MAPLELEAF CASE
Group 3
Aditya Chaudhary 19/125
Manan Agrawal 19/148
Mohit Soni 19/153
Surabhi Jain 19/174
Utkarsh 19/177
Assumptions
New plant can work at maximum capacity of 90%
If demand is more than the production, the amount sold is equal to
maximum amount that can be produced
Old plants are not running in loses
Construction of new plant begins in year 3 and it starts producing at
half its capacity in year 4
Depreciation is calculated from year 4 onwards
Transportation model without Guadalajara
facility
(5
Weyear
will be able
to produce
forecast)
Transportation Cost
only 9000 units since system
cannot operate above 90%
capacity
Demand for 1000 units will not
be met
Total cost of producing 9000
units will be $158587.5
Production Facilities
Centers
Toronto
Toronto
K.C
L.A
Forecast
Seattle
5 year
10 year
0.75
2.5
4.5
4.75
1000
1000
K.C
2.5
2.5
2.75
750
1000
L.A
4.5
2.5
0.5
2.25
2500
3000
4.75
2.75
2.25
0.75
1500
2000
1.5
1.5
3.75
2.5
1500
2000
2.25
3.5
750
1000
5.25
3.25
1.75
3.75
2000
3000
Seattle
Chicago
Atlanta
Guadalajara
Units Transported
Production Facilities
Centers
Toronto
K.C
Toronto
0
0
K.C
L.A
0
0
0
0
Seattle
1000
750
Total
1000
750
Forecast
5 year
10 year
1000
1000
750
1000
Transportation model with Guadalajara
facility
forecast)
(5
Weyear
will be able
to produce
10000 units when new facility
is added
Demand for 1000 units will be
met
Total cost of producing 1000
units will be $137837.5
Transportation Cost
Production Facilities
Centers
Toronto
Toronto
K.C
L.A
Forecast
Seattle
Guadalaj
ara
5 year
10 year
0.75
2.5
4.5
4.75
5.25
1000
1000
K.C
2.5
2.5
2.75
3.25
750
1000
L.A
4.5
2.5
0.5
2.25
1.75
2500
3000
4.75
2.75
2.25
0.75
2.5
1500
2000
1.5
1.5
3.75
2.5
3.75
1500
2000
2.25
3.5
3.5
750
1000
5.25
3.25
1.75
3.75
0.5
2000
3000
Seattle
Chicago
Atlanta
Guadalajara
Units Transported
Production Facilities
Centers
Toronto
K.C
L.A
Seattle
Total
Guadalajara
Forecast
5 year
10 year
Utilization
5 Years
10 Years
With
Guadalajara
facility
Without
Guadalajara
facility
With
Guadalajara
facility
Without
Guadalajara
facility
Toronto
90%
Toronto
90%
Toronto
90%
Toronto
90%
K.C
0%
K.C
90%
K.C
90%
K.C
90%
L.A
90%
L.A
90%
L.A
90%
L.A
90%
Seattle
40%
Seattle
90%
Seattle
90%
Seattle
90%
Cost per day of Gudalajara plant
Initial investment = $ 30,00,000
Fixed cost (depreciation) per day = 30,00,000/(10*360) = 833.33
Variable cost = 10*3600 = $ 36,000
Total cost = $ 36,833.33
Cost per unit = $36,833.33/3600 = $ 10.23
If per unit price of the product is more than $ 10.23 than Mapleleaf
shoul build Gudalajara plant
Opportunity cost of building new
plant
Future value of $ 30,00,000 with discount rate of 10%
FV = $ 30,00,000 (1.1)^7 = $ 5846151
Sum of profit earned via Guadalajara plant should be greater than $
94,15,285
Price per unit0 for it1 should
be3$ 11.3179
2
4
5
Year
Demand
Production
8000
8000
8500
8500
9000
9000
9500
9000
10000
10000
10500
10500
6
11000
11000
7
11500
11500
8
12000
12000
9
12500
12500
10
13000
12600
Production in new
plant
1000
1500
2000
2500
3000
3500
3600
FC/day
VC
0
0
0
0
0
0
0
0
833.33
10000
833.33
15000
833.33
20000
833.33
25000
833.33
30000
833.33
35000
833.33
36000
TC
Revenue
Profit
10833.3 15833.3 20833.3 25833.3 30833.3 35833.3 36833.3
0
3
3
3
3
3
3
3
11317.9
22635.8 28294.8 33953.7 39612.7 40744.5
0
3 16976.9
6
3
9
6
5
1143.56
2461.49
3779.42 3911.21
0
484.6
5 1802.53
5 3120.46
5
8
Concepts of OM involved in case
Demand forecasting: It is predicting future demand of the product
Utilization: Percentage of total capacity used for the production
Capacity planning : Process of determining the production capacity
needed by an organization to meet changing demand for its products
Transportation model: Model to decide optimal shipping plan by
minimizing cost of moving products from one place to another
Capacity: Maximum output that a system can produce
Downtime: The amount of time that a system fails to perform its
primary funtion
Thank you!
