Optimization of production cost of palm oil

Abstract

Production systems focus not only on providing enough product to supply the market but also on delivering the right product at the right price while minimizing the cost of production and maximising profit. This research was carried out to investigate the optimal solution that will minimize the production planning cost and provide a satisfactory supply of the products demanded by the customer within the specified time. Data analysis was done with "Excel Solver" to solve the linear programming model formulated by applying the simplex algorithm. With the monthly production capacity of 115 units for regular-time production and 25 units during overtime, the result of the analysis shows that the company cannot meet the monthly estimated units of palm oil required during regular time and thus should consider overtime production if it must meet the monthly units' requirement. The optimal solution indicates that for the best production planning to be obtained, the company must engage in both regular time and overtime production to meet demand specifications for the first three months, while regular time production is enough for the company to meet its estimated demand for the last three months.