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Production Planning At Viktor Lenac Shipyard Case Solution

Solution Id Length Case Author Case Publisher
1622 625 Words (5 Pages) David Currie , Giorgio Sinkovic Ivey Publishing : 904D19
This solution includes: A Word File A Word File and An Excel File An Excel File

Ivana Boric is concerned with her firm, Viktor Lenac Shipyard, which has been highly successful in the past. Viktor Lenac Shipyard places a heavy emphasis on repairs which has immensely helped Viktor Lenac Shipyard to build its place in the shipyard industry. However, recently Viktor Lenac Shipyard has focused on expansion and, as a result, its fixed costs have increased as well. Viktor Lenac Shipyard and Ivana Boric are faced with the challenge of finding ways to increase profits to cover the increased fixed costs or face potential bankruptcy. While there are several ways to increase profits, Ivana needs to find a quick solution to the problem and changing the mix of products seems to be the best solution for Viktor Lenac Shipyard in the given circumstances.

Following questions are answered in this case study solution

  1. Identification of Problem

  2. Analysis

  3. Result and Recommendations

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Case Analysis for Production Planning At Viktor Lenac Shipyard

2. Analysis

The primary objective of amending the current product mix of Viktor Lenac Shipyard is to improve the contribution of these products to operating income, and thus help Viktor Lenac Shipyard to cover its fixed costs. The variables that Viktor Lenac Shipyard can directly influence are the number and type of products that it produces. There are four areas in which Viktor Lenac Shipyard must choose to fulfill contracts; these include Repairs, Conversions, New-Building and producing offshore jackets.

Viktor Lenac Shipyard faces several constraints in production. These include the amount of steel used in the procedure, anticorrosion paint capacity, dock days and labor hours. Due to advance order amount of steel to be used in production was limited to 5500 tons. Anticorrosive paint had a capacity of 500,000 square meters due to regulation. Dock days were limited to 350 days and labor could be utilized for a maximum of four million hours.

Some of the additional constraints include the number of contracts in the four different categories of the shipping industry that Viktor Lenac Shipyard can avail in the next year. Since the number of contracts made has to be an integer, an additional constraint has to be set in Solver. Using the following constraints, this is the optimal solution:

  • Answer Report

  • Sensitivity Report

Here the objective was set to maximize the total contribution by all the contracts. The cost of securing a contract, from any of the categories in the ship-building industry, was calculated using parameters presented in the exhibits. The cost was then subtracted from the revenue from fulfilling the contract to calculate the contribution.

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