I.

Background of the Company

Mexicana Wire Winding, Inc is a subsidiary of a Texas firm called Westover Wire Works. The company is a
medium-sized producer of wire windings, which are described to be standardized design used in making electrical
transformers.
Below is Mexicanas plant layout, which also portrays the different processes in its facilities:

Office

Wire Drawing

Finished Product
Storage

Rework Department
Receiving
and Raw
Material
Storage

Packaging
Winding

Rejected Product
Storage

Extrusion
Inspection

A. Personalities Involved
a)

Ron Garcia a management trainee in Mexicana Wire Winding Inc who was hired because of his expertise in
Operations Management in his MBA program.
b) Carlos Alverez the production control manager who took time to describe the process in the winding business
c) Vivian Espania - general manager who represented the Mexicana Wire Winding with a key customer and promised
that the company will manufacture 600 units of product W0007X and 150 units of product W0075C for him during
April.
d) Jos Arroyo production control manager. He is assigned to determine which orders to run to maximize profit.
II. Statement of the Problem
Knowing that its Booking Orders are greater than its current production capacity, what strategy/strategies should
Mexicana Wire Winding employ to maximize profits in April?
III. Objectives
To determine how many of each products that Mexicana Wire Winding produces should they make with the aim of:
a. Filling in as much as possible the excessive amount of orders received for the month.
b. Maximizing the temporary employees that maybe hired for the extra work that needs to be done
c. Properly utilizing the refinancing the long-term debts of the company.
IV. Case Facts
Ron Garcia is tasked to make recommendations to Mexicana Wire Winding so that it could effectively meet

the wire orders that it has received. Mexicana Wire Works is currently booking more orders that it can fill, and the
company is expecting that the upcoming month of April will be very busy for it. Thus, it has ordered new
equipment, and hired temporary employees to help it with its capacity problems. Also, Mexicana is planning to
refinance some of its long term debts so it wants it profits to look good in April so that it could persuade its investors
to refinance its business.
For the month of April, Vivian Espania promised Mexicanas key customer that they will manufacture 600
units of product W0007X, and 150 units of of product W0075C. The orders for April are the following:
Table 1: April Orders
Product

Quantity

Priority

W0075C

1400

150

W0033C

250

W0005X

1510

W0007X

1116

600

Table 2: Standard Costs

Standard Cost
product

material

labor

overhead

selling price

W0075C

33.00

9.90

23.10

100.00

W0033C

25.00

7.50

17.50

80.00

W0005X

35.00

10.50

24.50

130.00

W0007X

75.00

11.25

63.75

175.00

Table 3: Plant and Labor Capacity

According to the company, it has no problem with inspection capacity because its employees can work
overtime.

Plant Capacity (Hours)

drawing

extrusion

winding

packaging

4000

4200

2000

2300

drawing

extrusion

winding

Bill of Labor (Hours/Unit)

product

packaging

W0075C

W0033C

W0005X

W0007X

IV. Alternative Courses of Action

ACAs

PROS

CONS

ACA 1: Cancel some of its Orders

There would be no need to adjust its

operating activities because it could
sufficiently fill all its orders for the
upcoming months.

It would forego of the profits that it

could have earned from the
cancelled orders.
The companys investors may not
refinance its activities because the
company is not aggressive when it
comes to profit-making and
adapting its company to present
circumstances..

ACA 2: Management should

come up with ways to make its
operating activities more efficient
and profitable.

Mexicana would be able to earn

more profit from its increased
orders.
If it is successful in making its
activities more efficient and
profitable, investors will be
motivated to refinance its business.

The adjustment of the companies

operating activities may be risky,
and could require plenty of
research, time, and money so that it
could be successful.

V. Quantitative Analysis
Objective Function: Maximize Profit
By using the Linear Programming method, Rons main objective is to maximize Mexicanas profit. To do
this, the profit for each product must be computed by deducting the costs from the selling price.
Max = 34(W0075C) + 30(W0033C) + 60(W0005X) + 25(W0007X)

Standard Cost
product

material

labor

overhead

selling price

Profit

W0075C

33.00

9.90

23.10

100.00

34

W0033C

25.00

7.50

17.50

80.00

30

W0005X

35.00

10.50

24.50

130.00

60

W0007X

75.00

11.25

63.75

175.00

25

Let Product W0075C = X1

Product W0033C = X2
Product W0005X = X3
Product W0007X = X4

Constraints:
1. 1) Orders for X1 <= 1400
2. 2) Orders for X2 <= 250
3. 3) Orders for X3 <= 1510
4. 4) Orders for X4 <= 1116
5. 5) Vivian Espanias commitment for X4 >= 600
6. 6) Vivian Espanias commitment for X1 >= 150
7. 7) Drawing time: 1(X1) + 2(X2) + 1(X4) <= 4000
8. 8) Extrusion time: 1(X1) + 1(X2) + 4(X3) + 1(X4) <= 4200
9. 9) Winding time: 1(X1) + 3(X2) <=2000
10 10) Packaging time: 1(X1) + 3(X3) + 2(X4) <= 2300

