Part 1

You are the CEO of a start up manufacturing company. The company makes high quality upholstered furniture. Your target market is young professionals.

Your first objective is to locate a supplier of the fabric used on to upholster the furniture. There are two potential suppliers that make fabric suitable for your operation.

Supplier 1. This supplier is located in North Carolina and has been making cloth for over 100 years. Because it is an old company, change comes to it very slowly. It only produces a limited line of upholstery grade cloth. Orders for special designs take six months to ship from the factory. However, pricing for both standard and special cloth is well within your budget. The quality of the fabric produced by this supplier is considered normal for the industry. The firm lacks the technical expertise to produce the newest and latest designs, especially in the specialty fabric market.

Supplier 2. This supplier is a new company located in South Korea. The company offers a full line of upholstery grade fabric. Specials are not a problem and are shipped within 3 weeks of receipt of order. Pricing, however, is almost double the price of cloth from supplier #1. The quality of the product is considered the best in the industry. The firm has the latest technical expertise and can produce any design the customer requires.

Your second objective is to prepare a forecast for the next 12 months. It is important that your forecast matches up with the capacity of your manufacturing facility. On average the plant operates 8 hours per day 5 days a week with a two week shut down in July for annual maintenance. On average it takes 1.25 hours to make a piece of upholstered furniture. The company currently has 5 upholstering machines. A steady rate of manufacturing throughout the year is critical to the operation of the facility. Sales of upholstered furniture are seasonal with 70% of sales occurring in the winter and spring. 605 of annual sales are upholstered chairs. Sales are expected to by 7,800 units annually.
Your final objective is to assure that everything you need to make the product is there when it is needed. To accomplish this you decided to use MRP. A multilevel bill of material for a basic upholstered chair is as follows:

Project Assignment

Your assignment is to prepare a written presentation to the board of directors of the company. The presentation must address in detail how you plan to address the following:

1. Vendor Selection: Which vendor(s) would you select and what is your justification for the selection?

2. Forecast: Make a sales forecast by month taking into consideration the seasonality of the upholstered furniture sales.

3. Capacity: Does the factory have enough upholstery machines to meet the expected demand? What would be the monthly production rate?

4. Bottleneck: How much would a bottleneck in the final assembly affect delivery if the bottleneck causes a reduction of two units per shift?

5. Bill of Material: (A) Using the above product tree determine how many units of component are required to make 1,000 finished items. (B) Assume the following inventory of components is currently on hand. How many of each component will be required to make the 1,000 units?

Product 1- 100
Component A- 250
Component B- 300
Component C- 100
Component D- 500
Component E- 250
Component F- 1000

Part 2

You work for a manufacturer in the automotive industry. The company has been in existence for ten years and is not doing very well. You know if you can get a contract with Ford Motor Company things will greatly improve from a financial stand point. However, before the company can approach Ford about doing business you must take close look at your company and make improvements to reduce costs and improve quality. You know you are losing money and your outdated processes and management practices are contributing to your problems. You brought in a management consultant to assess your situation. The consultant made the following observations.

Inventory - The consultant found that you are carrying a 3 month supply of your most expensive raw material. You have two weeks supply of the shop floor, 2 weeks in the main warehouse and 2 month supply in a rented off site warehouse. He analyzed the inventory costs associated with this raw material. Costs are as follows:

Annual Usage - 16,000 units
Ordering Cost - $50 per order
Carrying Cost- $2.50 per unit

Products and Manufacturing Processes - The consultant took a look at your product line and your production process and made the following observations. The company produces one main product for the automotive industry. That product is the aluminum luggage rack that are on the top of certain SUV's. No other products are produced. The plant is using simple metal bending and stamping equipment. The fixtures used to create the product on this equipment are inexpensive. The plant also has an anodizing tank where one of two colors, gold or bright aluminum is applied. The plant operates one shift per day, five days per week. Productivity is low due to the time it takes to change colors in the anodizing tank. The plant has been modified and added on to numerous times in the past ten years. As business grew walls were knocked and space added. Because of this the manufacturing flow is disrupted and excessive work-in-process inventory is built up. This addition inventory is taken to storage by a forklift.

The company utilized an assembly like process in making the product. The workers are in a union and there are tensions with management. The main source of this tension is due to the unwillingness of the union to allow workers to be crossed train for other jobs in the factory.

Quality Assurance - The Company has one person in quality control. This person is an Industrial Engineer and has had training Statistical Quality Control methods. The most important step in the manufacturing process, coating thickness, uses control chart to monitor the process. This process is in control and has a calculated standard deviation of .05. The process mean is .8. Ford has set an upper specification limit of 1.0 and a lower specification limit of .7. Ford also requires a Cpk value of equal to or greater than 1.33. This is the only process in the plant that uses statistical process control. Other process including bending and hole punching are experiencing defect rates of 1%. That equates to 10,000 defects parts per million produced.

Project Assignment- You have been assigned the task of addressing the issues found by the consultant. These issues must be addressed in the form of a report to management - just listing answers to these questions is not acceptable. Charts can be inserted if necessary.

1. What is the most economical quantity of inventory to order? How many orders will you need to place each year?

2. Are you carrying the proper amount of inventory of your main raw material? Why or why not?

3. How can proper inventory management save the company immediately?

4. What recommendation would you make regarding product mix? If you expand the line, what type of product would you add and why?

5. What would you recommend to reduce the time it takes to change colors in the anodizing process.

6. Where do you find waste that can be eliminated to make the process leaner?

7. What can be done to improve labor relations in order to allow management to redesign the manufacturing process?

8. How would you improve the manufacturing process to improve productivity?

9. What quality tools area available to improve the defect rates at the bending and hole punching process?

10. As it currently stands can the company produce product that meets Ford's specifications? Why or why not?