International Journal of Advanced Engineering Research and Technology (IJAERT) 4

Volume 5 Issue 1, January 2017, ISSN No.: 2348 8190

Appraisal of Optimal Production Quantity in Small and Medium

Scale Industry

Ezeliora Chukwuemeka Daniel1, Nwakobi John Oguejiofor2, Agu Sunday P.3

Department of Mechanical Engineering, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria1
Department of Industrial and Production Engineering, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria2, 3
Emails: cezeliora@gmail.com1, jnwakoby@hotmail.com2 aguhsunny@yahoo.com3

Abstract

The benefit and necessities of small and medium scale enterprise as means for developing a resilient growth in economic
system has been established. This was revealed in the small and medium scale economic flexibility, economic building
and excellent relationship and interactions with several other sectors of the economy. The appraisal of Productivity and its
improvement in small and medium scale enterprise develops the economic conditions in the country and the industry on
its side. In the cause of the research, the operational research techniques where employed to Golden plastic industry
limited (GPIL). The tool employed is a linear programming technique that was used in maximizing profit. Productivity
however, improve by applying the linear programming technique instead of applying trial and error technique which has
been employed by the managers of the industry. Operation research techniques improve the productivity of the firm and
thereby applying the techniques, the economics of developing countries like Nigeria can be enhanced. These techniques
can be applied also to the crude oil problem in Nigeria and see an end to many industrial problems faced by small and
medium scale enterprise.

Key words: Optimization, Bread, Profit, Productivity, Small and Medium Scale Enterprises, Response surface Modelling
and Integer Programming

1.0 Background of Study

In modern days, industries are concerned with the productivity rate, which is concerned with the effective and the
efficiency of the production system. However, in manufacturing industries all levels are faced with the challenges of
producing goods of right quality and quantity and at right time and more especially at minimum cost (minimized cost) and
maximum profit for their survival and growth. Productivity is defined as a measure of outcomes from production process
and production planning, per unit of income in the system. Productivity could be seen as a ratio to measure how well an
organization converts input resources (labour, materials, machines etc.) into goods and services.
Thus, this demands an increase in productive efficiency of the industry. In small and medium scale industries there exist
lots and lots of business ventures that are being engaged by individuals, group of people or association, firms, industries
and government with the main aim of maximizing profits. They range from small scale to medium and large scale. In the
Nigerian economy, the small scale enterprises are the most common form of business. The aim of any economy (either
industrialized or non-industrialized) depends largely on how well organized the small industries are, for instance, we look
at the standard of practice of small scale industries in economically developed countries. The small scale enterprise in
Nigeria seems too stagnant, less adventurous than developed countries. Meanwhile in economically developed countries

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small scale business are better organized and coordinated than in the developing countries because the governments
appreciate their significance to the national economy.
Most of the small businesses are solely operated which makes such companies sole proprietorship business ventures. The
profit of the business is reaped by the owner; this includes people or individuals who want to invest in that type of
business. It is also the easiest form of business ownership to organize because there is relatively small capital to use for its
establishment. The owner also has managerial freedom and this will help the owner in employing his incentive to the
maximum. Entrepreneurs are risk avoiders, not necessarily risk takers; but appear to be risk takers because they see
market differently than the other forms of businesses. They can be referred to as risk eliminators because they seem to
methodically eliminate all the factors that might prevent them from getting into a particular market.
There is no doubt that the relationship between the speeds with which businesses is created and sustained as well as the
proximity of financing to such businesses is an essential element in the wealth creation process of developing countries.
Small and Medium Enterprises (SMEs) play crucial roles in any nations economies as job creators, suppliers of basic
inputs/parts for larger businesses, and key players in the primary sector of the economy. Increasing productivity of SMEs
with properly structured approaches and commitments could be profitable, and given the right focus, SMEs provide the
fillip required to pump-start economic development of any country.
Clifford (1980) emphasized that in view of the large increase in world population especially in Nigeria and many other
developing countries, governments can certainly not afford to employ many more of its population. Moreover, the large-
scale industries have dramatically failed to absorb more than a tiny fraction of the multitudes that need jobs. SMEs are
therefore possibly the only scope of employment creation; little wonders why policy makers are so eagerly attempting to
promote and encourage them.
The path to economic recovery and growth may require increasing production inputs, land, labor, capital and technology
and or increasing their productivity.
Increasing productivity should be the focus because many other countries that have found themselves in the same
predicaments have resolved them through productivity enhancement schemes. Given the importance of high productivity
in boosting economic growth and the standards of living of the people, its improvement cannot but be of importance to
both Managers and production engineers. Industries all over the world including Nigeria are continuously faced with
shortages of production inputs which result in low capacity utilization and consequently low outputs. But an economy can
grow if management decisions at the firm level result in boosted output through either cost minimization or output
maximization culminating in increased production in the real sector. Thus firm managers are always seeking for the right
decisions so as to meet their objectives which mainly revolve on how best to increase profit.
The growth in industries puts pressure on management in finding the optimal planning, organizing, leading and
controlling levels of production in the various productive industries of the economy. As a result of this pressure,
managerial theories of the firm are introduced to analyze business environments and to solve practical business problems
such as operational problems emanating from within the industry, and environmental problems in which the industry
operates. Both theoretical and quantitative techniques are developed to model and analyze these decision problems.

