Management Science

Application on Fertilizer
Company
1. Cennyson Sapon 51388 4. Ong Choon Siong 53538
2. Chuah Yee Lyn 51528 5. Tan Su Yi 54033
3. Lai Kwan Yew 52202 6. Tey Kai Wen 54087
 Companys Background
Bintang Alam Sakti Sendirian Berhad is a fertiliser manufacturing company based in
Jasin, Melaka.
Originally established in 2000 in Ayer Keroh, the company moved to its present
location in 2007.
The companys fertiliser comprises of compounds of Nitrates (N), Phosphates (P)
and Potassium (K) which are essential for yielding high quality harvests without
compromising on the health of the plant.
This chemical composition has allowed Bintang Alam Sakti Sdn. Bhd. to price their
products at a premium.
 Problem Statement
Operated since 2000 but shows inconsistent trend of order quantity every
year
Capon, Farley and Hoenig (1990), high variance = unsatisfactory firm
performance
large number of competitors that offers similar products with similar prices
(market share)
 Objectives
To predict future sales for strategic planning
Determine ideal production levels for maximum profit
To reduce uncertainty of future sales and production costs
Extrapolate trend in the coming years of business lifespan
 Methodology
Primary data collection method - interview method
Secondary data collection method - internal source - company annual report.
Two method LP and Forecasting
Linear programming - identify the amount of each fertilizer needed to be
produce - to maximize the profit.
Forecasting - predict the sales - company
 Data Analysis (Part 1)
Linear Programming:
Maximize = 150 + 135 + 120
s.t.
3 + 1.5 + 60
2.5 + + 0.5 50
5 + 4.5 + 3 40
+ + 10
, , 0
where
= Total profit of Production
= Number of Product A
= Number of Product B
= Number of Product C
Rewrite objective function and inequalities constraints.
150 135 120 = 0
3 + 1.5 + + 1 = 60
2.5 + + 0.5 + 2 = 50
5 + 4.5 + 3 + 3 = 40
+ + + 4 = 10
 Discussion (Part 1)
Bintang Alam Sakti Sdn. Bhd. produces three types of fertiliser with
different grades, A, B and C. The production processes include sieving,
weighing, mixing and sealing, with each bag of fertiliser weighing 10
kilograms.
Every month, 160 hours are available for all products allocating 20 hours for
sieving, 25 hours for weighing, 95 hours for mixing and 20 hours for sealing.
 Discussion (Part 1 cont.)
The distribution of time for sieving of products A, B and C are 3 hours, 1.5
hours and 1 hour respectively whereas the weighing process are 2.5 hours, 1
hour and 0.5 hours. Additionally, mixing process for products A, B and C
takes 5 hours, 4.5 hours and 3 hours correspondingly while the sealing
process takes an hour for each product.
For every 100 kilograms, products A, B and C yield RM150, RM135 and
RM120 in profits, respectively.
 Discussion (Part 1 cont.)
Based on the above final table of the simplex method, the company can
make a profit of RM1350/100kg by producing 500kg of Grade A fertiliser
and 500kg of Grade C fertiliser at RM150/100kg and RM120/100kg
respectively.
 Data Analysis (Part 2)
Historical data of monthly sales for Company Bintang Alam Sakti Sdn Bhd
from May 2016 until April 2017.
 Month Actual Sales (Unit)
May 2016 2420
June 2016 1940
July 2016 5210
August 2016 5470
September 2016 3590
October 2016 5220
November 2016 4420
December 2016 4280
January 2017 2860
February 2017 4920
March 2017 3280
April 2017 5885
Total 49495
First of all, find out smoothing constant, through trial-and-error method for = 0.3, 0.6 and 0.9 respectively.

= 0.3
 = 0.6
 = 0.9
Since Mean Absolute Deviation (MAD) is the lowest for smoothing constant, = 0.3, therefore it is more
preferable to estimate the number of unit of sales for May 2017.
Forecast Sales for May 2017 = 3903.01 + 0.3 (5885 3903.01)

= 3903.01 + 594.597

= 4497.61

4498 Units
 Discussion (Part 2)
By using =0.3 smoothing constant, the forecasted sales for May 2017 is
4498 units. Through comparing smoothing constants =0.3, =0.6, and
=0.9, the MAD for =0.3 is lower than the other two, and hence is
preferable to use in forecasting sales for one month ahead.
 Recommendation
1. Prioritise Grade A and Grade C product.
2. Look for other potential customer groups beyond the current target
markets for Grade B.
3. Monitor closely the contribution of Grade B to profit margin.
4. Encourage company to employ linear regression, linear trend or nonlinear
regression to forecast its production capacity and sales.
 Limitation
1. Data limitation
- Insufficient data about company expenses due to owners privacy concern
to disclose company details.
THANK YOU :)