$17 House 0 -115200 979200 115200 1E+30
$E$17 Stream 0 -307200 844800 307200 1E+30
$F$17 Presidente 1 0 1248000 1E+30 115200
10
QUESTION 3:-
The minimal total transportation costs from El Cajon to each of the
distribution cities. (Discuss any time implications of your recommendations).
In case of El Cajon plant of the GSA industry, the case mentions various routes
that are available and the modes alternatives. There are three modes available:
Truck, rail and boat.
Below is the diagrammatic representation of the routes. The cost and time for the
same is produced in the table 2.1 in problem statement:
Figure 3: Routes from El cajon to distribution centers
(The green colored routes are selected as per minimum cost allocation.)
Now on the basis of the above mentioned routes and modes we have the following
alternatives available to transport the goods from El Cajon to Phoenix, Nashville
and Miami. We will choose the route from plant to the distribution center which
will produce the minimum cost:-
11
Figure 4: All the routes cost calculation )El Cajon to Distribution centers
So the minimum transportation costs are as following:-
Table 8: Consolidated minimum costs of transportation from El Cajon
DISTRIBUTION CENTER MINIMUM COST ($)

1. Phoenix 375
2. Nashville 1675
3. Miami 2625
12
Question 4:
The allocation of each housing model from each production city to each
distribution city.
As now, we have decided on transportation routes and cost from El Cajon to

distribution centers, we will allocate housing model to those regional distribution
centers. (i.e. Phoenix, Nasville and Miami)
Transportation cost for the as per our calculations mentioned in previous question.
Table 9: Transportaion cost (El Cajon to Distribution Centers)
From /To Phoenix Nasville Miami
El cajon 375 1675 2625
Transportation cost from Elkhart to distribution centers:
Table 10: Transportaion cost (Elkhart to Distribution Centers)
From /To Phoenix Nasville Miami
Elkhart 1450 725 2500
Supply and demand data:
For El Cajon Plant (As per our calculation after allocating the models to buildings):
For Elkhart Plant (As per given in the case):
Table 11:Supply and demand data for each of the models
13
Model
Phoenix 50 60 60 90
Nasville 80 60 30 20
Miami 75 90 85 90
Demand 205 210 175 200
Production at Elkhart 100 75 75 120

Plant
Production at El cajol 30 35 50 65
plant
Total units available 130 110 125 185
(Supply)
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.
Formulation for model Picket Fence:
Table 12.1: Allocation of units of Picket Fence
Picket Fence
From/To Phoenix Nasville Miami Supply
Elkhart 1450 725 2500 100
El Cajon 375 1675 2625 30
dummy
supplier 99999 99999 99999 75
Demand 50 80 75 205
14
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.
After solving it with the excel solver we got solution:
From/To Phoenix Nasville Miami Supply allocated
Elkhart 20 80 0 100 100
El Cajon 30 0 0 30 30
Dummy supplier 75 0
Demand 50 80 75 205
Allocated 50 80 0
Total cost 98250
Total cost of this transportation is coming to $98250.
We also tried it by putting constraint of Allocated demand should be less than

