Strategic Decisions for Mirza Manufacturer

TEAM 7Deeksha Ramesh

Milind JagreShrawani GargYashaswini Naik

*

Dec 8, 2017

Who is our client?

• Mirza Manufacturing have started making 4 electronic products, Product A, Product B, Product C and Product D.

• Each product comprises three main materials: – Magnet– Wiring– Casing

• According to the demand, the products are targeted to be shipped to three distribution centers - North America, Europe, and Asia.

What is the problem?

• Client is not sure of their marketing strategy so they need consultants to help them take those decisions.

• Few things which we will focus on:– Marketing Strategy– Break Even Analysis– Profit Optimization– Risk Simulation– Business Recommendations

Initial Analysis

• Decision Variables: The company produces 4 products – A,B,C,D . Demand of each product in NA, EU and Asia.

• Parameters: Cost of raw materials, packaging & shipping cost and revenue.

• Constraints: Min & Max demand.• Profit: $5879 with 100%

utilization of Wiring and Casing and 90% utilization of Magnets.

Tornado chart

How to optimize profit?Magnet Cost Optimization Wire Cost Optimization Casing Cost Optimization

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-1400-1200-1000

-800-600-400-200

0

Raw Material Marginal Value Comparison

Marginal Value Magnets Marginal Value WireMarginal Value Casing

The graph shows:• per unit increase in value of wire and

casing is tracing almost straight line, showing negligible effect on profit

• per unit increase in cost of magnet is affecting profit the most

How to optimize profit?

• Cost of Magnet affects profit the most.

• Slope of cost of magnet is steepest which tells that decrease in the cost of magnet will furnish huge profit.

When does profit become 0

Profit becomes 0 for following cost of unit raw material :• Magnet - $0.65• Wiring - $0.41• Casing - $0.46

Magnet Wiring Casing

0.65

0.41

0.46

Raw Materials Unit Cost for 0 Profit

Risk Analysis

Why should we do this?• To represent uncertainties with Monte Carlo for

probabilistic simulation and sensitivity analysis.• Transparency by providing a visual interface and

well-documented model structure.• To allow the company to grow without growing

gout of control.

What are the parameters considered?• Raw materials cost• Demand

Should we focus on raw material cost?

• There is a 18% chance that the company will make 0 profit with risk associated with Magnet Cost.

• The chances that the company makes more than $5000 profit is 41%.

Magnet

Casing

Wiring

When all 3 parameters

are varie

d$0.00

$1,000.00

$2,000.00

$3,000.00

$4,000.00

$5,000.00

$6,000.00

Mean Profit

Mean Profit

Recommendations• Stop Product D export to European Countries.• Stop Products B and D export to European Countries.• Stop Products A and D export to European Countries.

RecommendationsUnder any circumstances, in order to obtain more profit, Mirza Manufacturer should not• Stop production of Product D.• Stop export of Products A and C to European Countries.• Stop Product C production.

Base Case Profit Remove D Remove AC in EU Remove C

5879.07

-4365.5 -4764.79 -4891.83

Profit Comparison

RecommendationsTo increase profit by more than 18%, buy magnet which is 1 cent cheaper than the current rate.