CASErev

CASE: XYZ PRODUCTS COMPANY

BORROMEO, MARY GRACE
IMPERIO, MARK
LOPEZ, LAWRENCE ZYRICK
POTESTAD, MARY GRACE
SALVATUS, MATTHEW
SHIMIZU, MARIAN
SEPTEMBER 30, 2013

CASE: XYZ PRODUCTS COMPANY
XYZ Products Company is a supplier of gizmos for a large computer manufacturer located a few miles away. The company produces three different models of gizmos in production runs ranging, from 100 to 300 units.
Operation Number and Name
Operation Times (minutes)
Setup Times (minutes)
- Milling for Z
20
60
1 Lathe
50
30
2 Mod. 14 drill
15
5
3 Mod. 14 drill
40
5
4 Assembly step 1
50

Assembly step 2
45

Assembly step 3 50

5 Inspection 30

6 Paint 30
20
7 Oven 50

8 Packing
5

The production flow of models X and Y is shown in Case Exhibit 1. Model Z requires milling as its first step, but otherwise follows the same the flow pattern as X and Y. Skids can hold up to 20 gizmos at a time. Approximate processing times per unit by operation number and equipment setup times are shown in the following table:

CASE EXHIBIT 1
Gizmo Production Flow
The demand for gizmos from the computer company ranges 125 and 175 per month, equally divided among X, Y, and Z. Subassembly builds up inventory early in the month to make certain that a buffer stock is always available. Raw materials and purchased parts for subassemblies each constitute 40% of the manufacturing cost of a gizmo. Both categories of parts are multiple sourced from about 80 vendors and are delivered at random times. (Gizmos have 40 different part numbers.)
Some other information: scrap rates are about 10% at each operation, inventory turns twice yearly, employees are paid on day rate, employee turnover is 25% per year, and net profit from operations is steady at 5% per year. Maintenance is performed as needed.
The manager of XYZ has been contemplating installing a MRP system to help control inventories and “to keep the skids filled”. (It is his view that two days of work in front of a workstation motivates the worker to produce at top speed.) He is also planning to add three inspectors to clean up the quality problem. Further, he is thinking about setting up a rework line to speed up repairs. While he is pleased with the high utilization of most of his equipment and labor, he is concerned about the idle time of his milling machine. Finally, he has asked his industrial engineering department to look into a high-rise shelving to store parts coming off Machine 4.

STEPS ON HOW TO SOLVE THE CASE:
I. Time Context
Without the date being specified, the case analysts’ assumed that the problem occurred in the present date, September 30, 2013.
II. Viewpoint The production manager
III. Statement of the Problem How can the production manager reduce production cost at the same time ensure efficiency?
IV. Objectives
Short Range Objectives:
To lessen scrap rates
To diminish manufacturing cost
To reduce 80 vendors who deliver the 40 different parts of the gizmo
To add inspectors to clean up quality problem
Long Range Objectives:
To reduce employee turnover
To lower the buffer stock
To increase the net profit
V. Areas of Consideration/SWOT Analysis
Strengths
The customer is located a few miles away.
XYZ Products Company is able to meet the delivery to their customer, a large computer manufacturer.
High utilization of most of equipment and labor
Weaknesses
25% employee turnover per year
The net profit is 5% steady.
40% manufacturing cost
10% scrap rates
Repair
Quality production
Idle time of milling machine
Opportunity
The XYZ Company has a great demand because of the advent of technology.
Threat
The changing of the technology
Employees may be attracted and seek out jobs to other organizations.

VI. Alternative Courses of Action
A.C.A. #1
Implement the Manufacturing Resources Planning II (MRPII) System.
Advantages:
1. The ability to keep track of material requirements
2. The ability to evaluate capacity requirements
3. The production will be limit and will meet the demand
-Too much buffer stock will be lower.
4. A means of allocating production time
5. The ability to easily determine inventory usage by back flushing.
6. Gives manager the ability to ask “what if” questions, and provided them with a more precise decision making tool.
Disadvantages:
1. Costly to implement
2. Training program for employees
3. Understanding of the employees about the system
4. Takes a long time to plan and implement the system

A.C.A #2
Decrease the number of suppliers who can provide the same number of parts.
Advantage:
1. Reduced number of suppliers to keep track of their delivery activities.
2. Parts get to arrive in the facility at the same time.
3. Operating expenses will slightly go down.
Disadvantage:
1. This will break ties with current suppliers.
2. It’s going to take time to look for new suppliers and negotiate with them.
A.C.A #3 Rearrange the layout of the entire facility.
Advantage:
1. A more efficient new facility layout can help decrease operating expenses.
2. Allotted space will be maximized through effective planning.
Disadvantage:
1. Changing the entire layout will require a lot of funding. These funds can be used in other improvements of the business, eg. Personnel training and development, research, etc.
2. Part of the facility will temporarily be unavailable during the renovation.
VII. Recommendation The case study analysts’ recommendation is A.C.A #1, to implement the Manufacturing Resources Planning II (MRPII) system as the best way to clean up the quality problem. It is also a big help in terms of controlling inventories and to “keep the skids filled”. Further, we rely on that MRPII system can minimize scrap rates and will make the production more efficient. And lastly, if the MRP System is already implemented the company can increase their profit from 5% up.
VIII. Plan of Action