Chapter 9 – Mintendo Game Girl

The results for this case are obtained using the accompanying spreadsheet Mintendo Case Study.

Basic Model

The decision variables are contained in Cells B4:I10 in worksheet pricing. The constraints are as follows:

Workforce balance (Equation 8.2): Cells M5:M10

Capacity (Equation 8.3): Cells N5:N10
Inventory balance (Equation 8.4): Cells O5:O10
Overtime limit (similar to Equation 8.5): Cells P5:P10

The detailed costs are calculated in Cells B15:I20 and the total cost is shown in Cell C22. The net profit is
shown in Cell C25. Given that all demand is to be met, minimizing cost is equivalent to maximizing profit.

We first consider the case where a $5 discount in any month increases demand within the month by
50% and moves 30 percent of each of the following two months of demand forward.

Base Case (No promotion)

Set cell C27 = 0. Run Solver (within options you may have to deselect Assume Linear Model). The
solution is

Aggregate Plan Decision Variables

Ht Lt Wt Ot It St Ct Pt
Period # Hired # Laid off # Workforce Overtime Inventory Stockout Subcontract Production Demand Price
0 0 0 300 0 50,000 0 0 0
1 0 8 292 0 0 0 0 50,000 100,000 50
2 0 0 292 0 0 0 0 110,000 110,000 50
3 0 0 292 0 56,240 0 0 186,240 130,000 50
4 0.00 0 292 0 63,120 0 0 186,880 180,000 50
5 0 0 292 0 0 0 0 186,880 250,000 50
6 0 0 292 11,680 0 0 66,400 233,600 300,000 50
1669 24194 0 9486
Aggregate Plan Costs
Period Hiring Lay off Regular time Overtime Inventory Stockout Subcontract Material
1 0 40,000 700,800 0 0 0 0 600,000
2 0 0 700,800 0 0 0 0 1,320,000
3 0 0 700,800 0 112,480 0 0 2,234,880
4 0 0 700,800 0 126,240 0 0 2,242,560
5 0 0 700,800 0 0 0 0 2,242,560
6 0 0 700,800 262,800 0 0 1,195,200 2,803,200
Total Cost = $ 17,384,720
Total Revenue = $ 53,500,000
Profit = $ 36,115,280

Sandra’s Plan (Promote in September)

Set Cell C27 = 1 (promotion on) and Cell C28 = 3 (September) and Cell E29 = 5 (discount). Run Solver to
obtain the following solution:
Aggregate Plan Decision Variables
Ht Lt Wt Ot It St Ct Pt
Period # Hired # Laid off # Workforce Overtime Inventory Stockout Subcontract Production Demand Price
0 0 0 300 0 50,000 0 0 0
1 0 0 300 0 50,000 0 0 100,000 100,000 50
2 0 0 300 0 132,000 0 0 192,000 110,000 50
3 0 0 300 0 0 0 0 192,000 324,000 45
4 0.00 0 300 0 66,000 0 0 192,000 126,000 50
5 0 0 300 0 83,000 0 0 192,000 175,000 50
6 0 0 300 6,250 0 0 0 217,000 300,000 50
893 54429 0 0
Aggregate Plan Costs
Period Hiring Lay off Regular time Overtime Inventory Stockout Subcontract Material
1 0 0 720,000 0 100,000 0 0 1,200,000
2 0 0 720,000 0 264,000 0 0 2,304,000
3 0 0 720,000 0 0 0 0 2,304,000
4 0 0 720,000 0 132,000 0 0 2,304,000
5 0 0 720,000 0 166,000 0 0 2,304,000
6 0 0 720,000 140,625 0 0 0 2,604,000
Total Cost = $ 18,142,625
Total Revenue = $ 55,130,000
Profit = $ 36,987,375

Bill’s Plan (Promote in November)

Set Cell C27 = 1 (promotion on) and Cell C28 = 5 (November) and Cell E29 = 5 (discount). Run Solver to
obtain the following solution:

Aggregate Plan Decision Variables

Ht Lt Wt Ot It St Ct Pt
Period # Hired # Laid off # Workforce Overtime Inventory Stockout Subcontract Production Demand Price
0 0 0 300 0 50,000 0 0 0
1 0 0 300 0 10 0 0 50,010 100,000 50
2 0 0 300 5 82,031 0 0 192,021 110,000 50
3 26 0 326 21 160,754 0 0 208,723 130,000 50
4 2.00 0 328 22 190,768 0 5 210,009 180,000 50
5 0 0 328 13,120 0 0 11,832 262,400 465,000 45
6 0 0 328 19 0 0 5 209,995 210,000 50
1884 69081 0 1692
Aggregate Plan Costs
Period Hiring Lay off Regular time Overtime Inventory Stockout Subcontract Material
1 0 0 720,000 0 20 0 0 600,119
2 0 0 720,000 119 164,062 0 0 2,304,255
3 78,000 0 782,400 467 321,509 0 4 2,504,675
4 6,000 0 787,200 501 381,537 0 89 2,520,108
5 0 0 787,200 295,200 0 0 212,971 3,148,800
6 0 0 787,200 425 0 0 81 2,519,946
Total Cost = $ 19,642,887
Total Revenue = $ 57,425,000
Profit = $ 37,782,113

With a $5 discount, Bill’s plan of promoting in November is the most profitable.

$10 discount
With a $10 discount, the base case of offering no discount stays the same as shown above and produces
a profit of $36,115,280.

To check Sandra’s plan, Set Cell C27 = 1 (promotion on) and Cell C28 = 3 (September) and Cell E29 = 10
(discount). Run Solver to obtain the following solution:

Aggregate Plan Decision Variables

Ht Lt Wt Ot It St Ct Pt
Period # Hired # Laid off # Workforce Overtime Inventory Stockout Subcontract Production Demand Price
0 0 0 300 0 50,000 0 0 0
1 0 0 300 0 50,000 0 0 100,000 100,000 50
2 0 0 300 0 132,000 0 0 192,000 110,000 50
3 0 0 300 0 0 0 0 192,000 324,000 40
4 0.00 0 300 0 66,000 0 0 192,000 126,000 50
5 0 0 300 0 83,000 0 0 192,000 175,000 50
6 0 0 300 6,250 0 0 0 217,000 300,000 50
893 54429 0 0
Aggregate Plan Costs
Period Hiring Lay off Regular time Overtime Inventory Stockout Subcontract Material
1 0 0 720,000 0 100,000 0 0 1,200,000
2 0 0 720,000 0 264,000 0 0 2,304,000
3 0 0 720,000 0 0 0 0 2,304,000
4 0 0 720,000 0 132,000 0 0 2,304,000
5 0 0 720,000 0 166,000 0 0 2,304,000
6 0 0 720,000 140,625 0 0 0 2,604,000
Total Cost = $ 18,142,625
Total Revenue = $ 53,510,000
Profit = $ 35,367,375

To check Bill’s plan, Set Cell C27 = 1 (promotion on) and Cell C28 = 5 (November) and Cell E29 = 10
(discount). Run Solver to obtain the following solution:

