NASS NASS Bottle DecoratorsBottle Decorators

Cost AnalysisCost Analysisbyby

Ayesha, Neha, Shuen, SyedAyesha, Neha, Shuen, Syed

Our MissionOur Mission

To find optimal quantity points to, To find optimal quantity points to, maximize profitmaximize profit

OverviewOverview

The Supply Chain ProcessThe Supply Chain Process VariablesVariables Decision Variable Decision Variable Objective FunctionObjective Function ConstraintsConstraints Excel setup and answerExcel setup and answer Net profit AnalysisNet profit Analysis ConclusionConclusion

The supply Chain process

Glass Maker

Product Filler

Warehouse

Glass Decorator

Warehouse

Transport Cost

Transport C

ost

Transport Cost

Our Objective:

Optimize cost factors and minimize cost at the Decorator level

Transport C

ost

The Production The Production ProcessProcess

Spray DecorationSpray Decoration

Print DecorationPrint Decoration

Label DecorationLabel Decoration

Fixed Costs/bottleFixed Costs/bottle

Variables used to determine the fixed Variables used to determine the fixed cost/ bottle for spray, print and label cost/ bottle for spray, print and label decorations of bottles:decorations of bottles:

Labor WagesLabor Wages Number of Employees requiredNumber of Employees required Direct Material Costs (Foils, Inks, Direct Material Costs (Foils, Inks,

Paints etc.)Paints etc.)

Eliminated CostsEliminated Costs

Tooling CostsTooling Costs- Fixed amount of equipment required to - Fixed amount of equipment required to complete projectscomplete projects

- Costs paid by customer- Costs paid by customer

Freight CostsFreight Costs - Not part of the production process- Not part of the production process - Costs paid by customer- Costs paid by customer

Cost StructureCost Structure

60.030Labeling

90.023Print

90.041Spray

LaborCost per Bottle

Operation

Decision VariablesDecision Variables

Quantity of Sprayed BottlesQuantity of Sprayed Bottles

Quantity of Printed BottlesQuantity of Printed Bottles

Quantity of Labeled BottlesQuantity of Labeled Bottles

Objective FunctionObjective Function

Maximize Proft of Producing Sprayed, Printed and Maximize Proft of Producing Sprayed, Printed and Labeled bottles:Labeled bottles:

= Q= Qsprayed*sprayed*PPBPPB +Q+Qpainted * painted * PPBPPB +Q+Qlabeledlabeled * PPB * PPB

*ppb= profit per bottle*ppb= profit per bottle

$1.68/bottle$1.92/bottle$2.4/bottle

LabelingPaintSpray

ConstraintsConstraints

0 <= labor hours <= 3840 hours 0 <= labor hours <= 3840 hours 0<= machine hours <=480 hours0<= machine hours <=480 hours 0<= Qs + Qp + Ql <= 142,758 bottles0<= Qs + Qp + Ql <= 142,758 bottles 0<=.7Qp + .1Ql<= 230000<=.7Qp + .1Ql<= 23000 0<=.08Qs + .02Qp<=50000<=.08Qs + .02Qp<=5000 0<=.02Qs + .005Ql<= 38,5240<=.02Qs + .005Ql<= 38,524

Excel SetupExcel Setup

385241441.675<=0.0050.02Constraint 6

50005000<=0.020.08Constraint 5

2300022998.3<=0.10.7Constraint 4

142758142758<=111Constraint 3

480318.07<=0.0020.0010.003Constraint 2

3840839.45<=0.00690.00790.0039Constraint 1

Subject To

286270.8Max1.681.922.40Obj.

Function

622912395656511Var Values

RHSValueLabelin

gPaintSprayOperation

Answer ReportAnswer Report

0Binding$D$8=integer62291Var Values Labeling$D$8

0Binding$C$8=integer23956Var Values Paint$C$8

0Binding$B$8=integer56511Var Values Spray$B$8

37082.35Not Binding$F$17<=$G$171441.675<= Value$F$17

0Binding$F$16<=$G$165000<= Value$F$16

1.7Not Binding$F$15<=$G$1522998.3<= Value$F$15

0Binding$F$14<=$G$14142758<= Value$F$14

161.929Not Binding$F$13<=$G$13318.071<= Value$F$13

3000.546Not Binding$F$12<=$G$12839.45<= Value$F$12

SlackStatusFormulaCell ValueNameCell

Constraints

622910Var Values Labeling$D$8

239560Var Values Paint$C$8

565110Var Values Spray$B$8

Final ValueOriginal ValueNameCell

Adjustable Cells

286270.80profit$F$9

Final ValueOriginal ValueNameCell

Target Cell (Max)

Fixed Operational CostsFixed Operational Costs

Labor = $61317.83Labor = $61317.83Indirect Labor Cost = $44266.67Indirect Labor Cost = $44266.67Utilities = $20237.67Utilities = $20237.67Service and maintenance = $12411.67Service and maintenance = $12411.67Total supplies = 6224.67Total supplies = 6224.67Expenses = 49853.83Expenses = 49853.83

Total = $194,312.30Total = $194,312.30

Net Monthly ProfitNet Monthly Profit

Max Profit – Total Expense = Net Monthly profitMax Profit – Total Expense = Net Monthly profit

$ 286270.80 - $194,312.30 = $91958.5$ 286270.80 - $194,312.30 = $91958.5

Therefore, even after discounting operational Therefore, even after discounting operational expenses, by operating at the derived quantities, expenses, by operating at the derived quantities, the company would make profit of $91958.5 per the company would make profit of $91958.5 per month or $110,3502 annuallymonth or $110,3502 annually

Optimal Quantities for Max profitOptimal Quantities for Max profit

144733Quantity label

12181Quantity Print

59451Quantity Spray

Final ValueName

Net annual profit: $78,501.94 month Net annual profit: $78,501.94 month $942,023.28/year $942,023.28/year

Questions?Questions?