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Volume 5 Issue 1, January 2017, ISSN No.: 2348 8190

One decision area for the management of any firm is in determining the product mix of the firm. A product mix (also
called product assortment), according to Kortler (1993) is the set of all product lines and items that a particular seller or
producer offers for sale to buyers. Like most other developing countries of the world, Nigeria is faced with the general
nature of scarcity of factors of production. As a result of the increasing cost of production, scarcity of factors and high
customers expectations, the management of industries can hardly do without a well-articulated course of action in their
production decisions. This enables them to achieve their profit-maximizing objective.
The pronouncements of policy makers in Nigeria indicate that the aims of government economic policies are to increase
the rate of growth of the economy and to increase the contribution (absolute and relative) of the industrial sector to GDP
thus diversifying the economy. The contribution of the real sector to the rate of growth in the economy is very minimal.
This is due to the sectorial dependence on crude-oil economy. The productive sector is neglected without a planned
business environment to encourage national output, thus propping up unemployment, adverse exchange rate, rising factor
costs, underutilization of installed plant capacity and rising prices of finished goods, among others. To stay this tide,
researchers such as Sargeaunt (1985), Kurtz (1992), Lucey (2000) and Taha (2008) posit that the use of scientific
methods, particularly linear programming, in the allocation of scarce resources is of vital importance to the manufacturing
industries to boost output.
The objective of the study is the application of an optimal model to appraise the productivity of the small and medium
scale industry.

2.0 Review of Literature

However according to Dantzig (1993) For the purpose I had in mind, however, I saw that Leontiefs model had to be
generalized. His was a steady-state model and what the Air Force wanted was a highly dynamic model, one that could
change over time. In Leontiefs model there was a one-to-one correspondence between the production processes and the
items being produced by these processes. What was needed was a model with alternative activities. Finally it had to be
computable. Once the model was formulated, there had to be a practical way to compute what quantities of these activities
to engage in that was consistent with their respective input-output characteristics and with given resources. The activity
analysis model Dantzig formulated would be described today as a time-staged, dynamic linear program with a staircase
matrix structure. Initially there was no objective function; broad goals were never stated explicitly in those days because
practical planners simply had no way to implement such a concept. Non computability was the chief reason, I believe, for
the total lack of interest in optimization prior to 1947.
This was the situation prior to 1946. In place of an explicit goal or objective function, there were a large number of ad hoc
ground rules issued by those in authority to guide the selection. Without such rules, there would have been, in most cases,
an astronomical number of feasible solutions to choose from. Incidentally, Expert System software which is very much
in vogue today makes use of this ad hoc ground-rule approach. The foregoing about the early development of models took
place before the advent of the computer. More precisely, in late 1946, it was obvious that the computer was going to exist.

