Case study: Trans-European Plastics.

Trans-European Plastics (TEP) is one of Europe’s largest manufacturers of plastic household items. Its French factory makes a range of over 500 products that are sold to wholesaler and large retailers throughout Europe. The company dispatches orders within 24 hours of receipts using an international carrier. All consumers would expect received their requirements in full within one week. The manufacturing operation is based on batch production, employing 24 large injection molding machines. Mould changes (‘set-ups’) take on average three hours, at an estimated cost of € 500 per set-up. TEP had faced declining in delivery reliability, increased levels of finished goods inventory and failing productivity. Failing productivity apparently resulting from ‘split-batches’ where only part of a planned production batch is produces to overcome immediate shortages. Because of current high demand for many products, the backlog of work for planned stock replenishment currently averages two weeks and so all factory orders must be planned far in advance. Recently, however, to minimize the total cost of set-ups and to maximize capacity utilization, all products are planned for a minimum production run of 20 hours. The factory operates on three seven-hour shift, Monday to Friday: 105 hours per week, for 50 weeks per year. Regular overtime, typically 15 hours on a Saturday, has been worked most of the last years. Sunday is never used for production, allowing access to machines for routines and major overhauls.

Table 1: Details of a representative of 20 TEP products

Product reference number Description Unit manuf’g variables (Euro) Last 12 mths’ sales (000s) Physical inventory 2 Jan (000s) Standard moulding rate (items/hour)
016GH Storage bin large 2.40 10 0 240
033KN Storage jar + lid 3.60 60 6 200
041GH 10 litre bucket 0.75 2200 360 300
062GD Grecian-style pot 4.50 40 15 180
080BR Bathroom mirror 7.50 5 6 250
101KN 1 litre jug 0.90 100 22 600
126KN Pack (10) bag clips