equal to the actual demand and we got the same answer for the both
procedure.
By same method we solved the problem for other three models.
Solutions for those are as follow.
15
Town House:
Table 13: Allocation of units of Town House:
From/To Phoenix Nasville Miami Supply allocation
Elkhart 15 60 0 75 75
El Cajon 35 0 0 35 35
Dummy supplier 100 0
Demand 60 60 90 210
Allocation 50 60 0
Total cost 78375
Gentle Stream:
Table 14: Allocation of units of 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
Total cost 142500
16
El Presidente:
Table 15: Allocation of units of El Presidente:
Elkhart 25 20 75 120 120
El Cajon 65 0 0 65 65
Dummy supplier 15 0
Demand 90 20 90 200
Allocated 90 20 75
Total cost 262625
Table 16: Consolidated transportation cost and allocation of the models:
Elkhart El Cajon
Phoenix Nasville Miami Phoenix Nasville Miami
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
cost /unit 1450 725 2500 375 1675 2625
17
Total cost 101500 137750 275000 67500 0 0 581750
The final cost of the transportation is $581750.
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
Total cost 5,581,750
Net Profit 2,405,450
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.
We have a healthy profit of $2.4 million.
18
Recommendations:
If we meet the total demand by the distribution centers i.e.
 Phoenix – 260
 Nashville – 190
 Miami – 340
Then the Gross Profit would be – 10,915,200
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.
19
Tables and figures:
Figures:
Figure 2: Consolidated diagram for all the possess and problems
Figure 3: Routes from El Cajon to distribution centers
Figure 4: All the routes cost calculation ) El Cajon to Distribution centers
Tables:
Table 1: building capacity for each model
Table 2: Transportation cost and time from El Cajon route to Distribution centers
Table 3: building allocation after B4 allocation
Table 4: Gross profit margin for all the models
Table 5: Total gross profit
Table 6: Allocation of the models to building at El Cajon Plant
Table 7: Sensitivity Analysis Report
Table 8: Consolidated minimum costs of transportation from El Cajon
Table 9: Transportaion cost (El Cajon to Distribution Centers)
Table 10: Transportaion cost (Elkhart to Distribution Centers)
Table 11:Supply and demand data for each of the models
Table 13: Allocation of units of Town House:
20
Table 14: Allocation of units of Gentle Stream:
Table 15: Allocation of units of El Presidente:
Table 16: Consolidated transportation cost and allocation of the models:
Table 17:Net profit calculation for the year(after fixed cost and overheads)
21
References:
Stevenson, William J and Ozgur, Ceyhun. Introduction to Management Science with
Spreadsheets. Tata McGraw-Hill
John A. Lawrence, Bary A. Pasternack, Applied Management Science, 2Nd Ed,Printed

in india by brijbasi art press, Delhi
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E-mail: nikunj02patel@gmail.com
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Report On:

GSA Industries Case Study

Abhishek Saini (10003)

Harsh Sheth (10020)

Nargish Raman (10028)

Nikunj Patel (10029)

Sagar Bajpai (10039)

Report On: GSA Industries Case Study

G.S.A industries Produces four different types of prefabricated housing units at

Statement of the Problem/s:

As we mentioned in executive summery GSA Industries produces four models of

 How many Gentle Steam model can be produced in Building 4 of El Cajon

Report On: GSA Industries Case Study

Subassembly 1 Subassembly 2 Subassembly 3 Subassembly 4

Figure 1: Building 4 Subassembly Capacities for Gentle Stream Model

 Allocation of housing models to the buildings at El Cajon plant:

Given table for capacity of each building is reproduced below.

Table 1: building capacity for each model

Report On: GSA Industries Case Study

 Decide on the routes of transportation from El Cajon to distribution

Report On: GSA Industries Case Study

El Cajon Dallas 4 $350

 Transportation of units to regional distribution centers by minimizing the

Concluding Problem statement:

First we need to decide on the number of units can be produced in building 4 at El

Report On: GSA Industries Case Study

Decide on the route of transportation to the distribution centers from El Cajon

Subassembly 1 Subassembly 2 Subassembly 3 Subassembly 4

Figure 1: Building 4 Subassembly Capacities for Gentle Stream Model

Table 3: building allocation after B4 allocation

Picket Town Gentle El

Table 4: Gross profit margin for all the models

Model Gross profit/unit

Table 5: Total gross profit

Picket Town Gentle El

Table 6: Allocation of the models to building at El Cajon Plant

Model Building Units

Report On: GSA Industries Case Study

Table 7: Sensitivity Analysis Report

Final Reduced Objective Allowable Allowable

Report On: GSA Industries Case Study

Figure 3: Routes from El cajon to distribution centers

Report On: GSA Industries Case Study

So the minimum transportation costs are as following:-

Table 8: Consolidated minimum costs of transportation from El Cajon

DISTRIBUTION CENTER MINIMUM COST ($)

Report On: GSA Industries Case Study

As now, we have decided on transportation routes and cost from El Cajon to

Table 9: Transportaion cost (El Cajon to Distribution Centers)

From /To Phoenix Nasville Miami

El cajon 375 1675 2625

Transportation cost from Elkhart to distribution centers:

Table 10: Transportaion cost (Elkhart to Distribution Centers)

From /To Phoenix Nasville Miami

Elkhart 1450 725 2500

Supply and demand data:

For Elkhart Plant (As per given in the case):

Table 11:Supply and demand data for each of the models

Report On: GSA Industries Case Study

Production at Elkhart 100 75 75 120

Formulation for model Picket Fence:

Table 12.1: Allocation of units of Picket Fence

From/To Phoenix Nasville Miami Supply

Elkhart 1450 725 2500 100