Cases on production planning

Rochester Manufacturing’s Process Decision

About the case:

The company plans to introduce a flexible manufacturing system (FMS) with an expenditure of
$3 million to handle about 30% of RMC’s work. The existing traditional numerically controlled
machines have been operating in a high-variety, low volume manner with machine utilization at
about 10%. The idea is to consolidate machines from 15 to 4, with labour force from 15 to as
low as 3 & floor space required from 20,000 sq. ft. to 6,000.

With FMS, the company expects throughput to go down from 7 to 10 days to 1 to 2, yield one -
time $750,000 saving with inventory reduction & annual labour savings of 300,000. The project‘s
return on investment is expected to be around 10 to 15% per year which is below the
expectation of an over 15% return per year & sub 5 year payback period.

Discussion Questions:

1. Your recommendation as a production manager for RMC. The reason behind the
recommendation.
As the production Manager, we would suggest going forward with the FMS.
FMS has a lot of advantages like:
1) It has computer numerical machines and would be more systematized.
2) Machine utilization would go up extensively by 20 % on 10 percent initially.
3) Labour utilization would go up with 80 % reduction in labour force and decrease the
costs on labour.
4)14000 Sq ft of area would be freed up, which could be used for expansion, setting up
customized newer machinery and reduce rents or operating cost.
5) The period of throughput shall be reduced by 7 days average(8.5 days avg to 1.5
days avg.)
6) Inventory reduction would lead to savings of 750,000.
Though the Investment is 3M which shall take 8-10 years for recovery on the rate of ROI
expected which is lower than the expected 5 years by the management but the effective
investment can be considered to be (3,000,000-750,000)=2,250,000. The startup and
transition costs would also be incurred. As,a production manager, we shall go with FMS
for process optimization in spite of it being costly.

2. Prepare a case by a conservative plant manager for maintaining the status quo
until the returns are more obvious.
As a conservative plant manager, we would not favour implementation of FMS as the
ROI is much less than expected 15% and hence the payback period would be larger
than the acceptable range 5 years.Moreover these projections of return are done without
including the transition and setup costs which shall further increase the investment and
make the project expensive and payback period even longer.
 Hence the estimates and projections show that this is a very capital intensive project and
the ROI is low.

3. Prepare the case for an optimistic sales manager that you should move ahead
with the FMS now.
Going forward with FMS:
Investment = 3,000,000
One time saving= 750,000
Labour cost would decrease. (15 to 3: 80 % reduction)
Lower machine run cost : (15 to 4: 73.33% reduction)
Space use: 14,000 sq ft extra available to optimize.
Expected ROI: 10% - 15%
As an Optimistic Sales manager, FMS could be drastically used to reduce machines
required and floor space optimization. The extra space could be used for expansion or
increase production as the throughput time shall also drastically go down. Hence, with
more production, We can reach the breakeven point and focus on increasing our market
share by targeting higher sales and as the FMS process is more systemized, we could
focus on certain product kinds and increase ROI.

Process Strategy at Wheeled Coach

About the case:

Wheeled Coach currently works four 10 hour days each week with 350 workers to produce
custom-made ambulances. They are required to produce over 20 ambulances each week within
its focused factory with work cells for every major module on assembly line including aluminium
bodies, electrical wiring harnesses, interior cabinets, windows, paint & upholstery. Ford truck
chassis is mounted with an aluminium body, followed by a custom paint job joins the 7-day long
assembly line. One first day electrical wiring is installed, on day 2, the unit cabinet is installed,
then to window & lighting station, on to upholstery & finally to inspection & road testing.

Discussion Questions:

1. Why do you think major auto manufacturers do not build ambulances?

Ambulance building is process focused production which requires high variety and low
volume of product. Process focused production can be called specialised production as
requests are organised around specific activities and processes. In addition, process
focused needs general purpose equipment and skilled personnel for specialisation.
Planning and scheduling are challenges for process focused productions process and
non-regular purchasing gives rise to high costs and low equipment’s. because of these,
major auto manufacturers do not choose process focused product
 ion, they do repetitive focused production that is organised as assembly lines and
characterized by modules.

