Giant Motor Company Case
EXECUTIVE SUMMARY
The purpose of this analysis is to maximize profit of Giant Motor Company which has 3 lines of products and offers 3 brands of cars namely Lyra, Libra and Hydra which corresponds to subcompact car class, sporty car class, and luxury car class respectively. Currently the company has 3 manufacturing plants and each of them is dedicated to a specific product line. For future planning, the company has an option of retooling its manufacturing capacity which would bring a major expense to company but would increase its production efficiency and capacity significantly. The retooling option includes shut down of existing Lyra and Libra manufacturing facilities which are only dedicated to respective models and opening of new Lyra facility which is able to manufacture both Lyra and Libra and Libra facility which is able to manufacture all 3 models.
The analysis is performed by given plant characteristic (production capacity and associated fixed costs) for existing facilities and planned facilities, profit margins given by car lines depending on manufacturing plant, demand for 3 different car models, and demand diversion amount associated with unsatisfactory demand for each model. A rigorous analysis by Microsoft Excel with Solver Add-in indicated that Giant Motor Company needs to implement the renovation plan and shut down its existing manufacturing facilities. From first plant, the company should produce 1.400.000 units of Lyra and 100.000 units of Libra and from second plant, the company should produce 1.000.000 units of Libra and 800.000 units of Hydra. Based on this production plan, the company shall achieve maximum total profit of 4.040.000 USD.
MODELLING
Assumptions and Limitations
a) Production capacity given for facilities are constant since all factors that would lag production are ignored (physical and human factors).
b) Demand projection prepared by Giant Motor Company is consistent and true
c) No switching time is required from old
The purpose of this analysis is to maximize profit of Giant Motor Company which has 3 lines of products and offers 3 brands of cars namely Lyra, Libra and Hydra which corresponds to subcompact car class, sporty car class, and luxury car class respectively. Currently the company has 3 manufacturing plants and each of them is dedicated to a specific product line. For future planning, the company has an option of retooling its manufacturing capacity which would bring a major expense to company but would increase its production efficiency and capacity significantly. The retooling option includes shut down of existing Lyra and Libra manufacturing facilities which are only dedicated to respective models and opening of new Lyra facility which is able to manufacture both Lyra and Libra and Libra facility which is able to manufacture all 3 models.
The analysis is performed by given plant characteristic (production capacity and associated fixed costs) for existing facilities and planned facilities, profit margins given by car lines depending on manufacturing plant, demand for 3 different car models, and demand diversion amount associated with unsatisfactory demand for each model. A rigorous analysis by Microsoft Excel with Solver Add-in indicated that Giant Motor Company needs to implement the renovation plan and shut down its existing manufacturing facilities. From first plant, the company should produce 1.400.000 units of Lyra and 100.000 units of Libra and from second plant, the company should produce 1.000.000 units of Libra and 800.000 units of Hydra. Based on this production plan, the company shall achieve maximum total profit of 4.040.000 USD.
MODELLING
Assumptions and Limitations
a) Production capacity given for facilities are constant since all factors that would lag production are ignored (physical and human factors).
b) Demand projection prepared by Giant Motor Company is consistent and true
c) No switching time is required from old