case study

Case StudyU.S. Stroller

Case study 작성요령

Synopsis

개요 설명

Analysis or Answer to Questions

evaluate current system

find alternative methods

evaluate each alternatives

choose one of the alternatives

Terminologies

Master Production Schedule (MPS, 기준생산계획)

schedule (usually weekly) for the end item production

MRP (Type I : Material Requirements Planning, 자재소요계획)

A minimal inventory control system that releases manufacturing and purchase orders for the right quantities at the right time to support the master schedule

Terminologies

EOQ (Economic Order Quantity, Economic Production Quantity)

maximum inventory level :

Total Cost of Inventory

Safety Stock

Terminologies

GT (Group Technology, Cellular Manufacturing)

a manufacturing philosophy in which the parts having similarities are grouped together to achieve higher level of integration between the design and manufacturing functions of a firm

1. Current situation

U.S. Stroller is a manufacturer and distributor of a line of baby strollers.

3 types of strollers are :

regular model : $49, annual sales 54,000

deluxe model : $99, annual sales 24,960

shopping center model : $149, annual sales 27,040

sales can vary by 25%

market share 40%, Japanese companies have just entered the US market with a low-priced stroller that emphasizes quality and reliability of design

Poor profit after tax (only 2% of the sales)

Currently the company uses an MRP system.Now considers JIT and GT.

2. Discuss pros & cons of 2 options

Option 1 (JIT)

Pros :

setup is not necessary. master schedule is frozen to 2 weeks

finished goods inventory from 80 days to 15~30 days inventory cost $765,000 to $210,000 (765 x 22/80), savings $555,000

WIP inventory from 4 weeks to 2 weeks inventory cost $322,000 to $161,000, savings $161,000

Raw materials from 12 weeks to 2 weeks inventory cost $337,000 to $56,000, savings $281,000

reduced inventory : $997,000 (three quarter of current $1,424,000) cost savings = .25 * 997,000 = $249,000

lead time 2 weeks ⇒ shorter response time ⇒ better customer service

dedicated assembly line ⇒ better quality

2. Discuss pros & cons of 2 options

Option 1 (JIT)

Cons :

purchase of 2 assembly lines ($200,000)

⇒ lose production during changeover

more training and management required, cooperation with supplies is needed

lose flexibility

2. Discuss pros & cons of 2 options

Option 2 (cell production)

Pros :

same savings in inventory cost

throughput might be even faster ⇒ less lead time ⇒ better service or further savings

quality will be better

Cons :

additional equipments ($150,000)

more training required

lose flexibility more

3. Impact on MRP system

pull system does not make MRP system necessary

MRP cannot control the shop floor (not perfectly agreed)

MRP is needed only for major events such as changes in demand or product design

4. Which option to recommend?

proceed with option 1 and then move to option 2, if demand and product changes are relatively stableAfter implementing option 1, they will have time to evaluate whether a further move to option 2 is also desirable