Case of Paratha Wala

Version: 2.3 Updated: 9th Nov 2022 Scenario 1-9

A person decides to put up a stall and sell Paratha. He realizes that the market has unlimited demand since no
other vendor is there and so he can sell as many parathas as he can make ready.
A paratha needs only two ingredients as raw materials: Flour and Oil
Please read the various scenarios and answer the question that follows:
Scenario 1: Maximizing Profit
Suppose he has unlimited flour and oil and he can sell each paratha at Rs 10 per piece. Assume the cost to
make a paratha is negligible and his revenue is equal to profit.
Find his maximum profit
Scenario 2: Introduction of constraints
Suppose it is also given that since he is working alone, he can only make up to 200 parathas per day.
Find his maximum profit.

Scenario 3: Multiple Constraints

Let’s consider a more realistic scenario where he has 100 units of flour and 70 units of oil.
Also, it is known that to make paratha, he needs 2 units of flour and 1 unit of oil respectively.
Find his maximum profit.

Scenario 4: New Product Introduction : Puri

He realized that he can shift to a new product “Puri” whose demand is growing among youngsters. Puri sells
at Rs 8 per piece and requires only two raw materials: flour and oil. Also, it is given that one Puri needs 1 unit
of flour and 1 unit of oil respectively.
You may take an assumption that he can make unlimited Puris since the time taken to make a Puri is
infinitesimally small.
Find his maximum profit by selling only Puris.
Scenario 5a: Producing multiple products : Mathematical formulation
He feels that he can earn even more by selling a mix of both. (i.e. Paratha as well as Puris).
Find his maximum profit in this scenario. Also, mention how much Paratha and Puri should he be selling.?

Scenario 5b: More than 2 Products : Introduction Chapati

Supposes the vendor now introduces a new product Chapati . It is also known that one Chapati needs 2 unit of
flour only. The profit per piece of Chapati is Rs 8 only. Also there is no constraint on the number of Chapatis
that he can make on any day.
 Formulate the case mentioned in scenario 5b.
 Can you solve this problem using graphical method?
 Solve this problem in Excel and find the optimum solution. (The value of the DV and the profit)
 Is this solution better than earlier solution?
Scenario 6: Multiple Optima
The demand for Puris has increased and customers are ready to pay Rs 10 for Puri also as compared to Rs 8
earlier. However, the price of parathas is still Rs 10 as earlier.
Find his maximum profit in this scenario. Also, mention how much Paratha and Puri should he be selling.?
Scenario 7: Considering Fixed Cost. (Introduction to Binary Variables)
Most of the production process in today's world has fixed cost associated with them. The concept of fixed cost
This case has been prepared by Somu Gorai for his teaching lecture in IIM Jammu in the AY 2022-23 for MBA course Quantitative
methods II.
 is such that if you do the production you will incur the cost, else you won't incur it.
The Vendor’s business has increased and now he just wants to take care of the management and doesn’t want
to do the production himself. He hires cook/cooks to make Parathas and Puris on a daily basis.
Let us assume that the same cook doesn’t agree to make both items, so he has to hire Cook1 when he plans to
make Paratha and Cook2 when he plans to make Puris. He will hire both of them when he plans to make both
Parathas and Puris

Daily wages of Cook1 : Rs 100

Daily Wages of Cook 2: Rs 150
Now Can you do the formulation and arrive at the Optimal decision for Scenario 7?
Consider other Assumptions of Scenario 5a only
How will your answer change if he can hire a Cook3 who has the expertise of making both Parathas and Puris
but his daily charge is Rs 200

Scenario 8a: Concept of Inventory and Multi-Period Models

Till now we were considering that the vendor produces and sells on the same day (Period). However, in real
life, things are not always like this. We produce something and sell the same across multiple periods.
Whatever is not sold remains in the inventory.
However, keeping in inventory comes at a cost. It can be the cost associated with keeping the goods in cold
storage or it can be visualized as the loss of interest on the amount that could have been earned had you sold
the product in the same period. This cost is known as Inventory Carrying Cost (ICC)

Let us assume that the Parathas and Puris stay fresh for 3 days. i.e. on the day of production and the next two
days only. Also, assume that the customer is indifferent between both freshly prepared Parathas/Puris or a 1
day old and pays the same amount for both of them.
Let's take: ICC for Paratha = Rs 3 Per day per piece
ICC for Puris = Rs 2 Per day per piece.

