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Identifying and Solving Problems in a Performance Assessment on 3 Facilities

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You have been tasked with assisting the three facilities in Oregon. The "T" facility manufactures toner cartridges, the "P" facility manufactures PC printers, and the "S" facility manufactures stamped metal parts, injection molded plastic parts, and some assemblies for the T and P facilities. The T and P facilities are located in the same building, but are run as separate businesses. The S facility is located about seventy miles (at least 90 minutes) and across a major body of water from the other two facilities. Organizationally, all three facilities answer to a vice-president who is located at the P location.

The T facility has one major customer which accounts for over 98% of its production. Shipments to this customer are covered by long term contracts and require virtually the same quantity to be shipped every production day. The production process is a dedicated production line. The remaining (2%) business is opportunistically scheduled when time, materials and facilities permit. The T facility produces a total of four tone cartridge models. The T facility operates two shifts a day, five days a week. There is comparatively little space for storing incoming parts or materials.

The P facility has the same major customer which accounts for 100% of its production. Similarly, shipments are covered by long term contracts which require virtually the same quantity to be shipped to that customer every production day. The production process is a combination of assembly line and cellular manufacturing. The P facility currently produces a total of three PC printer models, but negotiations are underway to introduce a new, more configurable, PC printer line. The P facility operates two shifts a day, five days a week. This location has virtually no space for storing incoming parts or materials.

The S facility is starkly different from the T and P facilities. It has three departments: stamping, molding, and assembly. The stamping department consists of about twenty large stamping, bending, cutting, and welding machines. These twenty machines produce over fifty distinct parts for the T and P facilities. The stamping department is virtually a job shop in which any given part may be processed on up to seven different machines, all of which require significant time and expense to convert from producing one part to another. The molding department produces over thirty distinct plastic parts for the T and P facilities using twenty molding machines and twelve different plastic resins. In practice, eight of the twenty molding machines are dedicated to producing five of the parts, leaving the remaining twelve machines to produce the remaining twenty eight parts. Like the stamping department machines, the molding machines require significant time and expense to convert from one part to another. A further constraint is the availability of molds which are periodically removed from service for maintenance, cleaning, or rebuild. The assembly department produces sub-assemblies for the T and P facilities using certain parts from the stamping and molding departments and certain "accessory" parts. The "accessory" parts are small pins, springs, clips, and screws which are actually purchased by the P and T facilities and shipped to the S facility. The molding and stamping departments operate three shifts a day, seven days a week. The assembly department operates one shift a day, five days a week. This location has comparatively more storage space for parts / materials, but that space is generally consumed by WIP (work in process) in the stamping and assembly departments.

There are normally eight semi-trailer load shipments from the S facility to the T and P facilities every operational day. They leave the S facility every two hours with parts. Once a day, "accessory" parts are "back-hauled" from the P and T facilities to the S facility.

- Based on the facts presented above, conduct an informal performance assessment. Identify the problems, their significance, and the relative benefits of solving them?

The whole scenario is as follows:
You are a junior analyst in the Distribution Engineering, Maintenance, and Productions Management group of the central engineering department of the Canbide Corporation, located near Torrance, CA.

The Canbide Corporation is a multi-national, publicly traded (NYSE), US - based, manufacturing company with annual sales nearing $10 Billion. Canbide is one of the pioneers of the petrochemical industry and is the acknowledged technology leader in several market sectors and benefits from large licensing royalty fees for those technologies. Canbide is the low cost producer for a number of commodity products. Canbide's current marketing approach is based on providing a wider selection of products at a single location than do any of their competitors.

Two years ago, in a surprising move, Canbide purchased a leading Korean electronics company. As a result, Canbide is now in the PC printer, toner cartridge, copier, and electronic imaging business as well. The PC printer and cartridge product lines are closely aligned and often share facilities. The copier and electronic imaging facilities are, for the most part, free standing facilities. The chemicals and electronics businesses have, until now, been run separately.

In a suburb of Tulsa, Oklahoma, Canbide operates a Central Research & Development / Central Engineering Department for the chemicals business. A similar facility for the electronics business is situated in Torrance, CA. The divisional research and engineering departments are also located at these facilities. The divisional research and engineering groups are the experts on the specific reactions or production processes and equipment associated with that division's products. The central research and engineering groups are focused on providing experts in specific subjects who cross divisional boundaries and generally work as internal consultants for the divisional research and engineering groups and often work on plant level issues.

Mr. Iwami, president of the electronics business group, is pressing his divisional VPs to solve several problems. There is internal pressure for a new distribution facility in the Pacific Northwest. There are quality problems at a facility in Nebraska. There are customer service problems at most distribution locations, but they are especially bad at the facility located near Denver, CO. There are inventory / materials handling problems at the Newark, NJ facility.

Your supervisor has alerted you to three potential projects for the coming year.

Customer Service problems at the Denver facility: This facility has been in existence since the 1930s. It has slowly grown physically since then. New production units have repeatedly been added on the periphery of the facility, leading to widely scattered production units within the facility that currently measures about 2km by 1km. The customer service issues arise from several sources. First, customers desiring to pickup multiple products must now drive from point to point within the plant to pick up each product. There are often waiting lines at each loading point. A second problem is the arrival pattern of trucks to pick up products that materially contributes to gridlock within the facility.

Production Facilities in the Pacific Northwest: For the past few years, the performances of thethree production facilities in the state of Oregon have been declining. Inventory levels are up, on-time shipments are slipping. Costs are rising. Scrap rates are increasing. Delivered quality still remains strong.

Copier rehab facility near Charleston, SC: The copier rehab facility near Charleston, SC receives "trade-in" copiers from distributors across the country and restores them to "good as new" condition. The facility stocks certain parts that are always replaced and others that are often replaced, based on wear and condition. Moreover, sometimes, copiers require parts that are not stocked, leading to a delay in the repair of that copier. They have a target (imposed by the copier division VP) that copiers spend no more than seven days at the facility before being released for re-sale. Since the facility has no visibility of incoming copiers and has no precise knowledge of what parts may be required, materials and labor planning is difficult.

As the junior analyst you will be in charge of analyzing various operations management issues concerning Canbide Corporation ranging from customer service to location to operations for all three facilities. You will be making recommendations on changes, improvements and the possible use of Operations Management (OM) tools.

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Solution Summary

The solution breaks the problem down, making a performance analysis for each facility before looking at the problems and making recommendations from a more holistic viewpoint. This solution is 917 words.

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The purpose of the case is to present a production management scenario where three production facilities T, P and S. T produces four toner cartridge models and P produces three printer models and has a proposal for making a fourth model. What the examiner wants you to do is to make an assessment of the current scenario with regards to the problems, the significance of the problems and the relative benefits of solving the problems. It appears that we are required to take the production perspective, identify the problems relating to production and then make recommendations mainly using Operations Management tools.

The problem makes several assumptions, first the problem never mentions any quality control related problems, a situation which may not be true, for instance the problem never mentions any rejection rate, return of parts at T and P or return of goods by the purchaser. Second, the objective is implied to be maximizing production, however this may not be the case always, there could be the problem of cost reduction or better utilization of facilities. Thirdly, the problem presupposes that the production is profitable and selling extra production will not be a problem. There is no evidence to support it, there can be marketing problems or even profitability problems which this case is not mentioning. Fourthly, the problem presumes that ...

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