Linear Programming

(Please see the appendix for more Linear Programming results)

Recommendations Based on the Discussion Questions:
1) What recommendations should Ron Garcia make?
Based on the Linear Programming results, Ron Garcia should recommend that Mexicana produce 1100
units of Product W0075, 250 units of W0033, 0 units of W0005, and 600 units of W0007 to maximize its profit. This
will yield $59,900 as the optimum profit of the company, details below.
Quantity to
Produce

Back Order

Profit Per Unit

Total Profit

WOO75C

1100

300

34

37400

WOO33C

250

30

7500

W0005X

1510

60

W0007X

600

516

25

15000

Total Profit

59,900

2) Discuss the need for temporary workers in the drawing department.

Based on the given data for Bill of Labor, it is submitted that there is no urgent need to add more laborers of the
drawing department because the number of hours per unit in the drawing department is lower than the other
departments. The departments that need more personnel would be the extrusion and packaging departments. To
lessen the hours for extrusion and packaging and make them at par with the drawing and winding departments, the
company could add more workers in the extrusion and packaging departments rather than placing more workers in
the drawing department.
Bill of Labor (Hours per Unit)
Product

Drawing

Extrusion

Winding

Packaging

W0075C

W0033C

W0005X

W0007X

TOTAL

3) Discuss plant layout.

The companys current plant layout is not sequenced according to its process flow, to make its operations
more efficient it would be best for the company to have its plant layout sequenced in accordance with its process
flow. The diagram below proposes that drawing should be followed by extrusion, winding, inspection and then
packaging. After inspection, products that have passed quality check are sent to the finished product storage or
packaging, while defective products are either reworked or rejected.

VI. Ethical Considerations

1.
Contractual/Casual Basis. Since the company is in the manufacturing factory, the group assumes that
there are many contractual employees working for them. Whether part-time, full-time, seasonal or regular
contract, this kind of employment must be stopped because it is unfair for the labor sector. Employees exceeding
more than six months of their contract must be regularized from work. Ideally, it will be better to reduce other
costs instead of using the labor sector in reducing costs. Using alternative energy can be a good option in
reducing costs. Causal employment may decrease employees morale and it will be affecting the quality of work.
2.
Alternative Source of Energy. The company may use renewable source of energy in their factory to
reduce costs. The group assumes that the company uses electricity in production process. If they consider the use
of renewable energy like solar power or wind power, the company may cut down cost and decrease pollution. At
first, these alternatives are very capital intensive, but in the long run, its more sustainable and more eco-friendly.
3.
Child Labor. Mexicana Wire Works must not tolerate child labor in their factory. Since the nature of
business is in production and employees tend to resign due to redundancy of work, the group suggests that the
factory must not engage in any form of child labor because it is very dangerous for their health. Normally, this
kind of factory uses huge equipments and produces chemicals that can be hazardous for children. Mexicana
Wire Works must take the lead in promoting a good example of socially responsible factory. The group also
suggests that instead of letting the children work in the company, they must rebuild the community by
constructing recreation areas so that children can stay away from illegal drugs and other vices.
4.
Social Responsibility and Reducing Pollution. Natural resources diminish as this manufacturing
factories use earths natural resources. As it diminishes, it is the responsibility of these factories to replace the
depleted natural resources for sustainability purposes. As MBA students, the group believes that the company
must be responsible enough to take actions in restoring the balance and harmony of the community. Normally,
this kind of factory destroys the eco-system because of poor corporate social responsibility. In order to restore the
normal state, Mexicana must take the initiative to replace the natural resources like tree planting. Also, as they
use machineries in their production process, Mexicana Wire Works heavily contributes to the pollution. The
company must be socially responsible in promoting sustainable future. The group believes that each firm must
abide moral and ethical standards in making a sustainable community and reducing pollution while doing
business. The group also believes that it will be better if companies like Mexicana can start a green campaign so
that other factories follow their lead in preserving nature.
VII. Conclusion

APPENDIX: Other Linear Programming Results from POM QM

Dual Table

Ranging Table

Solution List

Iterations

10

11