Module 4 operations complex prombles

Trident University

Katrina Dowdell

Module 2 CASE 2

OPM 500

Dr. Leichter

20 FEB 16

OPM 500 REPORT TEMPLATE FOR CASE ASSIGNMENTS

TO: VP of Operations

FROM:

SUBJECT: Productivity and Process Improvement Plan

REVIEW OF THE CURRENT SITUATION

This report seeks to explore a plan for improving the inventory situation at EMC. The assignment given by the boss is looking forwards for a detailed writing on the previous discussions concerning the inventory issues in the Plasti-Brack product line in EMC. Specifically, the report examines a plan for productivity and process improvement regarding Plasti-Brack product line that currently stands at about 85% of the Construction Hardware Product Group. With 000s inventories and a total investment of $271.0, which is a loss compared to the company’s starting total investment worth $295.2, the line of product (Plasti-Barack) is facing challenges of production that needs proper assessment for improvement. In particular, the production process lacks adequate raw materials, with inefficient production methods in the WIP, and the Purch Parts. Despite the overall increase in the finished goods in the ending trading year, the gross margin (15.41%) that is lower than the gross income (30.20%) is an indicator of poor performance, mainly attributed to the poor production processes.

GOALS AND OBJECTIVES

The projects aim at establishing a productivity and process improvement plan that will increase the gross margin in Plasti-Barack line of product and overall increase the total investments. Closely associated with the qualitative and more general items featured in the project goal, the report seeks to achieve more concrete and quantitative objectives. For instance, I intend to determine a plan for improving the product flow that will eliminate the inefficient production processes and suggest efficient approaches. The other objective is to analyze the inventories including work-in-process, finished goods, and raw materials. Lastly, I intend to determine the implications EOQ methods regarding the production of Plasti-Barack. This will be more specific as to identify the areas that need to be adjusted or even replaced to bring efficiency in production.

ACTIONS/PLANS

The productivity and process improvement plan require the EOQ method for thorough analysis of the production processes and the data concerning the product to determine the area of the fault that requires the plan. In assessing the situation, it will be necessary to use the knowledge and expertise about the inventory operations. A proper approach will hold down the costs and inventories and ensure that the accuracy of the inventory records. A thorough analysis towards a similar approach requires the understanding of total inventory cost, holding cost, purchasing cost, and order cost. The other areas of concern include annual holding cost and the concept of economic order quantity (EOQ).

Total inventory cost=holding cost + order/set-up cost +purchasing cost (PD)

Where PD=No. of Fin. Goods X Cost per Unit.

Total Plasti-Barack products ending =85/100(271) = $230.35

Total Plasti–Barack product beginning = 85/100(295.2) = $250.92

Cost per order=$250.92/251=$0.9997

Annual holding cost per unit=$0.5059=$1.5056

Purchase cost per unit=$230.35/153

EOQ=2(153) ($0.9997)/$0.5059=604.68

Total costs at the EOQ

Q=$0.5059(604.68/2) + $0.9997(153/604.68) + $1.5056(153) = $383.5639

Savings = ($383.5639 – $230.35) = $153.2139

Using efficient production processes will result to savings estimated at $153.2139. Therefore, there is a need for a plan to eliminate the unnecessary processes including inserting the Plasti-Barack at a different stage and in different machines. This is wastage of time and resources. Other costs involved that would otherwise be savings for the company include the labor costs at the unnecessary stages of production including the salaries of supervisors that are otherwise indirect. Similar indirect costs include depreciation costs of the machines, power, and insurance. All these costs are likely to increase the production costs making the entire process rather expensive.

An appropriate plan to improve the productivity and the processes for the product involves the removal or adjustments of the inflexible equipment that are involved the production process. The right remedy for the situation will employ smaller scale equipment and Setup Reduction (SMED). The plan involves the following steps:

1. Avoid risk and difficulty loop. Running broad lines of products results in setups that are infrequent, instead, running moderate amounts of product facilitates faster learning of the processes involved due to the high frequency of exposure to the methods.

2. Embrace piece cost loop. Dealing with lines of products requires fixed setup costs that are amortized over large units reducing the unit cost.

3. Limit the mechanisms to prevent massive sizes from going to infinity amounts that lead to uncertainty. This way, there is a focus on the quality and not the results that lead to complex scheduling and high inventory.

EXPLANATION/JUSTIFICATION

The plan focuses on easier scheduling and a small inventory of manageable units in every production process. It is significant to understand the processes at every production stage in order to avoid the discouraging attitude of risky and difficult processes. Such processes take time through the long and constant practicing, and more resources to understand. The important aspects of production (costs) is taken care of by the plan: with the smooth scheduling and little inventory, the flow of different production costs slows due to less time spent in chasing, searching, and expediting.