Reference no: EM132257038

Consider the production capacity for the new Nissan plant in Smyrna, Tennessee. Assume that we can increase the capacity and suppose that Nissan currently has enough regular production capacity to produce 2500 electric Nissan Leafs per week. Further assume that with overtime, an additional 900 cars per week can be produced. The cost of assembly and inspecting a car during regular time is $1,200. Overtime production of a car costs $1900. It also costs $120 per week to hold a car in inventory for future delivery. Nissan’s order schedule for the next seven weeks is: 500, 3500, 3000, 2500, 3000, 3500 and 2700 cars. Their goal is to provide quality service and as such, they want to be able to meet all of their customer orders with no shortages.

Nissan wants to create a production schedule that will determine how much regular and overtime production it needs for the next six weeks while also minimizing its cost. Assume that there is no inventory on hand at the beginning of week 1.

Develop a linear programming (LP) model for the Nissan production problem. Solve this LP using the Excel Solver (You need to add the corresponding Excel Add-in that comes with Excel: Excel-Options → Add-Ins → Manage Excel Add-ins → Go → Solver Add-in). If you have any questions about using the Excel Solver, please do not hesitate to ask.

What is the optimal production schedule? What is the number of cars held in inventory each week, if any?

The workers’ union representative announces that they are willing to increase the weekly overwork capacity by 100 cars, to a total of 1000 cars, for a fixed payment of $15,000. Should Nissan take the deal?

Without resolving, what is the largest fixed payment such that the workers’ union proposal is still profitable for Nissan? Can you guess in which weeks would the extra overwork capacity be used, if any?