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By juliette.navarre | Updated: Nov. 25, 2018, 7:02 a.m.

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Flan vanilla solutions
Flan vaNILLA
Salas
1
Only week-end production
2
Only outsourcing 
3
Our mixed solution
4
Taking on the full penalty
Agenda of solutions 
We will assume throughout the solutions that penaties are paid not only for the promotion period  
Weekend production
1
WEEKEND PRODUCTION 
1
Sales prices: 
without promotion = 2.000€ per ton Sales price with promotion = 1.500€ per ton

Penalty for not delivering : 600€ / ton

- As we know that capacity if linear on the week-end to the week: 
5days → Capacity of 10 
7 days → Capacity of 14

(Capacity weekend: 4)

Price per ton on the weekend: 800€ / ton Capacity weekend = 4

Reminder
We decide to produce extra during all the weekend BUT in week 52, as demand is perfectly met during this weekend.

Cost weekend= 4(tons)*800€/ton =3200€

As we are producing for 4 weekends= 4x3200=12800

We are charged of a fine in week 50 as our capacity don't enable us to meet all the demand

9.1x600€/ton= 18.260€

Fine 
Cost of producing during weekends:
Opportunity cost for not selling 9.1 tons: 
Total cost:
Cost management of producing during weekends
= 18260€
= 31.910€
=13.650
(4x3.200€)+ (9,1x600€) 
9,1 x 1 500

Only outsourcing
2
Las salas 
Outsourcing in la salas
2
Sales prices: 
without promotion = 2.000€ per ton Sales price with promotion = 1.500€ per ton

Penalty for not delivering : 600€ / ton
Taken into account even for no promotion period

- Capacity = 7 tons per week Cost = 700€ / ton Must be 100%

Reminder
We decide to produce extra during all the weekend BUT in week 52, as demand is perfectly met during this weekend.

Cost outsourcing = 7(tons)*700/ton =4900€

As we are outsoucing for 4 weekends = 4x4900=19600

We are charged of a fine in week 50 as our capacity don't enable us to meet all the demand

0.1x600€/ton= 60€

Fine 
Cost of outsourcing :
Opportunity cost for not selling 0,1 tons: 
Total cost:
Cost management of outsourcing 
= 19.660€  
=19.810€
= 150€
(4x4.900€) + (0.1x600€) 
0.1 x 1.500€

Full Penalty
3
Capacity shortage:
1,8+19,3+3,05= 24,15

Assuming as said before that the penalty would apply for every period , not only during promotion.

We test the option of just being penalized and not meeting the demand : 
24,15x600= 14 490 euros

Cost of not producing extra and taking on penalty:
Opportunity cost for not selling 24,15 tons: 
Total cost:
Cost management of 
full penalty

= 14.490€
= 51.615€
= 37.125€
(1.8 + 19.3 + 3.05) x 600€
1.8 x 2.000 + 22.35 x1.500

Our mixed solutions
4
Weekend production
 
Penalty

We decide to outsource from la Salas until week 50,
3x4900€=14.700€
 and

we get a fine for the 0.1 tons unsold 
0.1x600=-60€

We then produce in the weekend  4 tons of units and we meet the demand, 
or pay the fine of week 51 amounting to (3.05)x600=4.575 €

Cost of outsourcing + weekend (Week 51):
Opportunity cost for not selling 0,1 tons: 
Total cost:
Cost management  
Outsourcing + weekend

= 18.610€
= 18.110€
 = 150€
(3x4.900)€ +( 0.1 x 600€ ) +
3200€

0.1x1.500€

Cost of outsourcing + penalty 
(Week 51):

Opportunity cost for not selling 3,15 tons: 
Total cost:
Cost management  
Outsourcing + Penalty

= 16.590€
= 21.315€
= 4725€
3x4.900€ 
+
3,15x600€

3,15x1.500€

Overview of La Salas solution
Here we summarized in a table all the possible solutions 
We also took into account external information such as remaining units, certainty and reputation.
Certainty is linked with the units left.

A situation of uncertainty is when we are not sure that the remaining units will be sold in the next quarter, that could result in potential losses.

Looking at the 2 less costly solutions we can see that outsourcing and outsourcing + weekends are the optimal ones BUT....
and the BEST SOLUTION is
Outsourcing + weekend 
Indeed with this solution, 
we:

- minimise our costs

- meet our demand nearly perfectly giving us a good image in front of our customer

- have extra-units that doesn't represent a huge loss in case we cannot sell them

Thank you very much for your attention

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