Mexican Wire Works is a producer of wire windings used in making electrical transformers. This company has the good fortune of booking more orders then they can fill. The company has ordered new equipment to help in the long term, but they still have a short term issue. In addition, the company is refinancing long term debt and needs profits to be as high as possible to counteract the effects of this refinance. The problem is to select the orders that will make the company the most profitable for the month, while keeping customers happy by filling their minimum requirements.
Mexicana, a subsidiary of Westover Wire Works, a Texas firm, is a medium-sized producer of wire windings used in making electrical transformers. Ron Garcia has just started his first week as a management trainee at Mexicana Wire Winding, Inc. He had not yet developed any technical knowledge about the manufacturing process, but he had toured the entire facility and had met many people in various areas of the operation.
Carlos Alverez, the production control manager, provided Ron with a tour of the plant, laid out by process type, followed the manufacturing sequence for the windings : 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.
On March 8 at a staff meeting, Vivian Espania, Mexicana’s general manager, introduced Ron to the team and asked him to help with a problem they have been discussing for a long time without resolution. Jose Arroyo, production control manager, explained that the company is booking more orders than they can fill. They will have some new equipment on line within the next several months, but that won’t help with upcoming month of April. Jose located some retired employees who used to work in the drawing department, and is am planning to bring them in as temporary employees in April to increase capacity there. Vivian wants their profits to look as good as possible in April and she is a hard time figuring out which orders to run and which to back order so that I can make the bottom line look as good as possible. They would like Ron’s to provide a fresh view to help come up with a solution.
Ron Garcia must develop a plan for Vivian with recommendations on what they should produce and discuss the plant layout. He must also address the need for temporary workers in the drawing department.
Mexicana Wire Works is looking to maximize their profits. Using Linear Programming an QM for Windows software, Ron has found that the maximum profits of $59,900 can be achieved from the manufacturing 1,100 units of W0075C , 250 units of W0033C , and 600 units of W0007X . The result also suggests not to produce W0005C product.
Looking at the need for additional temporary workers in the drawing department. Ron determined that by adding more headcounts in the drawing department, it is going to reduce the labor time yet it increases the labor cost up to 32%. The quantity of the product will still be the same but will decrease the profit to $53,653 due to no increase in the pricing but burdened by the increased in production cost.
Ron’s recommendation should be to produce 1,100 units of W0075C , 250 units of W0033C , and 600 units of W0007X to increase the company’s profit margin. Company must turn down the orders to produce 1,510 units of W0005X because it is better for the company not to increase the number of employee in the drawing department in order to keep the cost down.
Render, B., Stair, R., & Hanna, M. (2012). Mexicana Wire Works. Quantitative
Analysis for Management, 301.