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Dantzig, (1963) formulates a model which satisfactorily represented the technological relations usually encountered in
practice. He decided that the ad hoc ground rules had to be discarded and replaced by an explicit objective function. He
formulated the planning problem in mathematical terms using a set of axioms. The axioms concerned the relations
between two kinds of sets: the first was the set of items being produced or consumed and the second, the set of activities
or production processes in which these items would be inputted or outputted in fixed proportions providing these
proportions are non-negative multiples of each other. The resulting system to be solved was the minimization of a linear
form subject to linear equations and inequalities. The use (at the time it was proposed) of a linear form as the objective
function to be extremized was a novel feature of the model. There was also a linear objective to be extremized. Luckily
the particular geometry used in his thesis was the one associated with the columns of the matrix instead of its rows. This
column geometry gave him the insight which led him to believe that the simplex method would be a very efficient
solution technique. He earlier had rejected the method when he viewed it in the row geometry because running around the
outside edges seemed so unpromising. He proposed the simplex method in the summer 1947. But it took nearly a year
before his colleagues and himself in the Pentagon realized just how powerful the method really was.
However, many authors has different views and to be in resonance with all these views we need to maintain and set up a
standard optimization model for production processes that will be workable in bread industries.
Dibua (2004), explains that Linear Programming model is best applied where a manufacturer wants to develop a
production schedule / target and an inventory policy that will satisfy sales demand in future period. Ideally, the schedule
and policy will enable the production company to satisfy demand and at the same time minimize the total production and
inventory costs.
Everette (2003) said that Linear programming could be used to provide uninterrupted production by optimizing
production processes for efficiency.

3.0 Research Methods

The analysis of the data were based of the integer programme and response surface models applied to the data to obtain
the maximum quantity and maximum profit in the bread production industry.

Table 1: Quantity of Long loaf (D1) Produced per month

Year Jan Feb March April May June July Aug Sep Oct Nov Dec total
2010 8875 7944 9775 8225 7225 8050 8000 7625 6552 9800 7848 7725 97644
2011 7800 8376 6050 10250 6800 7800 10225 9550 7032 7025 7608 6400 94916

2012 11625 10344 8700 9775 9275 10325 8500 7100 6384 5850 7872 8225 103975

2013 10825 10248 9350 9300 8625 8350 7800 9575 9408 6325 6840 7800 104446
2014 6675 9336 10800 9775 9950 9775 9225 10200 7488 6100 7656 9350 106330
2015 8725 7416 11200 8200 9625 9450 10250 8725 9072 8725 7896 9250 108534

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Table 2: Profit made in Long loaf (D1) per month

Year Jan Feb March April May June July Aug Sep Oct Nov Dec total

2010 177500 158880 195500 164500 144500 161000 160000 152500 131040 196000 156960 154500 1952880

2011 156000 167520 121000 205000 136000 156000 204500 191000 140640 140500 152160 128000 1898320

2012 232500 206880 174000 195500 185500 206500 170000 142000 127680 117000 157440 164500 2079500

2013 216500 204960 187000 186000 172500 167000 156000 191500 188160 126500 136800 156000 2088920

2014 133500 186720 216000 195500 199000 195500 184500 204000 149760 122000 153120 187000 2126600

2015 174500 148320 224000 164000 192500 189000 205000 174500 181440 174500 157920 185000 2170680

4.0 Response Optimization of Long Loaf Quantity

Parameters
Goal Lower Target Upper Weight Import
Yield Maximum 20000 65000 65000 1 1

Global Solution
X1 = 11625
X2 = 12096
X3 = 11200
X4 = 10725
X5 = 9950
X6 = 10550

Predicted Responses
Yield = 66146, desirability = 1.000000
Composite Desirability = 1.000000

Contour Plots of Yield

X2*X1 X3*X1 X4*X1 X5*X1
12000
10500
Yield
10000
9000
9000 < 48000
9000
7500
9000 8000 48000 50000
6000 8000 7000 50000 52000
0 0 0 0 0 0 0 0 0 0
00
0 0 0 0 0
00
0 00 00 00
0 52000 54000
70 90 10 70 90 11 70 90 11 70 90 11
1 54000 56000
X6*X1 X3*X2 X4*X2 X5*X2
10000 10500 56000 58000
10000 9000
9000 9000 > 58000
9000 8000
8000 7500
8000 7000 Hold Values
0 0 0 00 00 0 00 0 0 0 0 0 X1 9150
7 00 9 00 00 60 90 00 60 00 00 00 00 00
11 12 9 12 6 9 12 X2 9012
X6*X2 X4*X3 X5*X3 X6*X3
X3 8625
10000 10000 10000
9000 X4 9275
9000 9000
9000 8000 X5 8375
8000 8000
8000 7000 X6 8950
00 00 00
0 00 00 00 00 00 00 00 00 50
0
60 90 12 75 90 105 75 90 105 75 90 10
X5*X4 X6*X4 X6*X5
10000 10000
9000
9000 9000
8000
8000 8000
7000
0 00 00 0 0 0 00 00 00
8 00 90 00 8 00 9 00 00 70 80 90
1 10

