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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

Group V I Section E I Indian Institute of Management Kozhikode

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

Group V I Section E I Indian Institute of Management Kozhikode

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)

Group V I Section E I Indian Institute of Management Kozhikode

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)

Group V I Section E I Indian Institute of Management Kozhikode

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

Group V I Section E I Indian Institute of Management Kozhikode

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

Group V I Section E I Indian Institute of Management Kozhikode

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

Group V I Section E I Indian Institute of Management Kozhikode

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

Group V I Section E I Indian Institute of Management Kozhikode

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

Group V I Section E I Indian Institute of Management Kozhikode

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

Thanks!!!