Background and context of the situation
The current problem of Tillerman’s Tea is to find the best possible product mix for its new location in India and reduce production costs. Tillerman has to know how much tea he will be for a New Delhi Blend. Traffic managers attempt to reduce transportation costs, inventory managers to reduce inventory costs, production managers to reduce production costs, and sales managers to increase customer satisfaction. Subsystem optimization occurs rather than the coordinated systems approach of reducing total costs and achieving maximum profits. For Tillerman’s Tea, it is the only possible way to remain competitive and
Recommendations on Product Mix Issue
The proposed product mix is the following: New Delhii blend – 70 %, Kyoto Blend – 15%, and Beijing Blend – 15%.
Justification
The proposed product mix will help the company to overcome such problems as excess capacity, seasonality of products, seasonality of demand, ease of entry into the industry, patents, and know-how, research, and development. The proposed product mix is becoming units that assess market opportunities against such criteria as the rate of return on investment, and that change their facilities when the opportunities warrant it. This orientation demands a change from product rigidity to product flexibility. The proposed product mix will help the company to seek a balance between manufacturing efficiency and market desirability. As markets become more heterogeneous, and diverse products are developed to satisfy them, manufacturing efficiency will decline. In reality, management seeks to develop a balance between product diversity and production feasibility.
Overview of methodology
The task of the management is to calculate the time and resources required for each blend. It will be important to calculate the number of gallons of tea being produced. Then, to maximize the total profit, which comes from the profit from traditional and new product mix. The number of hours used to produce the new tea product mix. The LP model will calculate labor and material costs needed per blend. Then, it will be important to calculate the costs required for the total product mix.
Issue 1 Discussion
The proposed product will benefit the company because it is the most cost-effective solution. The fundamental activities performed by a physical-distribution system are concentration and dispersion. They can be performed several times in the distribution of a final product as products are assembled and stored and bulk is broken. Terminals are located at points to balance market requirements with the movement and shipment size. The latter are dictated by movement-and-handling technology.
Issue 2 Discussion
Intelligence is gathered about profits and is evaluated and reviewed by product, territory, salesmen, and product line. The situation is then audited and changes may be made. In this manner, market position is assessed based on market share, competition, opinions and reactions of customers, and degree of customer satisfaction. Marketing operations are rated in terms of such activities as inventory levels, credit, accounts receivable, and working capital.
Issue 3 Discussion
The major purpose of the proposed product mix is to increase corporate opportunities and efficiency by overcoming current problems of ineffectiveness and pointing out new directions and opportunities. Four levels of auditing occur. These are an audit of the total marketing system, an audit of the marketing mix, an audit of any of the submixes, and an audit of individual marketing elements.
Technical Section
The LP model will be as follows:
Max 5 X1 + 3 X2
Subject to:
2 X1 + X2 £ 40 labor costs
X1 + 2 X2 £ 50 material costs
and both X1, X2 are non-negative.
Introducing variables into equality form: Max 5 X1 + 3 X2
Subject to:
2 X1 + X2 + S1 = 40
X1 + 2 X2 + S2 = 50