Figure 1: Contour Plots of Yield of Long Loaf Quantity

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 International Journal of Advanced Engineering Research and Technology (IJAERT) 9
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Surface Plots of Yield

Hold Values
X1 9150
60000 57500
Yield 55000 Yield 55000 Yield
56000
54000 Yield
56000
54000
X2 9012
52500
52000 52000
50000
9000
12000 50000 10000 50000 10000 50000 9500
8500
X3 8625
X2 8000 X3 9000 X4 X5
8000 10000 8000 10000 8000 10000 8000 8000 10000 7500

X1
12000
6000
X1
12000
6000
X1
12000
X1
12000 X4 9275
X5 8375
X6 8950
60000 57500 57500
56000
55000 55000
Yield 54000 Yield 55000 Yield Yield
52000 52500 52500
50000 50000 50000 9500
50000 10000 10000 10000
9000 8500
8000 X6 8000 X3 9000 X4 7500 X5
8000 10000 6000 6000 8000 6000
9000 6000 9000 9000
12000 12000 12000 12000
X1 X2 X2 X2

57500 57500 57500

56000
55000 55000 55000
Yield Yield 54000 Yield Yield
52500 52000 52500 52500
50000 10000 50000 10000 50000 9500 50000 10000
9000 8500 9000
X6 9000 X4 X5 X6
6000 8000 6000 8000 6000 7500 6000 8000
9000 8000 10000 8000 10000 8000 10000
12000
X2 X3 X3 X3

56000 56000 56000

Yield 54000 Yield 54000 Yield 54000
52000 52000 52000
9500 10000 10000
50000 8500 50000 9000 50000 9000
X5 X6 X6
8000 9000 7500 8000 9000 8000 7500 8500 8000
10000 10000 X5 9500
X4 X4

Figure 2: Surface Plots of Yield of Long Loaf Quantity

Optimal X1 X2 X3 X4 X5 X6
D High 11625.0 12096.0 11200.0 10725.0 9950.0 10550.0
Cur [11625.0] [12096.0] [11200.0] [10725.0] [9950.0] [10550.0]
1.0000 Low 6675.0 5928.0 6050.0 7825.0 6800.0 7350.0

Composite
Desirability
1.0000

Yield
Maximum
y = 6.615E+04
d = 1.0000

Figure 3: Optimization Plot of Long Loaf Quantity

INTEGER PROGRAMMING B&B TREE

Title: Quantity of Long Bread per month
Subproblem N10
Defining branches:
Objective value, z= 69298.00 Branching variable: x?

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The results were developed from the Response surface modelling and Integer programming modelling. The models
develops the optimum production quantity of the long loaf of bread in the case study company. The application of
response surface model reveals that the optimum production quantity of the long loaf bread is 66,146 quantity of the loaf
in monthly bases. However, the application of the integer programming model shows the optimum monthly production
quantity of 69, 298.00 units of the long loaf product.

5.0 Response Optimization of Long Loaf Profitability

Parameters
Goal Lower Target Upper Weight Import
Monthly Prof Maximum 80000 124000 124000 1 1

Global Solution
X1 = 232500
X2 = 241920
X3 = 224000
X4 = 214500
X5 = 199000
X6 = 211000

Predicted Responses
Monthly Prof = 1322920, desirability = 1.000000
Composite Desirability = 1.000000

Optimal X1 X2 X3 X4 X5 X6
D High 232500.0 241920.0 224000.0 214500.0 199000.0 211000.0
Cur [232500.0] [241920.0] [224000.0] [214500.0] [199000.0] [211000.0]
1.0000 Low 133500.0 118560.0 121000.0 156500.0 136000.0 147000.0

Composite
Desirability
1.0000

Monthly
Maximum
y = 1.323E+06
d = 1.0000

Figure 4: Optimization Plot

INTEGER PROGRAMMING B&B TREE

Title: Profit of Long Bread per month
Subproblem N10

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Defining branches:
Objective value, z= 1443737.00 Branching variable: x?

