CASE STUDY 2

CHANDPUR ENTERPRISES LIMITED,

STEEL DIVISION

Name:

SYED ABDUL RAHMAN BIN SYED AHAMED

816025
KHALIDUL ANWAR BIN ISHAK
818573
NOOR HANIM BINTI MD ISA
818933

UUM CASE STUDY 2

DECISION ANALYSIS

Date:

SQQP 5023

10 JANUARY 2015

Table of Content
Chapter Title

Page

1.0

Introduction & Problem Statement

2.0

Analysis & Discussion

3-11

3.0

References

11

UUM CASE STUDY 2

DECISION ANALYSIS

SQQP 5023

1. INTRODUCTION & PROBLEM STATEMENT

Numerous administration choices include attempting to make the best utilization of a
organization's assets. Assets commonly incorporate hardware, work, cash, time,
warehouse space and crude materials. These assets might be utilized to make items such
as hardware, furniture, sustenance or apparel or benefits, for an occasion, plan for
aircrafts or creation, publicizing arrangements or venture choices.
Linear programming (LP) is a generally utilized scientific demonstrating method
designed to help supervisors in arranging and choice making with respect to asset
allocation. As talked about in Chandpur Enterprises Limited (CEL), Steel Division case
study, and the organization overseeing executive needs to settle on the crude materials
requirement for August creation at his steel plant.
Because of lower and upper limits on the measures of every crude material in a

batch

and changing measures of power and time devoured for distinctive crude materials,
Akshay Mittal, overseeing chief of CEL can't just utilize the least expensive crude
material. A linear program and Excel's Solver enhancement capacity will give the ideal
amounts that meet the imperatives.

2. DISCUSSION & ANALYSIS

2.1

There is couple of vital focuses should be breaking down for better choice
making which are;
a) What would be the best batch that could be making for one batch?
3

UUM CASE STUDY 2

DECISION ANALYSIS

SQQP 5023

b) What is the profit associated with this batch?

Decision variables:

x i = kilograms of raw materials i to order per batch

Related variables: fi = recovery i *

x i = finished goods tons of raw material

i
The optimization is:
Max [Revenue Cost of RM Electricity Cost Consumables Cost Salary
Cost]
Where, per batch,
Revenue = 29000 *
Cost of RM =

ifi /1000

Rate per Tonx i /1000

i

Electricity Cost = 4.30 * [700 *(

Consumables Cost = 2000 *

ixi

/1000+1200

ifi /1000

Salary Cost = 3000

a)

Constraint on batch size of 4,000 kg

Figure 1: Solution to the batch model

UUM CASE STUDY 2

DECISION ANALYSIS

SQQP 5023

So, to optimize a batch without any constraint related to monthly limits, profit per
batch will be INR5, 421.
b)

Batch optimization with limits implied by monthly supply

Figure 2: Solution to a model with batch variables and linear limits implied by
monthly supply

UUM CASE STUDY 2

DECISION ANALYSIS

SQQP 5023

Alternative yields less per batch: INR 5,322. These shows yield more every month by
doing more groups, 328 versus 321. There are more batches every month this
optimization in light of the breaking point on the month to month supply. As a result of
this constraint, Solver now becomes strength to utilize all the more excessive material
rather than less expensive material. This enhances the general proficiency and in a
roundabout way diminishes the time of one bunch.

2.2

Second analysis, will the administrative requirement of 4,000 kg for each batch of
finished product hamper the capacity to make benefit? Is it worth to discover
administrative endorsement to expand that point of confinement?
Ideal answers for LP have hitherto been discovered called, deterministic
assumptions. Implies, presumption on complete assurance in information and
relationship of a issue are characterize. On the other hand, conditions are
continuing changing in certifiable just in this contextual analysis. Thus, to handle
the error, significance of seeing just how touchy that arrangement is to model
suspicions and information is essential.
Affectability examination only for the group without month to month
requirements in view of this case study:
Figure 3: Sensitivity analysis for batch model without supply limits

Variable Cells
Name
Tasla Raw Material per Batch (Kg)
Rangeen Raw Material per Batch (Kg)
Sponge Raw Material per Batch (Kg)
Local Scrap Raw Material per Batch (Kg)
Imported Scrap Raw Material per Batch (Kg)
HC Raw Material per Batch (Kg)

Final

Reduced

Value

Cost

Objective
Coefficient

Allowable
Increase

Allowable
Decrease

1391.788450
1391.788450
556.715379
835.073069
0.000000
1113.430760

0
0
0
0
0
0

2.67
3.37
2.14
2.37
0.18
1.24

0.72127846
1.E+30
0.56473868
0.65316276
2.93138483
1.E+30

0.56199723
1.00457297
6.98050847
4.65367232
1.E+30
0.49234907

UUM CASE STUDY 2

DECISION ANALYSIS

Pig Iron Raw Material per Batch (Kg)

SQQP 5023

278.357690

2.24

0.80967742

13.9610169

Constraints
Tasla Raw Material per Batch (Kg)
Rangeen Raw Material per Batch (Kg)
Sponge Raw Material per Batch (Kg)
Local Scrap Raw Material per Batch (Kg)
Imported Scrap Raw Material per Batch (Kg)

