Question

Case Study #1 Written Assignment

Your name

MT435 Operations Management

Kaplan University

Date

 

 

 

 

Introduction

 

Question 1

Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions):

  1. Cost
  2. a) Cost or Production:

 

  1. b) Economies of Scale:

 

  1. c) Cost of Raw Materials Sitting Idle in the Warehouse:

 

  1. d) Cost of Finished Goods Sitting Idle in the Warehouse:

 

  1. Speed of manufacturing process from order to finished product.

 

  1. Flexibility in filling order(s)

 

  1. Technology

 

  1. Capacity and facilities

 

  1. Service to customers (what types of services would an anchor company provide to marine wholesalers?

Question 2

There are many ways that mushroom/bell anchors may be manufactured. Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs.  Analysis of the information below will help determine which process has the lowest break-even point (this validates the process is more cost effective).

 

For each process the following fixed costs and variable costs are identified below:

 

Anchor and Process Process A Process B
Sale price per anchor $45.00 $45.00
Total Fixed cost $650,000.00 $950,000.00
Variable cost per anchor $36.00 $29.99

 

Related Paper :Operation Management

Based on the information in the table above complete the chart below:

 

Anchor and Process Process A Process B
(a) Fixed costs per anchor
(b) The total number of anchors to attain break–even point for Process A and Process B

 

 

(c) Based on your calculations which Process (A or B) that you would recommend for adoption (you can select only one).  Please make sure to explain how you arrived at your conclusion.

 

Conclusion

 

Case Study #1 Albatross Anchor Proposal

Your name

MT435 Operations Management

Kaplan University

Date

 

 

Introduction

KU Consulting is a large international consulting firm that has been in operation for over a decade. The firm provides consulting services at the local and international levels. Having been in the industry for over a decade, the firm has acquired critical skills and knowledge concerning the manufacturing industry. The firm has been able to utilize the skills and knowledge gained in the industry to helping small businesses and manufacturing firms to counter competition from large international firms and to improve their market presence. Over the years, Albatross Anchor has experienced exponential growth. However, this has resulted to a number of operational challenges which must be addressed if the firm is to remain competitive in the future. This proposal is tendered to Albatross Anchor to assist in process improvement in a variety of manufacturing areas such as technology, cost improvements, storage, and other areas as well as a recommendation of an appropriate manufacturing process.

Question 1

Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions):

  1. Cost

  2. a) Cost or Production:

The main challenge in keeping the costs down relates to operations inefficiencies. There is need to continually improve operational efficiency in order for the firm to remain competitive. Albatross Anchor can improve operational efficiency by implementing real time process feedback. Real time process feedback enables corrections in errors to be made as they arise rather than after they lead to problems. Operator screens can be used to monitor the entire production system. This can reduce downtimes and improve production efficiencies at the firm. If the production inefficiencies are high, Albatross Anchor should consider re-engineering the production systems. This may involve implementing structural changes in the production process such adopting a product-based structure instead of a functional structure and revamping the value chain (Naga, 2011).

  1. b) Economies of Scale:

Economies of scale refer to the cost advantages that a firm may experience as it increases in size or as the scale of its production increases. According to Hill & Jones (2009), the cost per unit of goods produced will reduce as the scale of production increases. The main reason behind this is that the firm’s fixed costs will tend to remain relatively the same with additional units of output. In addition, since the firm will obtain raw materials and other production inputs in bulk, it can be able to obtain good price discounts thus lowering the cost of raw materials. Currently, production at Albatross Anchors is only possible through small batches due to the type of machinery in use and safety issues. This has greatly hindered the firm from enjoyed economies of scale. The firm must devise ways of improving production so that it can enjoy economies of large scale production. For instance, though acquisition of new production equipment, the firm can be able to reduce the current lead time of bulk orders from three to one week.

  1. c) Cost of Raw Materials Sitting Idle in the Warehouse:

There is limited space for holding raw materials at the firm. In addition, the cost of holding the raw materials may be high. Albatross Anchor should adopt just-in-time (JIT) management philosophy that is commonly used by large organizations. This management philosophy advocates for demand driven production (Cheng, Podolsky, & Jarvis, 1996). In other words, the firm should purchase the right raw materials at the right quantity, right place and also time. In summary, JIT philosophy calls for minimum stock of raw materials, work in progress, and stock of finished goods.