The analysis and evaluation of the long bread product was evaluate using response surface algorithm and Integer
programming algorithm. The results reveals that the optimum profit made in long bread over any given month using
response surface algorithm is 1,322,920, while the optimum profit made in long bread over any given month using
integer programming algorithm is 1,443,737.00. The response surface plot also shows the optimum plot and the current
independent variable used to establish the optimum profit of the profit made in the long bread over any given month. It
also develops the design new points for the independent variables.

Discussion
The discussion is based on the data collected, analysis of the data, the results developed, the tables and the charts
developed in the research work. The research models applied in the cause of this research were Integer programming
algorithm, Response Surface Algorithm and the Linear Programming Algorithm. The various optimum values of the
optimization models for the aforementioned company were summarized in tables 4.1 and 4.2. I this research work, the
researcher develops two types of optimization method. Firstly is the optimization of the production quantity over any
given month, while the second method is the optimization of the profitability in the product over any given month. The
researcher considers three major products, namely; long loaf, giant loaf and small loaf of bread in the case study company
In Long loaf product, the results were developed from the Response surface modelling and Integer programming
modelling. The models develops the optimum production quantity of the long loaf of bread in the case study company.
The application of response surface model reveals that the optimum production quantity of the long loaf bread is 66,146
(units) quantity of the loaf in monthly bases. However, the application of the integer programming model shows the
optimum monthly production quantity of 69, 298.00 units of the long loaf product. The contour plot and the surface plot in
figure 4.1 and figure 4.2 respectively showed the impact of the monthly variations in the variables for the six years of
study. The response surface algorithm however develops new design points for the dependent variables and also develops
the analysis of variance (ANOVA) for the dependent and independent variables.
However, in profitability analysis of the long loaf product, the results revealed the optimum profit made in long bread
over any given month using response surface algorithm is 1,322,920, while the optimum profit made in long bread over
any given month using integer programming algorithm is 1,443,737.00. The response surface plot also shows the
optimum plot and the current independent variable used to establish the optimum profit of the profit made in the long
bread over any given month. It also develops the design new points for the independent variables. However, response
surface also observed the analysis of variance (ANOVA) in both dependent and independent variables
Finally, the results of the optimization techniques applied in the case company has been revealed and the researcher was
able to develop the results of the optimum monthly production quantity and optimum monthly profitability of each of the
products under investigation. The results developed has yield a great influence to the aforementioned company. Based on

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Volume 5 Issue 1, January 2017, ISSN No.: 2348 8190

the discussions, the researcher has made a tremendous contribution to academics and especially to the case study
company.

5.1 Conclusion
The application of the optimization models for optimum production quantity and optimum profitability of the product in
the small-scale industry for productive and competitive production is very essential. Having observed that the profitability
of the long loaf is 1,322,920.00, using response surface algorithm. Using integer programming, the optimum profit of
the long loaf is 1,443,737.00 However, it was observed that the optimum quantity of the long loaf is 66,146.00 units
using response surface algorithm. Using integer programming, the optimum profit of the long loaf is 69, 298.00 units. The
results developed have given an edge and has tremendously establish a standard for the aforementioned company and
especially for optimization of productivity and profitability in the research under investigation.

References
[1] Dantzig, G., 1993, Computational Algorithm of the Revised Simplex Methods, RAND Memorandum RM-1266

[2] Dantzig,G.B.(1963).Linear Programming and Extensions, Princeton university Press, Princeton, New York.

[3] Dibua E. C. (2004). Quantitative Approach to Decision making in Organizations, Paulic Publications Ltd. Enugu,

Nigeria.

[4] Everette Adams (2003). Production and Operation Management, Prentice Hall of India.

[5] Kotler, P., 1993, Marketing Management: Analysis, Planning, Implementation and Control, Prentice-Hall of India

Private Limited, New Delhi

[6] Kurtz, D et al, 1992, Principles of Management, McGraw-Hill Inc., USA

[7] Lucey, T., 2002, Quantitative Techniques, Book power, London

[8] Murugan, N and S. Manivel, 2009, Profit Planning of an NGO run Enterprises using Linear Programming

Approach, International Research Journal of Finance and Economics, Issue 23, 443-454

[9] Sargeaunt, M, 1965, Operation Research An introduction, Macmillan New York

[10] Taha, H., 2008, Operations Research: An Introduction, 110001 PHI Learning Private Limited, New Delhi.

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