Elec-Tech International Co., Ltd.
Introduction.
In May 1996, the Elec-Tech International company limited was founded in Zhuhai. Due to the notable progress the company showed in the market, in June 2004, it was listed on the Shenzhen Stock Exchange. The main products of this company include LED series products and other small electrical appliances. Elec-Tech is currently operational in many different parts, with over 20 wholly-owned enterprises. With 765 patents, Elec-Tech is considered one of the outstanding private technology-based enterprises in China. The devotion and strategic plans by Elec-Tech have set it at the top of the world when it comes to LED production and that of small appliances. This is the secret behind its winning several European design awards.
Problem statement.
Financial management and the balance between labor, material, and profits attained have faced a lot of challenges in many companies. This does not exclude Elec-Tech International Company Ltd. Over time, making sound financial decisions has been used to define financial literacy. This is the drive-in this company to having estimates before each quarter, which will help maximize profits. Data on ratings is thus the only pillar for this company regarding helping it make informed decisions that are benefits-oriented. Don't use plagiarised sources.Get your custom essay just from $11/page
The motivation of the project.
The company’s motivation is the fact that the company has had exemplary performance in the past. The company just ought to concentrate on minimizing the inputs while maximizing the profits/output. This is in agreement with the project objectives, which include; reducing unsalable products, having a scheme of maximizing net profit, developing a production plan, and analyzing the existing data. The teams’ motivation is based on the fact that having seen the success of the company, it is possible and evident that the company can retrieve its glory and do even better. Through the allocation of limited resources, the company will be in a position to maximize profits.
Methodology/ Model development.
Decision Variables
These decision variables are what is used to measure the amounts of resources to be used. For this project, since limited resources are to be used, the decision variables must, therefore, reflect this. Since the company needs five different products, these products can be given identities with an unknown value X to be able to develop the objective function. The decision variables are thus outlined as:
X1 = Number of plastic PP Plastic Produced
X2 = Number of Thermometer produced
X3 = Number of Copper Thread produced
X4 = Number of ABS Plastic produced
X5 = Number of Stainless Steel produced
This five variable is to be considered in developing the model to be used. As a part of modeling, decide how much detail is required is quite critical.
Objective function
This is the next step after defining the decision variables. Defining the objective function solely depends on the decision variables outlines. For an objective that aims at maximizing the profits, we could have:
Max profit: Z = 1.03X1 + 0.87X2 + 20.14X3 + 1.98X4 + 3.07X5
On a spreadsheet, the 1.03, 0.87, 20.14, 1.98, and 3.07, which are the objective function coefficients, could be entered in their cells, and the X1, X2, X3, X4, and X5 also entered in their cells.
In some cases, decision variables and objective functions are what define an optimization model. However, most common optimization problems involve constraints that restrict values, which can be assumed by the decision variables, and in turn, the objective values can be obtained.
Constraints.
For this company, considering the input demands of: Investment at 110,000 Mechanical hours at 20,000 and labor hours at 8,100, the constraints then will be:
9.93X1 + 7.73X2 + 53.11X3 + 12.46X4 + 16.07X5 ≤ 110,000
1.5X1 + 1.3X2 + 32X3 + 3X4 + 5X5 ≤ 20,000
0.9X1 + 0.5X2 + 12.4X3 + 1.2X4 + 2.2X5 ≤ 8,100
Running this in excel, then produces the optimal solutions.
Analysis and Results.
From the objective cell, the total profit, the original value is higher than the final value. This indicates that a loss would be recorded as some parameters in the input were probably generating zero value to the benefits. On the optimal solution generated, the variable cells clearly have it that material to make bronze and stainless metal produced zero in the final value. This is the bug that needs to be fixed, should we need to realize better profits.
In deciding on this production line, the ultimate goal is to make the highest net profits out of the limited resources available. In constructing the linear regression model, the aspects of the data that are critical and were considered included; the most profitable single product, the need to only produce products that give maximum profits, the gross margin profits of the products, and trying different product combinations to maximize benefits.