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Operations research

Case let 1 : Production Planning

Miller fasteners is a well known enterprise in the Auto ancillary industry segment.

It produces 3 products namely :- Radiator Caps, Springs and Sprockets. Radiator caps is the flagship
product for the company. It enjoys a market share of 80 % therein. There is only one another
manufacturer of radiator caps in the country and its market share is 20 %. These two companies
together employ advanced OR techniques to estimate the demand for the industry and together they
produce the quantity that maximises the Total revenue for the entire Industry. Miller produces the
exact no of units needed to keep its market share intact at 80% of the industry demand and the
second co produces exactly 20%. As for the other 2 products(viz; Springs and sprockets) , the markets
are nearly perfectly competitive. The company can sell as many units as they want in these two
industries at the Price set by the market.

The strategy dept set out to gather Information from the market and after employing extensive
statistical techniques has come out with the following equation for the demand curve for radiator
caps viz : -

X = - 20 P + 200 ( P is in units of Rs 100. Ie P =2 represents a price of Rs 200 and so on )

Where ‘X’ represents the no of units sold, ‘P’ represents the Unit price.

The production planning department was trying to esvtablish the no of units of each product to
produce for the up-coming month based on the following additional information, besides the above.

The management has desired that the total Revenue from all the 3 products for the month shall be
exactly Rs 5 lacs. The Unit price for the second and third items are Rs 2,000 and Rs. 2,500
respectively.

The Production process needs a tical raw material. The present stock of the same is 42,500 units.
The management desires that the entire stock may be fully used up in the next month. 150 units of
this Raw material are needed to produce 1 unit of the first product. Similarly 100 and 250 units of
the Raw material are needed to produce each unit of the 2nd and 3rd products respectively.

The direct labour employed by the company is about 100 in nos and each labourer works every
month on an average for 8 hrs/day for 25 days/month. The company does not employ labour on
overtime. The management desires that the total labour time available be used up as much as
possible. Some idle time is inevitable though. Each unit of product 1 needs 40 direct labour Hours.
Similarly products 2 and 3 need 60 hrs and 80 hrs of Dir labour respectively.

Considering all the above, suggest the no of units of each of the 3 products to be planned for
production.