Plant Capacity and Minimax Regret Rule - Assignment Example

I will encourage the management to give maxi a wide berth if the company is not in the capacity to withstand extreme losses. This is specifically because the max is only attractive to risk-takers who are prepared to face huge losses if such losses occur. Furthermore, if this business is new or small, then this method is very unsuitable. In choosing the maximin criterion, the management will be looking at the worst possible situation in all the options and then adopting the option that provides the least bad results; that is, they adopt the option that optimizes the least profits. As already discussed, this criterion will not be attractive to this particular company if its owners are risk-averse decision-makers because the method is based on excessive watchfulness.

From the calculations, the most central location is B; therefore, the most frequented department (4) should be placed there. The department that makes more trips to Department 4 is Department 2, therefore should be placed at the locations closest, for instance, A, which is 40 yards from A. Second priority should be offered to Department 1, which makes 80 trips to Department 4. This department should be placed at location C, which is 40 yards from location B. Automatically, the last department, which is 3, will be located at location D, which is the most distant location at 50 yards from department D’s location (Stevenson, 2008).

            Table showing the placement of the different departments, number of trips made to the different departments, and the cost per trip from the different allocations of the department.

Department 1

Department 2

Department 3

Department 4

Location C

Location A

Location D

Location B

(Trips to department 4) 80

(Trips to department 4) 90

(Trips to department 4) 55

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(Cost per trip) $ 40

(Cost per trip) $ 40

(Cost per trip) $ 50

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b).       

            Following the revised trip schedule, minimizing travel costs will be best when the departments are placed as described below. The highest number of trips are made to department 4, therefore, it should be placed at the most central location. Therefore, taking the distances indicated in part A, department 4 should be placed at Location B, which is 40 yards from Location A; 40 yards from Location C; and 50 yards from Location D. However, priority should be given to Department 3, which does 60 trips to department 4. Department 3 should be placed at either location C, then Department 2, which makes 50 trips to Department 4. Department 2 should be placed at location A, as the distance between the two and location B. Lastly, department 1, makes 40 trips to department 4. Department 1, should be placed at location D (Stevenson, 2008).

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