PRACTICE FOR GROUP WORK WEEK 2-3

Case 2.1 – ASSIGNING PLANTS TO PRODUCTS (BETTER PRODUCTS

COMPANY)
The Better Products Company has decided to initiate the production of four new
products, using three plants that currently have excess production capacity. The products
require a comparable production effort per unit, so the available production capacity of the
plants is measured by the number of units of any product that can be produced per day, as
given in the rightmost column of Table case 2.1. The bottom row gives the required
production rate (number of units produced per day) to meet projected sales. Each plant can
produce any of these products, except that Plant 2 cannot produce Product 3. However, the
variable costs per unit of each product differ from plant to plant, as shown in the main body
of the table.
Management now needs to make a decision about which plants should produce
which
products. Product splitting, where the same product is produced in more than one plant, is
permitted.
Table case 2.1 – The Data for the Better Products Co. Problem Formulated as a Variant
of a Transportation Problem

Unit Cost
Product Capacity
1 2 3 4
Plant Available
1 $41 $27 $28 $24 75
2 $40 $29 - $23 75
3 $37 $30 $27 $21 45
Required production 20 30 30 40
Case 2.2 – ASSIGNING PLANTS TO PRODUCTS (BETTER PRODUCTS
COMPANY)
The Better Products Co. needs to assign three plants to produce four new products.
The relevant data are given in Table case 2.2. Management had permitted product splitting
(where the same product is produced in more than one plant). However, there are some
hidden costs associated with product splitting that are not reflected in Table case 2.2,
including extra setup, distribution, and administration costs. Therefore, management now
has decided to have the problem analyzed again under the additional restriction that product
splitting is prohibited.
New Problem Statement: Given the data in Table case 2.2, minimize the total cost
of assigning each plant to at least one new product where each product is to be produced
in only one plant (no product splitting). Since there are three plants and four new products,
two plants will produce one new product and a third plant will produce two. Only plants 1
and 2 have the capacity to produce two.
Table case 2.2 – Data for the Better Products Co. Problem

Cost ($/day)
Product Total
1 2 3 4
Plant assignments
1 820 810 840 960 2
2 800 870 - 920 2
3 740 900 810 840 1
Total assigned 1 1 1 1
Case 3.1 – Production Scheduling of the Northern Airplane Company
The Northern Airplane Company builds commercial airplanes for various airline
companies around the world. The last stage in the production process is to produce the jet
engines and then to install them (a very fast operation) in the completed airplane frame.
The company has been working under some contracts to deliver a considerable number of
airplanes in the near future, and the production of the jet engines for these planes must now
be scheduled for the next four months.
To meet the contracted dates for delivery, the company must supply engines for
installation in the quantities indicated in the second column of Table case 1. Thus, the
cumulative number of engines produced by the end of months 1, 2, 3, and 4 must be at least
10, 25, 50, and 70, respectively.
Table case 1 – Production Scheduling Data for the Northern Airplane Company Problem

Unit Cost of
Maximum Production Production
Scheduled ($million) Unit Cost
Month of Storage
Installations Regular Overtime Regular Overtime ($thousand)
Time Time
1 10 20 10 1.08 1.10 15
2 15 30 15 1.11 1.12 15
3 25 25 10 1.10 1.11 15
4 20 5 10 1.13 1.15
The facilities that will be available for producing the engines vary according to other
production, maintenance, and renovation work scheduled during this period. The resulting
monthly differences in the maximum number of engines that can be produced during
regular time hours (no overtime) are shown in the third column of Table case 1, and the
additional numbers that can be produced during overtime hours are shown in the fourth
column. The cost of producing each one on either regular time or overtime is given in the
fifth and sixth columns.
 Because of the variations in production costs, it may well be worthwhile to produce
some of the engines a month or more before they are scheduled for installation, and this
possibility is being considered. The drawback is that such engines must be stored until the
scheduled installation (the airplane frames will not be ready early) at a storage cost of
$15,000 per month (including interest on expended capital) for each engine, as shown in
the rightmost column of Table case 1.
Apply Excel Solver and QM for Windows to help the Northern Airlines Company’s
production manager develop a schedule for the number of engines to be produced in each
of the four months so that the total of the production and storage costs will be minimized.