CJL operates two paper mills Mill 1 [M1] has a capacity of 20,000 tonnes and Mil
ID: 2342482 • Letter: C
Question
CJL operates two paper mills Mill 1 [M1] has a capacity of 20,000 tonnes and Mill 2(M2)-30,000 tonnes and they currently have three Newspaper customers NA, NB & NC. The current demand from these customers are NA -12,000, NB - 20,000 & NC 16,000 tonnes. There are other suppliers of paper who will quickly fill any demand from these Newspaper customers if CJL fails to deliver or if it increases its price. The controller of CJL is looking at last month's shipping costs of $1,512,000 and identified that the cost of shipping newsprint was increasing thereby threatening the profitability of the business; it was therefore agreed that the only feasible resolution to this problem is to reduce the monthly cost of shipping and this has to be done without affecting delivery schedules to customers. Shipping costs are as follows: From Mill1 to NA -costs $$20 tonne to NB $28/tonne & to NC $40/ tonne. From Mill 2 to NA $40/tonne to NB $$36/tonne & to NC $32/tonne It was decided that the solution to the problem would be to ship only the maximum from each factory in such a manner that it minimizes the costs of shipping. REQUIRED: 1. Write a brief paragraph explaining the financial objectives of CJL and the problem they are experiencing in meeting thoss specific financial objectives 2. List the factors, and or functions of the business and the constraints that exists for each 3. Express the constraints in financial terms 4. Suggest a formulae that would be used to resolve the problems and satisfy the objectives of CJLExplanation / Answer
1. Financial objective of CJL is to decrease the shipping cost for shipping the newspaper to the newspaper agency from the Mills. However since they have different locations of Mills and there will be situations that one particular mill may not fulfill the entire demand of news agency and CJL may have to supply to the same newspaper agency from different Mills, this will be having unnecessary burden of shipping cost on their profit.
2. Production department is facing the problem that their production facilities are sprawled in between two different locations. And thus they have constraint of not able to meet demand from the production capacity of any one mill.
Delivery or supply department is facing the problem that they have different cost structure to deliver paper from each mill m
mhus they are not able to decide how to arrange the transportation facility so as to reduce the shipping cost.
3. The constraint can be easily be expressed in financial terms by using three different variable.
For instance let's assume avg. transportation cost per tonne for three newspaper agency be x,y,z then we have constraint as. 12000x+20000y+16000z<1512000
4) This problem can be solved by two methods
a) linear programing
b) optimization metrix