As decision support specialists, we generate the operational and financial information that companies require to optimize use of business resources. We do this by developing business models that companies use to achieve "best case" performance through cost efficient use of resources. Nothing is more costly to a firm over time than suboptimal performance caused by the wasteful use of resources. Cash balances become depleted; investment opportunities vanish; and competitive pressures force companies to lose market share. Our models eliminate these possibilities by defining the changes a business can make to marketing and operational activities so that maximum performance is achieved.
Your Decision Support Requirements
Typically, companies achieve success by making cost effective decisions on how resources should be allocated and used to produce and sell products and services. A company
might allocate resources to meet production and sales targets per product while minimizing total operating costs. For fixed levels of production and sales, such cost minimization also maximizes income.
Alternately, a company can evaluate resource allocation for multiple production and sales targets per product and then select the combination of targets that maximizes revenue, income or some combination of both these outcomes. Regardless of how your company defines the outcomes for success, Business Optimization Services will support your needs for generating the right information so that you can make the right decisions to capitalize on present and future business opportunities.
We develop our business models in EXCEL spreadsheets using SOLVER applications. Typically, a SOLVER business model is structured to include: a) data values, b) control variables and c) one or more outcome variables. The data variables can include such items as unit costs for different materials or wage rates for different types of labor used in a particular production process. Control variables are the decision variables selected by company management to maximize (minimize) values for outcome variables. Decision variables can include such items as the number of units produced or the frequency of email marketing campaigns for different products. Last, outcome variables capture the results that a particular company selects to optimize, typically maximize for income or minimize for cost. In operating the model, the user populates the model with the relevant data values and then activates SOLVER to generate the control and outcome variable values that define optimal performance. These values are available to the user in designated cells, defined according to the model structure.
Examples of SOLVER Applications
Consider the following
examples showing how we can support specific decision requirements through our
model building approach.
1. An umbrella manufacturer faces highly seasonal demand due to local climate conditions. To serve its seasonal demand pattern, the manufacturer can follow a either a production or inventory “smoothing” policy. There are cost trade-offs to consider in determining which policy to follow. With production smoothing, the firm minimizes production costs by relying on permanent workers to produce at average demand per month. Inventory builds during slack demand periods and then reduces during peak periods. With inventory smoothing, the firm varies production per month by hiring temporary workers and using overtime during peak demand periods. Inventory levels and related carrying costs are reduced but personnel-related costs increase from hiring workers and use of overtime hours. The company has forecasted sales per month for the next year and desires staffing levels for permanent and temporary workers and a mix of regular and overtime hours from each that minimizes total production and inventory carrying costs.
2. A firm delivers goods from its warehouse to retail centers using its own fleet of trucks. Trucks deliver goods on a periodic basis to each center to service each center’s demand for goods. Each truck has both capacity and time constraints. Capacity constraints are measured in maximum allowable total pounds per trip and time constraints are measured in maximum allowable total mileage per trip. The firm desires to evaluate its current route structure and change it as necessary to minimize truck usage and related costs subject to the indicated capacity and time constraints.
3. A firm advertises nationally a line of home cleaning products to households through periodic catalog mailings managed by zip-code. Catalog recipients submit orders to the company and then the firm fulfills these orders through packaged mailings. The firm monitors orders and sales per order by month for each zip-code and finds that order levels peak the month after catalog mailings but then decline steadily until the next mailing occurs. Therefore annual sales and mailings costs vary directly with mailing frequency. Catalogs are now mailed every three months to all locations. The Company would like to optimize the frequency of catalog mailings by zip-code so as to maximize profit.
We would be happy to discuss your business decision needs in more detail. Write us at [email protected]ptserv.com to arrange for a discussion of your business needs. After discussion and review of your business requirements, we will chart your path to better decision making by developing the models that you need to optimize your business outcomes.