2. What is an alternative process strategy for the assembly line that Wheeled Coach
currently uses?
Wheeled coach needs that more than 20 ambulances roll off the assembly line each
week, making the process design a continuing challenge. There are 6 assembly lines in
the company, in which ambulances move forward to the next workstation each day.
The alternative process of building the custom products are arranging different parts of
the ambulance at the workstation and get it assembled as the final output. Testing can
be done at the later stage.

3. Why is it more efficient for the work cells to prepare “modules” and deliver them
to the assembly line than it would be to produce the component on the line?

Wheeled coach’s response has been to build a focused factory, the established work
cells for every major module feeding the assembly line.
Labour standards drive the schedule so that every work cell feeds the assembly line on
schedule, just in time for installations. Each work cell driver's its respective module to the
appropriate position on the assembly line. Work cell provides rapidity and regularity, so it
is more efficient.

4. How does Wheeled Coach manage the tasks to be performed at each workstation?

Labour standards drive the schedule so that every work cell feeds the assembly line on
schedule, just in time for installations. First day, electrical components are installed, then
the vehicle's body structure is mounted, and it is prepared with other implements
respectively. Finally, customized and inspected to be ready for the road testing.

Facility layout at Wheeled Coach

About the case:

With the expansion of the company to 350 employees, the company is forced to have different
cells in different buildings including painting work, aluminium fabrication, & body installation. The
company has failed to have its facility designed from scratch owing to marginally higher material
handling costs. Aluminium cutting, body fabrication, & body installation are adjacent while the
vehicle needs to be driven for paint job & final assembly. Cells can accommodate changes in
product mix & volume & are small & movable with many workbenches & staging racks borne on
wheels. Assembly line balancing is one of the key problems at Wheeled Coach where
ambulances must move on right schedule through different cells. Balancing workers is important
as too many ends up running into each other & too few can’t finish an ambulance in seven days.

Discussion Questions:

1. What analytic techniques are available to help a company like Wheeled Coach deal with
layout problems?

Fuzzy Analytic Hierarchy Process

Analytic Hierarchy Process is a technique which takes into account both Quantitative
and Qualitative goals which are often in conflict with each other. The regular AHP
method needs crisp judgments. However, the complexity and uncertainty involved in
real-world problems make it difficult, a decision-maker may feel more confident to
provide fuzzy judgments than clear comparisons. It is easier to make judgments on
interval scales rather on a fixed value scale. Thus, this method is more effective to help
the decision-makers take the decision.
Computer-Aided Simulation
Computer-aided simulation can help the organization to study the behaviour of real-
world manufacturing systems to gain a better understanding of underlying problems. It
has resulted in a greater emphasis on automation to improve productivity and quality.
The cost of equipment and facilities can be very large, thus the relatively small
expenditure on simulation can reduce the risk of a failed implementation. Therefore, a
simulation model is an easier way to a trial and error approach. We can build up models
to represent real-life scenarios so that we can identify bottlenecks, enhance system
performance in terms of productivity, queues, resource utilization, cycle times and lead
times. Here we can simulate different layout design and calculate the cost incurred in
different design and also identify roadblocks and then choose the right method.

2. What suggestions would you make to Bob Collins about the layout?
Making of An Ambulance requires a lot of customization as per the client requirement.
Having a cellular layout does help in allowing that customization to happen as compared
to the Assembly line layout which is better for a job which requires very less efficient.
Moreover, the Assembly Line layout is a lot cost-effective because the cost saved on
material handling and working inventory management. While the Cellular layout offers
the most flexibility for customization, Bob Collins should opt for a hybrid approach with
different components custom made in different cells and then assembled on to the unit.
This will allow him to cut down on a large amount on the cost instead of moving the
 Ambulance to be driven across the street for different jobs to be completed. Also
reducing the workload at the workstation will reduce the assembly line balancing
problem.

3. How would you measure the efficiency of this layout?

Efficiency = no of Product completed x standard / no of employees x hours working on a
product (Subtract breaks)
The efficiency of a production layout depends on how well the machines, services,
production facilities and employee's amenities are located in the plant. This can be
measured by calculating the resources spent on each unit produced. What percentage
of the costs are the working inventory costs and how much constitutes the material
handling cost.