  1. d) Cost of Finished Goods Sitting Idle in the Warehouse:

In order to reduce the cost of finished goods, just-in-time production can also be applied. JIT philosophy advocates for demand driven production, meaning that the firm should produce goods as per projected or actual demand. This can reduce the amount of finished goods at the warehouse.

  1. Speed of manufacturing process from order to finished product.

There is need to focus on the speed of the manufacturing process. Currently, both type of anchors are produced in the same area, yet they undergo different manufacturing process. In order to improve the speed of manufacturing process, there is need to separate the manufacturing area for both anchors. This will eliminate the wasted time during a switch from one manufacturing process to another. The speed of manufacturing process can also be improved by acquisition of modern manufacturing equipment that are fast and cost effective.

  1. Flexibility in filling order(s)

Albatross Anchor is inflexible in filling orders. This is caused by the lengthy lead time experienced in production of a single batch. In addition, there is a lot of time wasted in shifting from one production process to another.

  1. Technology

Albatross Anchor employs outdated technology in the manufacture of the anchors. Over the recent years, the firm has experienced growth driven by market demand. Application of modern technologies can enable the firm improve efficiency. For instance, Materials Requirement Planning (MRP) systems can be important in helping the firm integrate the production process, sourcing of materials, quality checks, and sales into a single seamless process. MRP is a computer-based production system that can be applied in inventory control and production planning (Lussier, 2008). This system can help the firm maintain optimum inventory levels of raw materials and finished products.

  1. Capacity and facilities

There is need for a new facility to handle production of one type of anchor. Separation of the two manufacturing processes can help reduce inefficiencies. The floor plan arrangement is also causing inefficiencies. The floor plan should be arranged in such a way that the raw materials are received on one end and undergo through the process to come out as finished products on the final end. The manufacturing area should be pushed to the southern end of the building. Once raw materials are received, they should be kept where the Foundry is currently stationed. The foundry should be moved to the manufacturing area. Shipping should be conducted at the southern end of the building.

  1. Service to customers (what types of services would an anchor company provide to marine wholesalers?

Albatross Anchor can provide its customers with product warranties for specified periods of time. This can lead to more purchases of the firm’s products. The firm can also provide marine wholesalers with financial services. For instance, it can help them acquire the products on credit with a good repayment plan.

Question 2

There are many ways that mushroom/bell anchors may be manufactured. Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs.  Analysis of the information below will help determine which process has the lowest break-even point (this validates the process is more cost effective).

 

For each process the following fixed costs and variable costs are identified below:

 

Anchor and Process Process A Process B
Sale price per anchor $45.00 $45.00
Total Fixed cost $650,000.00 $950,000.00
Variable cost per anchor $36.00 $29.99

 

 

Based on the information in the table above complete the chart below:

 

Anchor and Process Process A Process B
(a) Fixed costs per anchor $90 $15
(b) The total number of anchors to attain break–even point for Process A and Process B        72,222 63,291

 

 

(c) Based on your calculations which Process (A or B) that you would recommend for adoption (you can select only one).  Please make sure to explain how you arrived at your conclusion.

From my calculations, I would recommend Process B. This is because it has a lower break-even point (the firm will produce fewer anchors in Process B to start making profit than in Process A). In addition, Process B ($15 per unit) has low fixed costs per unit compared to Process A ($90 per unit).

Conclusion

In conclusion, there is need for Albatross Anchor to implement the outlined changes in order to improve the production process. There is a greater need to improve the speed of the production process which will lead to reduced lead time. Customers are keen on quality of products and their availability. If customers do not find the firm’s product at the purchase point, they are most likely to buy those of competitors. With improved production system, the firm can be able to implement just-in-time management philosophy.

References

Cheng, T., Podolsky, S., & Jarvis, P. (1996). Just-in-time manufacturing: An introduction. London, Angleterre: Chapman and Hall.

Dolllery, B., & Wallis, J. (n.d.). The .

Hill, C., & Jones, G. R. (2009). Strategic managment theory: an integrated approach. Boston, MA: Houghton Mifflin.

Lussier, R. N. (2008). Management fundamentals: concepts, applications, skill development. Mason, OH: South-Western/Cengage Learning.

Naga, A. (2011). Strategic Management. India: Vikas Publishing House.

 

 

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