Final
Value

Shadow
Price

1391.788450
1391.788450
556.715379
835.073069
0

0
1.03952679
0
`
0

Constraint
R.H. Side
0
0
0
0
0

Allowable
Increase
1.E+30
1441.96107
1.E+30
1.E+30
1.E+30

Allowable
Decrease
1391.78845
1344.98991
2226.86152
3618.64997
4453.72303

HC Raw Material per Batch (Kg)

Pig Iron Raw Material per Batch (Kg)
Tasla Raw Material per Batch (Kg)
Rangeen Raw Material per Batch (Kg)
Sponge Raw Material per Batch (Kg)
Local Scrap Raw Material per Batch (Kg)
Imported Scrap Raw Material per Batch (Kg)
HC Raw Material per Batch (Kg)
Pig Iron Raw Material per Batch (Kg)
Total Finished Product per batch (Kg)

1113.430760
278.357690
1391.788450
1391.788450
556.715379
835.073069
0
1113.430760
278.357690
4000

0.57320807
0
0
0
-0.56395268
-0.63952679
-2.93138483
0
-0.80347947
3.39526792

0
0
0
0
0
0
0
0
0
4000

1751.31349
1.E+30
1391.78845
1391.78845
1386.96255
1344.98991
1331.55792
1113.43076
276.243094
1.E+30

956.36581
278.35769
1.E+30
1.E+30
557.491289
852.878465
0
1.E+30
280.504909
4000

Discussion:
i.
ii.
iii.

Batch size is a big constraint on profits

If increase the batch size by 1 kg, profit increase per batch by INR3.40
If increase batch size by ~320 batches per month, profit increase to

iv.

INR109, 000 (~6.25%)

If it requires approximately INR1, 300,000 in capital and time investment
to increase the batch size by just 100 kg, will able to recover that cost in
less than 12 months

2.3

Third analysis, what amount of benefit will Akshay Mittal lose in the event that he
should use in any event one unit of a crude material in a clump given or pick not
to utilize that crude material? This is to stay away from miserable if CEL does not
arrange a specific sort of crude material
From the sensitivity analysis in the case study:

UUM CASE STUDY 2

DECISION ANALYSIS

i.

SQQP 5023

Row 13 indicates, Imported Scrap is the only raw material not being used
in the current optimized plan which is the maximum profit per batch

ii.

without any monthly limit constraint.

Row 31 shows, CEL would losing INR2.93 per additional kilogram if use

iii.

Imported Scrap.
Suggest buying Imported Scrap if necessary and the price must below
INR20, 070 per ton.

2.4

Forth analysis, Akshay Mittal must know the suggestions from ideal batch from
question 2.1 on month to month commitment.
At the point when run Solver for boosting the benefit every month, benefit every
month shows INR1, 788,705 which is much higher than the benefit every month
assessed in question 2.1, INR1, 739,245. In the meantime, benefit per clump
INR4, 873 dropped essentially from inquiry 2.1 INR1, 739,245.

Figure 4: Nonlinear model with batch decision variables and a monthly objective

UUM CASE STUDY 2

DECISION ANALYSIS

SQQP 5023

The past methodology finishes up a shabby and ease crude material such as HC
great in cluster plan and might incorporated in with the general mish-mash. Be
that as it may, subsequent to this is a nonlinear model, there is probability that this
enhancement may not produce a worldwide most extreme and only one of
numerous nearby maxima. Along these lines, nonlinear model required to check if
worldwide optima have. Nonlinear model need to use at many distinctive
beginning stages to see dependably wind up at same ideal arrangement.
An approach to detail a straight month to month model is to utilize month to
month crude material choice variables and include a choice variable for the
quantity of batches. Month to month enhancement:
y i = tons of raw material i to order per month
b = number of batches in a month
Revenue = 29000 *
Cost of RM =

igi

Rate per Ton yi

i

Electricity Cost = 4.30 * 700 *(

Consumables Cost = 2000 *

iyi
+1200b

igi

Salary Cost = 3000 * b

UUM CASE STUDY 2

DECISION ANALYSIS

SQQP 5023

Subject to min and max constraint for each i, constraint on batch size of 4,000 kg,
batch size limit and hours available per month.
Monthly optimization:
Max [Revenue Cost of RM Electricity Cost Consumables Cost Salary
Cost]

Figure 5: Linear model with batch decision variables and a monthly objective

10

UUM CASE STUDY 2

DECISION ANALYSIS

SQQP 5023

Discussion:
i.
ii.
2.5

Profit per month is same as profit per month for nonlinear monthly model.
Nonlinear model did provide a global optimal

Last analysis, what are the suggestions to improve profits?

Based on sensitivity analysis (Fig 3):
i.
ii.

Find other sources for Rangeen to increase supply.

Negotiate a deal with supplier and pay an amount up to an additional
INR919 per ton of supply for each ton over the current limit of 500 tons.

iii.

Improve time per month from 600 hours to higher. Every one hour
increase in time will result profit by INR2, 981. This additional profit

iv.

would be applicable for the next 7.7 hours.

Improve the time per month:
a. Hire better maintenance personnel to reduce maintenance time
b. Use better / costlier machinery to reduce breakdown periods
c. Timely supply of consumables and spare parts to reduce waiting
time (emergency)
d. Put in place a better safety plan for workers to reduce time in
related activities.

3. REFERENCES
i.

Render B., Stair, R.M., & Hanna, M.E. (2006). Quantitative Analysis for

ii.

Management. Prentice Hall.

(2011), Chandpur Enterprises Limited, Steel Division: Teaching Note

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