Mexicana Wire Winding, Inc

Vivian (Mexicana’s general manager) turned to José

Arroyo, the production control manager, “José, why don’t
you describe the problem we are facing?” “Well,” José
said, “business is very good right now. We are booking
𝑥
more orders than we can fill. We will have some new
𝑥 equipment on line within the next several months, which
𝑥 will take care of our capacity problems, but that won’t
𝑥 help us in April. “

“I have located some retired

employees who used to work in the
drawing department, and I am
planning to bring them in as
temporary employees in April to
increase capacity there. Because we
are planning to refinance some of our
long-term debt, Vivian wants our
profits to look as good as possible in
April. I’m having a hard time figuring
out which orders to run and which to
back-order so that I can make the
Discuss the need for bottom line look as good as possible.
temporary workers in the Can you help me with this?”
drawing department.

1
 Mexicana Wire Winding, Inc
Formulation
𝑀𝑎𝑥𝑖𝑚𝑖𝑧𝑒 34𝑥 + 30𝑥 + 60𝑥 + 25𝑥

Subject to
𝑥 + 2𝑥 + 𝑥 ≤ 4000
𝑥 + 𝑥 + 4𝑥 + 𝑥 ≤ 4200
𝑥 + 3𝑥 ≤ 2000
𝑥 + 3𝑥 + 2𝑥 ≤ 2300
𝑥 ≤ 1400
𝑥 ≤ 250
𝑥 ≤ 1510
𝑥 ≤ 1116
𝑥 ≥ 150
𝑥 ≥ 600
𝑥 ,𝑥 ,𝑥 ,𝑥 ≥ 0

2
 Mexicana Wire Winding, Inc
• Packaging time is the culprit here! But even if the
company decides to invest in this resource, what would
be the bang for buck?
• W5X has the maximum profit contribution and the
maximum orders, yet it is NOT produced at all in the
optimal solution! What if we go ahead and produce W5X
anyway?
• W33C’s order is met fully. So, is there a chance that had
there been more demand for W33C, our profits could
have gone higher?
• W7X has the minimum profit contribution but also has a
minimum promised quantity. Incidentally, the produced
quantity equals the promised quantity. Would it help if
the promised quantity is lower? If yes then can we
quantify the amount? 3
 Multiperiod Production Smoothing Model
A company is planning the manufacture of a product for March, April, May, and June of next year.
The demand quantities are 520, 720, 520, and 620 units, respectively. The company has a steady
workforce of 10 employees but can meet fluctuating production needs by hiring and firing
temporary workers. The extra costs of hiring and firing a temp in any month are $200 and $400,
respectively. A permanent worker produces 12 units per month, and a temporary worker, lacking
equal experience, produces 10 units per month. The company can produce more than needed in
any month and carry the surplus over to a succeeding month at a holding cost of $50 per unit per
month. Develop an optimal hiring/firing policy over the 4-month planning horizon.

4
 Multiperiod Production Smoothing Model
March April May June
Demand 520 720 520 620
𝑥 : # hiring in month 𝑖
Steady WF 10 10 10 10 𝑦 : # firing in month 𝑖
Hiring Cost $ 200 $ 200 $ 200 $ 200
𝐼 : Inventory at the end of month 𝑖
Firing Cost $ 400 $ 400 $ 400 $ 400

Production Capacity (units/month)

Steady WF 12 Minimize 200 𝑥 + 𝑥 + 𝑥 + 𝑥 + 400 𝑦 + 𝑦 +𝑦 +𝑦 + 50(𝐼 + 𝐼 + 𝐼 )
Subject to
Temp WF 10 10 𝑥 − 𝑦 = 400 + 𝐼
10 𝑥 − 𝑦 + 𝑥 − 𝑦 + 𝐼 = 600 + 𝐼
Holding Cost $50 per unit per month 10 𝑥 − 𝑦 + 𝑥 − 𝑦 + 𝑥 − 𝑦 + 𝐼 = 400 + 𝐼
10 𝑥 − 𝑦 + 𝑥 − 𝑦 + 𝑥 − 𝑦 + 𝑥 − 𝑦 + 𝐼 = 500
𝑥 , 𝑦 ≥ 0 and integers for all 𝑖 = 1,2,3,4
𝐼 ≥ 0 and integers for all 𝑖 = 1,2,3

x1 x2 x3 x4 y1 y2 y3 y4 I1 I2 I3 Z
50 0 0 0 0 0 5 0 100 0 50 19500 5
 Hawaii Sugar Company
Hawaii Sugar Company produces brown sugar, processed (white) sugar, powdered sugar, and molasses from
sugar cane syrup. The company purchases 4000 tons of syrup weekly and is contracted to deliver at least 25
tons weekly of each type of sugar. The production process starts by manufacturing brown sugar and molasses
from the syrup. A ton of syrup produces 0.3 ton of brown sugar and 0.1 ton of molasses. White sugar is
produced by processing brown sugar. It takes 1 ton of brown sugar to produce 0.8 tons of white sugar.
Powdered sugar is produced from white sugar through a special grinding process that has a 95% conversion
efficiency. The profits per ton from brown sugar, white sugar, powdered sugar and molasses are $150, $200,
$230, and $35, respectively. Formulate the problem as a linear program, and determine the weekly production
schedule.

6
 Hawaii Sugar Company
0.3x1 x3 White x5 Powdered
Brown Sugar Sugar
Sugar
syrup x4 Process 2
Process 1 0.8x4 x6 Grinding x7
x1
Molasses x2

Maximize 150x3+200x5+230x7+35x2
x1 ≤ 4000 x2 = 0.1x1
x3 ≥ 25 x3+x4 = 0.3x1 x7 = 0.95x6
x5 ≥ 25 x5+x6 = 0.8x4 xi ≥ 0  i
x7 ≥ 25

7
 Hawaii Sugar Company
0.3x1 x3
25 White 25
x5 Powdered
Brown Sugar Sugar
Sugar
syrup x4 Process 2
Process 1 0.8x4 x6 Grinding x7
869.25
4000
x1
Molasses x400
2

Maximize 150x3+200x5+230x7+35x2 Z = 222677.5

x1 ≤ 4000 x2 = 0.1x1
x3 ≥ 25 x3+x4 = 0.3x1 x7 = 0.95x6
x5 ≥ 25 x5+x6 = 0.8x4 xi ≥ 0  i
x7 ≥ 25

8
 Investment Planning
An investor has money-making activities A and B available at the beginning to each of the next five
years. Each dollar invested in A at the beginning of a year returns $1.4 two years later. Each dollar
invested in B at the beginning of a year returns 1.7 three years later.

In addition, investment opportunities C and D will each be available only once in future. Each dollar
invested in C at the beginning of year 2 returns $1.90 at the end of year 5. Each dollar invested in D
at the beginning of year 5 returns $1.3 at the end of year 5.

The investor begins with $60,000 and wishes to know which investment plan maximizes the amount
of money at the end of five years. Formulate the problem as a linear program.