Harimann International

Harimann International

by kichu6789 | studymode.com

DECISION SUPPORT MODEL

Instructor: DR.DO BA KHANG

CASE REPORT

Harimann International

REPORT CONTENT:

CASE ABSTRACT2

1/ Prepare a decision tree for the initial problem2

2/ Do you agree with Mr. Dhawan’s analysis in Exhibit 3?4

3/ Prepare a decision tree to include the different possible delivery dates of the embroider. Interpret the results.5

4/ Prepare a decision tree to describe the situation with parallel production process7

5/ Assuming that Mr. Dhawan can hire an assistant who would make sure that there will be no internal production problem. How much he would pay for this assistant at most?8

6/ Do you have any other suggestion to help Dhawan to improve further his situation with the order?10

CASE ABSTRACT:

Harimann International, a Delhi-based manufacturer of finished textiles, receives a large, unexpected order at the beginning of the off-season. With a sequential production scheme, Dhawan, leader of Harmann, faced a tough situation, that is accept or decline the order from Pioneer.

Unfortunately, none of the available embroiderers, including the existing one, can commit to finishing the goods in time for internal processing to be completed in time to guarantee the shipping date. Again, this man had to negotiate with embroider to improve the situation with a couple of possible delivery dates.

Later on, Dhawan started to think of new solution – parallel production. This new approach gives his company advantages of time efficiency. This case offers a rich context for analyzing problem solving under uncertain conditions and exploring risk-minimizing opportunities.

1/ Prepare a decision tree for the initial problem

Mr. Dhawan was facing to 2 decisions. The first decision was to accept the order. The second decision was to decline the order. He also knows that if he accepted the order, the probability of missing the date was 20%. In the case of missing the date, there was significant decrease in payment from Pioneer. Specifically, Pioneer would probably pay 50%, 30% and 20% of the payment. Mr Dhawan believed that there was a 40% chance that Pioneer would pay 50% of the contracted price, a 40% chance that it would pay 30% and a 20% chance that it pay as little as 20%. Mr. Dhawan’s problem can probably be illustrated by the general model

It is clearly shown from the model that Mr Dhawan should be concerned about 5 possible situations that he was be able to deal with. Each situation could result in different gain or loss.

Situation 1: Mr Dhawan rejected the order. In this situation, he would certainly lost 188,400 INR of his investment. Situation 2: Mr Dhawan accepted the order and there was no delay. In this case, Pioneer certainly paid 100% of the payment to Mr Dhawan. In addition, he also received 57% of the government incentives. To sum up, the total profit that he could earn was 315,238 INR. Situation 3: Mr Dhawan accepted the order but Pioneer just paid 50% of the contracted price because of the late date. This led to a loss of 72,081 IND in his investment. Situation 4: Mr Dhawan accepted the order but Pioneer just paid 30% of the contracted price because of the late date. Moreover, notice that the government incentives could not be applied in this case because the receipt was smaller than the qualifying minimum of 150,000 IND. As a result, he suffered a significant loss of 311,380 IND. Situation 5: Mr Dhawan accepted the order but Pioneer just paid 20% of the contracted price because of the late date. This case is quite similar to the situation 4 and he suffered the worst loss of 360,720.

| Decline the order| 100% of payment| 50% of payment| 30% of payment| 20% of payment| Revenue| 0| 493400| 246700| 148020| 98680|

Government's incentives| 0| 281238| 140619| 0| 0|

Cost| -188400| 459400| 459400| 459400| 459400|

Total| -188400| 315238| -72081| -311380| -360720|

The five situations can be summarized as the following table:

There were different circumstances that Mr Dhawan was likely to meet. It is obvious that he tried to analyze each event to find out the best solution that he could earn profit from that. By using the decision tree model, he could identify the best decision associated with the best expected value.

Result: It can be clearly seen from the model that Mr Dhawan should accept the order and the value that he expected was 207,084.7 INR

2/ Do you agree with Mr. Dhawan’s analysis in Exhibit 3?

Mr. Dhawan’s analysis Exhibit 3 is partially disagreed. According Mr. Dhawan’s analysis in Exhibit 3, in 2 case On- time delivery and late delivery he also has the Government incentives.

First of all you can see, Mr. Dhawan have chance of occurring On- time delivery are 80 percent, in this case he has revenue is $493,400 exceed the qualifying minimum of 150,000 INR, the order qualified for Government incentives and Government incentives are: 57%*$493, 400 = $281,238. But in late delivery case, he has 3 situation: | Paid 50%| Paid 30%| Paid 20%|

Revenue| 493,400*50% =246,700 INR (1)| 148,020 INR | 98,680 INR| Cost | 459,400 INR (2)| 459,400 INR| 459,400 INR| Gain/Loss| (1)-(2)=-212,700 INR(3)| -311,380 INR| - 360,720 INR| Incentives| (1)>150,000 INR I = (1) * 57% = 140,619 INR(4)| Revenue<150,000 INR * I = 0| I=0| Final receives| (3)-(4) = -72,081| -311,380 INR| -360,720 INR| 1. 40 percent chance hat Pioneer would pay 50 percent of the contracted price. Thus, the revenue is: 50%*$493, 400= $246,700 exceed the qualifying minimum of 150,000 INR, the order qualified for Government incentives. Government incentives are: 57%*$246,700 = $140,619. 2. 40 percent chance hat Pioneer would pay 30 percent of the contracted price. Thus, the revenue is: 30%*$493, 400= $148,020 less than the qualifying minimum of 150,000 INR, the order not qualified for Government incentives. 3. 20 percent chance hat Pioneer would pay 20 percent of the contracted price. Thus, the revenue is: 20%*$493, 400= $98,680 less than the qualifying minimum of 150,000 INR, the order not qualified for Government incentives. As the results, in the event that shipping date was missed (late delivery) 60 percent Mr. Dhawan (paid 30% and paid 20%) will not receipt of Government incentives. With Mr. Dhawan’s analysis Exhibit 3, we understand that he certainly received the Government incentives in all pay-less events: If on- time delivery occurred, he received the Government incentives of $281,238 and in case of late delivery occurring, he received the Government incentives of $101,246. It is not realistic.