Toyota

Exercise 3: Determining Production Capacity needed at Toyota Motor Manufacturing of Canada (TMMC) Decision trees are another meaning(a) if intriguing world-class operations management method which operations managers should get word and with which other managers should be familiar. This exercise illustrates how using a finish tree, determination of an optimal exertion subject resource mess be made from among several possible force options base on the provided probable market conduct and expect addresss/payoffs of even offts that work on the options. It is spring 2000, and TMMC has indeed just been chosen to produce the reinvigorated Lexus RX 330 caper, with the first units deliverable in 2003. Toyota moldiness now regularise the amount of annual production capacity it should signifier at TMMC. Toyotas goal is to maximize the utility from the RX 330 line over the v years from 2003-2007. These vehicles will sell for an just of $37,000 and incur a mean unit production speak to of $28,000 (here, $ = the Canadian dollar). 10,000 units of annual production capacity can be built for $50M (M=million) with superfluous abashs of 5,000 units of annual capacity distributively cost $15M. Each block of 5,000 units of capacity will also cost $5M per year to maintain, even if the capacity is unused.

Assume that the number of units actually sold each year will be the lesser of the demand and the production capacity. Marketing has provided three vehicle estimated demand scenarios with associated probabilities as follows: regard 2003 2004 2005 2006 2007 Probab ility Low 10,000 10,500 11,000 11,500 12,0! 00 0.25 Moderate 15,000 16,000 17,000 18,000 19,000 0.50 exalted 20,000 24,000 26,000 28,000 30,000 0.25 a. To maximize profit earned during this period, which production capacity should TMMC in 2000 decide to build - 10,000, 15,000, 20,000, 25,000, or 30,000 cars? Justify your choice. b. What are the weaknesses or limitations in this psychoanalysis? How...If you want to get a climb essay, order it on our website: BestEssayCheap.com

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