Now the Vendor can make all the Parathas and Puris that he wishes to sell on Day 1 or he can make some on
Day 1 and some on Day 2 &3 respectively.
To make the problem easier lets consider only one product Paratha. So there is no demand for Puris in this
case.
Suppose the demand of Paratha is given for two days as mentioned below.
Demand
Day 1 : 40 units
Day 2: 20 units
Day 3: 50 Units

Ignore any Raw material or labour constraint in this scenario.

Only ICC will be considered which is Rs 3 per piece per day.
Formulate an LPP and find the optimal answer to this problem.

Scenario 8b:
How will your answer change if you also incorporate the fixed cost into the model ?
For simplicity just assume that you incccur a charge of Rs 100 on any day you do production. (i.e. you are
hiring cook1 if you plan production on any day)
Scenario 9a : Assignment Problem

This case has been prepared by Somu Gorai for his teaching lecture in IIM Jammu in the AY 2022-23 for MBA course Quantitative
methods II.
 Suppose the vendor is planning to increase his workforce now. He plans to hire two labours from two
neighbouring states. He needs labour for two tasks, first for cleaning the premises and second for dishwashing.
The cost of labour is different in different states. It also depends on the task that someone has been hired for.
Monthly charges are given below (in thousands)

State/Job Premise Cleaning Diswashing

Punjab 12 15
Himachal 14 16

Also he doesn’t want to keep both the employees from the same state fearing the formation of union or
possible collusion between both of them.
Find the optimal decision that he should take.

*(Such problems are known as assignment problem.

The assignment problem is a fundamental combinatorial optimization problem. In its most general form, the
problem is as follows:

The problem instance has a number of agents and a number of tasks. Any agent can be assigned to perform
any task, incurring some cost that may vary depending on the agent-task assignment. It is required to perform
as many tasks as possible by assigning at most one agent to each task and at most one task to each agent, in
such a way that the total cost of the assignment is minimized.)

Scenario 9b :

Suppose the problem become more complex with higher number of jobs/tasks and labours who can be
assigned the taks as shown below. Find the optimal decision in this case

State/Jobs Premise Cleaning Diswashing Delivery Cooking

Punjab 12 15 13 18
Himachal 14 16 12 17
Delhi 15 16 17 18
Haryana 11 12 17 16

Find the Optimal assignment in this case. Try in excel after writing the LPP

This case has been prepared by Somu Gorai for his teaching lecture in IIM Jammu in the AY 2022-23 for MBA course Quantitative
methods II.
 Scenario 10: Transportation Problems

Suppose in the long run, the vendor has expanded to 2 different production facility in two different locations.
The customer base are located at 3 different places. There is a cost associated with transporting (per unit cost)
of the finished goods from a source location to a destination location.
(Values in pink cells are the unit tranportaion cost from a source to destination eg: for Transporting 1 unit of
product from S1 to D1, the cost incurred is Rs 2)

Source/ D1 D2 D3 Total Supply

Destination
S1 2 1 3 100
S2 3 2 1 200
Total 60 60 80
Demand

Find the optimal decision in this case ?

**(Transportation problem is a special kind of Linear Programming Problem (LPP) in which goods are
transported from a set of sources to a set of destinations subject to the supply and demand of the sources and
destination respectively such that the total cost of transportation is minimized. It is also sometimes called as
Hitchcock problem.

Types of Transportation problems:

Balanced: When both supplies and demands are equal then the problem is said to be a balanced transportation
problem.

Unbalanced: When the supply and demand are not equal then it is said to be an unbalanced transportation
problem. In this type of problem, either a dummy row or a dummy column is added according to the
requirement to make it a balanced problem.)

This case has been prepared by Somu Gorai for his teaching lecture in IIM Jammu in the AY 2022-23 for MBA course Quantitative
methods II.
 Scenario 10: Travelling Salesman Problem (TSP)

This case has been prepared by Somu Gorai for his teaching lecture in IIM Jammu in the AY 2022-23 for MBA course Quantitative
methods II.