Rochester

Manufacturing’s
Process Decision
- Gabriella Lisa Danica
- Kafian Dimas Triyoga
- Vetmi Cesaria Oka
- Michelle Ferdinand
 Case Summary
RMC considers to change its production from
traditional numerically controlled machines to a
flexible manufacturing system (FMS).

A system is flexible because both the material-

handling devices and the machines themselves
are controlled by easily changed electronic
signals (computer programs).
Operators simply load new programs, as
necessary, to produce different products.
 • With that decision, RMC believes there are benefits, which are:

Faster production
(7-10 days into 1-2)

Fewer machines (15 into 4 machines) Fewer personnel (15 into 3) Smaller floor space (20,000 into
6,000 feet square)

Thus resulted in $300,000 of annual labor saving

+ one-time $750,000 savings of inventory reduction
Problem Statement
‘FMS system’
Prepare a case by conservative plant
1 manager for maintaining the status Cons
quo until the result are more obvious

Prepare the case for an optimistic

2 sales manager that you should
move ahead with the FMC now
Pro

As a production manager for RMC, Cost-Benefit

3 what do you recommend? Why?
Appraisal
 Conservative
Cons Financial Target
Unmeet Investment Standard
Plant
Manager
1. Unmeet return View
Layoff on investment
standard (<=15%)
Responsibility
2. Unmeet payback
period Standard
(>5 years)

Year Saving 3M
1 1,05 M 1,95M
Ethical dilemma & Sunk cost
Payback
2 300.000 1,65M High risk responsibility
1. High Layoff cost 3 300.000 1,35M
One of the manager KPI
2. Potential conflict with Period 4 300.000 1,05M is to meet the target of the firm.
labor union
3. High training cost (if the Calcu- 5 300.000 0,75M Thus if the manager can’t meet
labor allocated lation 6 300.000 0,45M The ROI and payback period
to another division 7 300.000 0,15M
target. The manager should be
rather than layoff). responsible
8 300.000 (7,5 years)
for it.
 Optimistic

Pro
Sales
Manager
View
Case After
Theory
Before 3 
4 1-2 C
Machine : 15 4 A
P
3 A
+
Worker : 15
a system that uses The use of

FMS

Process Control
C electronic signals centralized
from a centralized computer to
Space: 20.000 6.000 I computer to control a physical
automate process
T production and
Working Days: 7-10 days 1-2 y material flow

“By choosing the new system, it ease the manager’s task with the high efficiency on production
scheduling, number of man power, and operational maintenance for it is a real-time monitoring.”
 Optimistic
Sales
Pro
Case Increase
Manager
View
Theory

OM Rules

Mapping
Value-stream
Quality, a process that helps
The case stated that the ROI is Reduce Cost, manager understand
10% - 15% annually while the Improve how to add value in
company expect to be over 15% overall value the flow of material
and information
with the payback less than 5 through the entire
years. production process.

Analysis
Assumption: 10-15% ROI is only
If using Value stream mapping, the
based on cost saving.
manager could improve the value
•  ROI from labor saving = = 10%
of the product. Whereas, higher
•   ROI from cost saving (depends on the machine lifetime) = product value could attract more
, If 5 years = 15%, 10 year = 12,5% customer or potentially increase
the price (/profit margin).
 Pro - Cons -
Appraisal
Benefit Cost
Strength Weakness
Operational Improvement
+ Production Capacity
+ Flexibility, + Faster Layoff . Improved value
- Cost reduction
. Uncertainty
. Layoff issue
delivery Ethical Layoff - Adaptability
Issue cost

Opportunity
Threats
. Increasing Sales
. Competition
. Company brand
. Customer
Implication+ Customer value . Segmenting new expectation
+ Potential customer market improvement
proposition, + Company (flexibility)
handling capability
Branding, + New market If not being layoff
Wages Training
cost cost SO: Change to FMS system to improve
competitive advantage
Result ST: Change to FMS system to be
sustainable in the industry
+ Competitive
+ Financial profitability
advantage Implication WO: Transfer the worker to sales
department
*FMS enables the operators to simply load
new program and produce different product. A lot of Sunk Cost
WT: minimize the potential risk
They can produce low volume but high variety
CONCLUSION
The benefit of adopting FMS is outweigh the cost
ROI is part of managers’ responsibility, we believe that by
changing the system into a FMS will give more benefits to
the company by increasing the quality of the product and Also FMS will ease the managers job by the less control
improve delivery time that will give positive impact to the and direction with the help of technology.
customer value preposition, and will lead to higher
profitability.

Recommendation
Exploit the excess Transfer the worker to
capacity through rising sales department with
Change to FMS system
sales person and target appropriate in house
new market training