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MAPLELEAF CASE

Group 3
Aditya Chaudhary 19/125
Manan Agrawal 19/148
Mohit Soni 19/153
Surabhi Jain 19/174
Utkarsh 19/177

Assumptions
New plant can work at maximum capacity of 90%
If demand is more than the production, the amount sold is equal to
maximum amount that can be produced
Old plants are not running in loses
Construction of new plant begins in year 3 and it starts producing at
half its capacity in year 4
Depreciation is calculated from year 4 onwards

Transportation model without Guadalajara


facility
(5
Weyear
will be able
to produce
forecast)
Transportation Cost

only 9000 units since system


cannot operate above 90%
capacity
Demand for 1000 units will not
be met
Total cost of producing 9000
units will be $158587.5

Production Facilities
Centers
Toronto

Toronto

K.C

L.A

Forecast

Seattle

5 year

10 year

0.75

2.5

4.5

4.75

1000

1000

K.C

2.5

2.5

2.75

750

1000

L.A

4.5

2.5

0.5

2.25

2500

3000

4.75

2.75

2.25

0.75

1500

2000

1.5

1.5

3.75

2.5

1500

2000

2.25

3.5

750

1000

5.25

3.25

1.75

3.75

2000

3000

Seattle
Chicago
Atlanta
Guadalajara

Units Transported
Production Facilities
Centers
Toronto
K.C

Toronto
0
0

K.C

L.A
0
0

0
0

Seattle
1000
750

Total

1000
750

Forecast
5 year
10 year
1000
1000
750
1000

Transportation model with Guadalajara


facility
forecast)
(5
Weyear
will be able
to produce
10000 units when new facility
is added
Demand for 1000 units will be
met
Total cost of producing 1000
units will be $137837.5

Transportation Cost

Production Facilities

Centers
Toronto

Toronto

K.C

L.A

Forecast

Seattle

Guadalaj
ara
5 year

10 year

0.75

2.5

4.5

4.75

5.25

1000

1000

K.C

2.5

2.5

2.75

3.25

750

1000

L.A

4.5

2.5

0.5

2.25

1.75

2500

3000

4.75

2.75

2.25

0.75

2.5

1500

2000

1.5

1.5

3.75

2.5

3.75

1500

2000

2.25

3.5

3.5

750

1000

5.25

3.25

1.75

3.75

0.5

2000

3000

Seattle
Chicago
Atlanta
Guadalajara

Units Transported
Production Facilities
Centers

Toronto

K.C

L.A

Seattle

Total
Guadalajara

Forecast
5 year
10 year

Utilization
5 Years

10 Years

With
Guadalajara
facility

Without
Guadalajara
facility

With
Guadalajara
facility

Without
Guadalajara
facility

Toronto
90%

Toronto
90%

Toronto
90%

Toronto
90%

K.C
0%

K.C
90%

K.C
90%

K.C
90%

L.A
90%

L.A
90%

L.A
90%

L.A
90%

Seattle
40%

Seattle
90%

Seattle
90%

Seattle
90%

Cost per day of Gudalajara plant


Initial investment = $ 30,00,000
Fixed cost (depreciation) per day = 30,00,000/(10*360) = 833.33
Variable cost = 10*3600 = $ 36,000
Total cost = $ 36,833.33
Cost per unit = $36,833.33/3600 = $ 10.23
If per unit price of the product is more than $ 10.23 than Mapleleaf
shoul build Gudalajara plant

Opportunity cost of building new


plant
Future value of $ 30,00,000 with discount rate of 10%
FV = $ 30,00,000 (1.1)^7 = $ 5846151
Sum of profit earned via Guadalajara plant should be greater than $
94,15,285
Price per unit0 for it1 should
be3$ 11.3179
2
4
5

Year
Demand
Production

8000
8000

8500
8500

9000
9000

9500
9000

10000
10000

10500
10500

6
11000
11000

7
11500
11500

8
12000
12000

9
12500
12500

10
13000
12600

Production in new
plant

1000

1500

2000

2500

3000

3500

3600

FC/day
VC

0
0

0
0

0
0

0
0

833.33
10000

833.33
15000

833.33
20000

833.33
25000

833.33
30000

833.33
35000

833.33
36000

TC

Revenue

Profit

10833.3 15833.3 20833.3 25833.3 30833.3 35833.3 36833.3


0
3
3
3
3
3
3
3
11317.9
22635.8 28294.8 33953.7 39612.7 40744.5
0
3 16976.9
6
3
9
6
5
1143.56
2461.49
3779.42 3911.21
0
484.6
5 1802.53
5 3120.46
5
8

Concepts of OM involved in case


Demand forecasting: It is predicting future demand of the product
Utilization: Percentage of total capacity used for the production
Capacity planning : Process of determining the production capacity
needed by an organization to meet changing demand for its products
Transportation model: Model to decide optimal shipping plan by
minimizing cost of moving products from one place to another
Capacity: Maximum output that a system can produce
Downtime: The amount of time that a system fails to perform its
primary funtion

Thank you!