Mexicana Wire Works

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Mexicana Wire Works
In partial fulfilment Of the course requirement In Management Science 1st Term, S.Y. 2012-2013 Submitted to: Dr. Dennis Berino

Prepared by Group 5: Shyne Ampatuan Diberjohn Balinas Jo-Ann Deseo July 24, 2012

Company background
Mexicana, a subsidiary of Westover Wire Works, a Texas firm, is a medium-sized producer of wire windings used in making electrical transformers. Its product, the windings, is considered a standardized design. The production process for this involves drawing, extrusion, winding, inspection and packaging. After inspection, good product is packaged and sent to finished product storage; defective product is stored separately until it can be reworked. Please refer to the plant lay-out below: Office Wire Drawing Finished Product Storage Rework Department Rejected Product Storage

Packaging Receiving and Raw Materials Storage Winding Extrusion Inspection

Mexicana would want to address its capacity problems. Thus, Vivian Espania, the general manager, has asked Ron Garcia, the new management trainee, to help the company in addressing its issues.

Problems of the case
Mexicana is planning to refinance some of its debts. As such, Vivian would want to optimize the profit for the month of April using its limited capacity and resources. However, the main problem is this: Mexicana is booking more orders than it can fill (booking orders > production using present capacity). Although the company plans to have some new equipment within the next several months, the plan would not help the company to immediately address this issue for the month of April. Thus, Mexicana is now considering re-hiring some retired employees in the drawing department in order to increase the capacity during the month. From the above, the group would want to address the following issues: a. What recommendations should Ron Garcia make in order to address the over-booking problem of Mexicana? b. Is there a need for temporary workers to be re-hired in the drawing department? c. Does the plant lay-out of Mexicana optimize its production capacity?

Case facts, limitations and constraints
The data provided to Ron Garcia are as follows: April orders: Product Product W0075C Product W0033C Product W005X Product W0007X Orders 1,400 units 250 units 1,510 units 1,116 units

Note that Vivian has given her word to a key customer that they will manufacture 600 units of product W0007X and 150 units of product W0075C during April. Selling price and standard costs: Product Product W0075C Product W0033C Product W005X Product W0007X Selling Price 100 80 130 175 Standard Cost per unit Materials Labor Overhead Total 33.00 9.90 23.10 66 25.00 7.50 17.50 50 35.00 10.50 24.50 70 75.00 11.25 63.75 150 Profit 34 30 60 25

Selected operating data: Average output per month = 2,400 units Average machine utilization = 63% Average percentage of production set to rework department = 5% (mostly from Winding Department) Average no. of rejected units awaiting rework = 850 (mostly from Winding Department) Plant capacity (hours) and bill of labor (hours/unit) Process Product W0075C Product W0033C Product W005X Product W0007X Capacity (hours) Drawing 1 2 0 1 4,000 Extrusion Winding 1 1 1 3 4 0 1 0 4,200 2,000 Packaging 1 0 3 2 2,300

Note that inspection capacity is not a problem since employees can work overtime in order to accommodate any schedule.

Approach used
The main problem is how to optimize the profit of Mexican in the month of April. Considering that there are four products involved, the group will identify the number of units to be produced for each product while complying with the constraints mentioned above.

Quantitative method
For purposes of identifying the solution to the problem of Mexicana, we will use Linear Programming since it is used in reaching an optimum solution to problems that have a series of constraints binding the objective. Note that the objective of Mexicana is to maximize the profit in April....
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