Aggregate Plan Decision Variables

Ht Lt Wt Ot It St Ct Pt
Period # Hired # Laid off # Workforce Overtime Inventory Stockout Subcontract Production Demand Price
0 0 0 300 0 50,000 0 0 0
1 0 0 300 0 0 0 0 50,000 100,000 50
2 0 0 300 0 82,000 0 0 192,000 110,000 50
3 0 0 300 0 144,000 0 0 192,000 130,000 50
4 0.00 0 300 0 156,000 0 0 192,000 180,000 50
5 0 0 300 12,000 0 0 69,000 240,000 465,000 40
6 0 0 300 4,500 0 0 0 210,000 210,000 50
2357 61714 0 9857
Aggregate Plan Costs
Period Hiring Lay off Regular time Overtime Inventory Stockout Subcontract Material
1 0 0 720,000 0 0 0 0 600,000
2 0 0 720,000 0 164,000 0 0 2,304,000
3 0 0 720,000 0 288,000 0 0 2,304,000
4 0 0 720,000 0 312,000 0 0 2,304,000
5 0 0 720,000 270,000 0 0 1,242,000 2,880,000
6 0 0 720,000 101,250 0 0 0 2,520,000
Total Cost = $ 19,609,250
Total Revenue = $ 55,100,000
Profit = $ 35,490,750

With a $10 discount it is best not to run any promotion.

Outsourcing Cost Rises to $22

Change Cell B24 in Sheet1 to 22.

To evaluate the base case without discounting, set Cell C27 = 0 to obtain the following solution:

Aggregate Plan Decision Variables

Ht Lt Wt Ot It St Ct Pt
Period # Hired # Laid off # Workforce Overtime Inventory Stockout Subcontract Production Demand Price
0 0 0 300 0 50,000 0 0 0
1 0 0 300 0 0 0 0 50,000 100,000 50
2 0 0 300 0 0 0 0 110,000 110,000 50
3 0 0 300 0 60,720 0 0 190,720 130,000 50
4 1.00 0 301 0 73,360 0 0 192,640 180,000 50
5 30 0 331 0 35,200 0 0 211,840 250,000 50
6 0 0 331 13,240 0 0 0 264,800 300,000 50
1891 31326 0 0
Aggregate Plan Costs
Period Hiring Lay off Regular time Overtime Inventory Stockout Subcontract Material
1 0 0 720,000 0 0 0 0 600,000
2 0 0 720,000 0 0 0 0 1,320,000
3 0 0 720,000 0 121,440 0 0 2,288,640
4 3,000 0 722,400 0 146,720 0 0 2,311,680
5 90,000 0 794,400 0 70,400 0 0 2,542,080
6 0 0 794,400 297,900 0 0 0 3,177,600
Total Cost = $ 17,440,660
Total Revenue = $ 53,500,000
Profit = $ 36,059,340

Sandra’s plan with a $5 discount does not use subcontracting and thus continues to provide a profit of
$36,987,365.

To evaluate Bill’s plan, set Cell C27 = 1, C28 = 5 and E29 = 5 to obtain the following solution:

Aggregate Plan Decision Variables

Ht Lt Wt Ot It St Ct Pt
Period # Hired # Laid off # Workforce Overtime Inventory Stockout Subcontract Production Demand Price
0 0 0 300 0 50,000 0 0 0
1 0 0 300 0 0 0 0 50,000 100,000 50
2 0 0 300 0 82,000 0 0 192,000 110,000 50
3 0 0 300 0 144,000 0 0 192,000 130,000 50
4 29.00 0 329 6,810 201,800 0 0 237,800 180,000 50
5 0 0 329 13,160 0 0 0 263,200 465,000 45
6 0 0 329 0 0 0 0 210,000 210,000 50
2853 68257 0 0
Aggregate Plan Costs
Period Hiring Lay off Regular time Overtime Inventory Stockout Subcontract Material
1 0 0 720,000 0 0 0 0 600,000
2 0 0 720,000 0 164,000 0 0 2,304,000
3 0 0 720,000 0 288,000 0 0 2,304,000
4 87,000 0 789,600 153,225 403,600 0 0 2,853,600
5 0 0 789,600 296,100 0 0 0 3,158,400
6 0 0 789,600 0 0 0 0 2,520,000
Total Cost = $ 19,660,725
Total Revenue = $ 57,425,000
Profit = $ 37,764,275
Promoting in November (Bill’s plan) continues to be the most profitable even if subcontracting costs rise
to $22 / unit.