Operations Research (Session 5)

Decision Making under Certainty

Linear programming
Operations Research (Session 5)
Case : Red Brand Canners
Who is correct?
Bill Cooper?
Make more of Full Tomatoes
Or Myers?
Make tomato paste & juice
How to proceed
Decision problem
How much of various products the company should
make
Operations Research (Session 5)
Red Brand Canners: Decision Problem
Grade A
Grade B
Whole Can
Juice
Paste
TAC
TBC
TAJ
TBJ
TAP
TBP
Operations Research (Session 5)
Decision Variables
TAC : Pounds of tomato grade A used in whole
tomato cans
TBC, TAJ,TBJ, TAP, TBP
Objective
Maximise the profit
Z= (TAC+TBC)/18*-0.01 + (TAJ+TBJ)/20*0.08+ (TAP+TBP)/25*0.55
Operations Research (Session 5)
Constraints
Limits of availability
Limits on Demand
Quality Constraint
Availability
A grade: TAC+TAJ+TAP <=60,0000
B grade TBC+TBJ+TBP <=2,40,0000
Demand
Whole Tomato cans (TAC+TBC)/18 <=800,000
Juice (TAJ+TBJ)/20 <= 50,000
Paste (TAP+TBP)/25 <=80,000
Quality
Average Grade for Can is 8 : 9 TAC+ 5 TBC >= 8 (TAC+TBC)
Average Grade for Juice is 6 : 9 TAJ + 5 TBJ >= 6 (TAJ+TBJ)

Operations Research (Session 5)
Solution
Whole Cans : Nil
Juice : 50000 cases (2,50,000 lb A & 7,50,000 lb of B)
Paste : 80000 cases ( 3,50,000 lb of A &16,50,000 lb of B)
Total Profit : $48,000

Is this right?

What is wrong?
Operations Research (Session 5)
Cost of Tomotoes
0.06* 3 Million = 1,80,000
Cost of tomotoes as per the solution
1,66,000
Where is the mistake?
Sunk Cost
so the correct Objective fn. is
Maximise the contribution
Z= (TAC+TBC)/18*1.48 + (TAJ+TBJ)/20*1.32+ (TAP+TBP)/25*1.85
Operations Research (Session 5)
Constraints remain same
Constraints
Limits of availability
Limits on Demand
Quality Constraint
Availability
A grade: TAC+TAJ+TAP <=60,000
B grade TBC+TBJ+TBP <=2,40,000
Demand
Whole Tomato cans (TAC+TBC)/18 >=800,000
Juice (TAJ+TBJ)/20 >= 50,000
Paste (TAP+TBP)/25 >=80,000
Quality
Average Grade for Can is 8 : 9 TAC+ 5 TBC >= 8 (TAC+TBC)
Average Grade for Juice is 6 : 9 TAJ + 5 TBJ >= 6 (TAJ+TBJ)

Operations Research (Session 5)
Solution
Whole Cans : 38888.9 cases (525,000 lb A & 175,000 lb of B)
Juice : 15000 cases (75,000 lb A & 225,000 lb of B)
Paste : 80000 cases ( 2 Million lb of B)
Total Contribution : $225,355.6

Cost of Tomatoes : 3 Million lb *0.06 = $180,000

Contribution : $45,355

Is it inferior to Myers Solution?
Operations Research (Session 5)
Myers Solution
Make paste : 2 Million lb of B : 8000 Cases
Make juice : 0.4 Million B + 0.6 Million A = 5000 cases
What is the contribution
8000*1.85 + 5000*1.32 = $214000
Net contribution : 214000 3million*0.06 = 34,000
Model Solution is superior by $ 11,355
Operations Research (Session 5)
Operations Research (Session 5)
SOLUTION
Operations Research (Session 5)
Sample Problems