PRODUCTION OPTMIZATION ANALYSIS Powell Products Oak and pine boards David Barrymore Edmond Kwok Jimmy Lau Chirag Tilara

Presentation Outline: Process Overview Objective and Strategy Current Situation Analysis Optimum Production Plan Future Recommendation

Process Overview:

Objective and Strategy: Objective: ◦ Determine production plan that maximizes the gross contribution for the oak and pine board production processes Strategy: ◦ Analyze current situation to:  Determine production constraints  Find product mix (oak : pine) that utilizes maximum production capacities

Current Situation: Receive Logs Maximum supply: Oak: 18K ft Pine: 16K ft Stripping Stripping Rate: Oak: 2 hr per 1K ft Pine: 3hr per 1K ft Machine capacity: Max 60 hours per week Cutting Cutting Rate: Oak: 2 hr per 1K ft Pine: 3hr per 1K ft Machine capacity: Max 40 hours per week Gross Margin Contributions: Oak: $ 40 per 1K ft Pine: $ 30 per 1K ft Gross Margin Contributions: Oak: $ 40 per 1K ft Pine: $ 30 per 1K ft

Analysis: Production is constrained by two factors: ◦ Primary: Stripping and Cutting machine capacities ◦ Secondary: Maximum purchase as contracted by supply agreements Analysis was performed by varying the actual purchase quantity of oak and pine logs.

Optimum production plan: Production mix to optimize gross margin is 15K ft of Oak and 10K ft of Pine. Resulting gross margin will be $ 900 per week. Optimum point

Future recommendation: Increasing machine capacities to match maximum purchase quantity would maximize the contribution. 33%