Thursday, December 3, 2009

Notes on Assignment 6: Australian Motors Case Study

I've been responding to questions regarding the Australian Motors (AM) case study and wanted to pass on a couple of observations.

First, the purpose of this exercise is to implement the business model outlined in Exhibit 8.  AM leases trucks on 2, 3, 4, and 5 month contracts. It makes money by renting those trucks to customers for short term needs.  AM is like a rental car company that obtains it cars through leasing.  Your task is to implement a business model that AM can use to schedule leases for maximum profit.

Second, the model described in Exhibit 8 assigns no cost to AM for leasing surplus vehicles for its fleet that don't, in turn, get rented out to customers. This unrealistic assumption leads to a trivial solution.  You'll get a more realistic solution if you modify the objective function to include an additional cost of $500 per month for each surplus vehicle in the inventory.

Take some time to look over your solution.  In particular, the marginal values on the inequality constraints provides much insight into this business case.  For example, which months and demand segments would your prioritize for a marketing effort intended to increased profits?  Do you see months and demand segments where increasing demand by one unit would increase profits by more than the monthly contribution of that unit?  Why does that occur?

3 comments:

  1. A writer has to have a good mind to see things that aren't there, things that are different from his or her reality, but also able to convince the readers that those things are true or relatively true.
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  2. A writer has to have a good mind to see things that aren't there, things that are different from his or her reality, but also able to convince the readers that those things are true or relatively true.
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    ReplyDelete
  3. Hi,
    This is really a great stuff for sharing. Keep it up .Thanks for sharing.

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