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Operations Research

[Red Brand Canners]

Submitted by: Kavya SS PGP/14/276 Kritika Gupta PGP /14/277 Kulbhushan Baghel PGP/14/278 Lokesh Singh PGP /14/279

Group V Mahtaab Kajla PGP/14/280

Case Facts

Red Brand Canners medium sized, fruit and vegetable cannery Decide the optimal product mix for tomato products Canned whole tomatoes, Tomato Juice and Tomato Paste

Two grades of tomatoes available Grade A and Grade B whether to purchase the 80,000 pounds of grade A tomatoes

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Decision Variables Xaw Pounds of Canned Whole Tomatoes produced using grade A tomatoes Xaj Pounds of Tomato Juice produced using grade A tomatoes Xap Pounds of Tomato Paste produced using grade A tomatoes Xbw Pounds of Canned whole tomatoes produced using grade B tomatoes Xbj Pounds of Tomato Juice produced using grade B tomatoes Xbp Pounds of Tomato Paste produced using grade B tomatoes

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Objective function

Contribution from various products: Cw = $1.48 / 18 = 0.082 Cj = $1.32 / 20 = 0.066 Cp = $1.85 / 25 = 0.074 Hence the Objective function is to maximize the contribution : Maximize Z = 0.08222(Xaw + Xbw) + 0.066(Xaj + Xbj) + 0.074(Xap + Xbp)

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Constraints

Demand Constraints : Whole tomatoes, Xaw + Xbw < = (800000*18) Tomato Juice, Xaj + Xbj< = (50000*20) Tomato Paste, Xap + Xbp< = (80000*25) Quality constraints : For Canned whole tomatoes, 9Xaw + 5Xbw >= 8(Xaw+Xbw) For tomato Juice, 9Xaj + 5Xbj >= 6(Xaj + Xbj)

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Constraints cont.

Quantity Constraints: A grade tomatoes are 20% of the total produce, (Xaw+Xaj+Xap) < = 600,000

B grade tomatoes are the rest 80 %, (Xbw + Xbj + Xbp) <= 2400,000

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Optimal Solution

Using Excel Solver, the optimal solution obtained is: Xaw = 525000 Xaj = 75000 Xap = 0 Xbw = 175000 Xbj = 225000 Xbp = 2000000 Objective function, Z = $225355.56

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Additional A grade tomatoes

When extra 80,000 pounds of grade A tomatoes are available: The sensitivity report shows that the allowable increase in the quantity constraint is 600000 With an increase of 80000 pounds, the increase in contribution becomes = (80000*0.090333) = $7226.64, where 0.090333 is the shadow price Hence, net contribution = $232582.2

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Profit calculation

Cost of Tomatoes = 3 million * 6 cents = $180,000 Profit in normal scenario = $225355.56 - $180000 = $45355.56 Profit with costs as proposed by Myers = $225355.56 $180240 = $45115.56 Profit in scenario 2 = $232582.2 (180000 + 6800) = $45782.8

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More grade A Tomatoes?

Since the profit in scenario 2, with 80000 more grade A tomatoes is higher than normal scenario, the company should opt for buying the extra tomatoes

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Analysis

Myers had proposed a product mix as following: 2 million grade B tomatoes for paste, remaining grade A and B tomatoes for juice Contribution = 2000000*0.074 + 1000000*0.066 = $214000 Profit = $214000 = $180000 = $34000 The profit in the optimal solution is greater than that of solution as proposed by Myers

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Thanks!!!

Group V I Section E I Indian Institute of Management Kozhikode