REFINING AND BLENDING PROBLEM

Quantitative Methods In Management’s Term Presentation

Prepared by:
Group No: 8
Aditya Vikram Vaid (2017SMF6565)
Ankit Agarwal (2017SMF6685)
Latika Kaushal (2017SMF6612)
Rahul Kumar (2017SMF6610)
Sujoy Sengupta (2017SMF6609)
Table of Contents

Problem Description

Solution - Variables

Solution – Excel Solver

1
 Problem Description
Category Oil
 Listed two categories of raw oils needs to be refined and blended to produce Vegetable oils: VEG 1
a given food product VEG 2
Non-vegetable oils: OIL 1
 The manufacturer can buy raw oils for the current month and/or buy them on
the futures market for delivery in a subsequent month OIL2
OIL 3

Table 1: Two categories of Raw oils

Month VEG 1 VEG 2 OIL 1 OIL 2 OIL 3

Constraints:

January 110 120 130 110 115  The final food product sells for $150 per ton
February 130 130 110 90 115
March 110 140 130 100 95
 Each category of oil (vegetable and non-vegetable) needs to be
refined on a different production line
April 120 110 120 120 125
May 100 120 150 110 105  Maximum of 200 tons of vegetable oils and 250 tons of non-
June 90 100 140 80 135 vegetable oils can be refined
Table 2: Raw oil prices in the futures market in $/ton
 Problem Description
 1000 tons of each raw oil can be stored for future and the storage cost is $5 per ton per month

 Final food product must have a hardness between three and six

 At the start of January there are 500 tons of each type of raw oil in storage and this should also be the
level of raw oils in storage at the end of June

Oils Hardness
VEG 1 8.8
What buying and manufacturing policy
should the company pursue in order to VEG 2 6.1
MAXIMIZE profit ? OIL 1 2.0
OIL2 4.2
OIL 3 5.0
Fig 3: Hardness of each raw oil
 Solution - Variables
Variables:
BOt Purchase of oil 'o' in month t
o V1, V2, N1, N2, N3
UOt Usage of oil 'o' in month t t 1 (Jan), 2(Feb), 3(Mar), 4(Apr), 5(May), 6 (Jun)

SOt Storage of oil 'o' in month t

V1 Vegetable oil 1
V2 Vegetable oil 2
N1 Oil 1
N2 Oil 2
N3 Oil 3
 Solution – Excel Solver

Maximum Profit = £ 107842.5926