SOME SELECTED CASES

FACILITY CASE ONE WORKOUT PLUS Workout Plus is a health club that offers a full range of services to its clients. Recently, too other fitness clubs have opened up in town, threatening Workouts solvency. While Workout is tops among serious fitness buffs, it has not attracted a wide spectrum of members. Shannon Hiller, owner and manager, has decided its time for aface lift. She started the process by sponsoring a week-long ideathon among club members. Nonmembers who frequented an adjacent grocery store were also canvased for suggestions. Their comments are provided below, along with the current facility layout. Free Weights Aerobics Rooms Member comments: The cardio machines fill up too fast on rainy days. Then everything else gets backed up. I dont feel like strutting through the gym from one end to the other just to finish my workout. How about a quick 30-minutes workout routine for busy folks? I like working out with my friends, but aerobics is not for me. What other group activities are good for cardio? Separate the people who want to gab from the people who want to pump. Its so confusing with all those machines and weights. Its hard to work yourself in when you come from across the gym. Id like to see the machines Ill be using to gauge my time. Circuit training is for wimps. The next thing you know youll be stopping and starting the music to tell us when to change machines. We all seem to arrive at the popular machines at once. Can you space us out? Id like for my kids to get some exercise too while Im working out. But I dont want them wandering all over the place trying to find me. This place is too crowded and disorganized. Its not fun anymore. You have classes only at busy times. During the day the gym is empty but you dont provide many services. I think youre missing a great opportunity to connect with the not-so-fit at off-peak times. 1. How can Workout update its facility to attract new customers? What additional equipment or services would the layout help? 2. It is your job to design a new layout for Workout Plus. Visit a nearby gym to get ideas. Watch the customer flow, unused space, and bottlenecks. What aspects of a process layout do you see? A product layout? Cells? Draw a simple diagram of your proposed layout. (Youll want to be more detailed than the original layout.) How does your layout respond to the comments collected by Shannon? Circuit Training Cardio Machines

FACILITY LOCATION MODELS SELECTING A EUROPEAN DISTRIBUTION CENTER SITE FOR AMERICAN INTERNATIONAL AUTOMOTIVE INDUSTRIES American International Automotive Industries (AIAI) manufactures auto and truck engine, transmission, and chassis parts for manufactures and repair companies in the United States, South American, Canada, Mexico, Asia and Europe. The company transport to its foreign markets by container AIAI has large warehouse/distribution centers. In Europe it ships into Hamburg and Gdansk, where it has contracted with independent distribution companies to deliver its product it customers throughout Europe, however, AIAI was not overly concerned since its European market wasnt too big and its European customers didnt complain. Plus, it had more pressing supply chain problems elsewhere. In the past 5 years, since trade barriers have fallen in European and Eastern European markets have opened up, its European business has expanded, as has new competition, and its customers have become more demanding and quality conscious. As a result, AIAI has initiated the process to select a site for a new European warehouse/distribution center. Although it provides parts to a number of smaller truck and auto maintenance and service centers in Europe, it has seven major customers - auto and truck manufacturers in Vienna, Leipzig, Budapest, have adopted manufacturing processes requiring continuous replenishment of parts and materials. AIAIs European headquarters is in Hamburg. The vice-president for construction and development in Dayton, Ohio, has asked the Hamburg office to do a preliminary site search based on location, geography, transportation, proximity to customers, and costs. The Hamburg office has identified five potential sits in Dresden, Lodz, Hamburg, Gdansk, and Frankfurt. The Hamburg office has forwarded information about each of these sites to corporate headquarters, including forecasts of the number of containers shipped annually to each customer as follows: Vienna, 160; Leipzig, 100; Budapest, 180; Prague, 210; Krakow, 90; Munich, 120; and Frankfurt, 50. When the vice-president of construction in Dayton received this information, he pulled out his map of Europe and Began to study the sites. Assist AIAI with its site selection process in Europe-Recommended a site from the five possibilities, and indicate what other location factors you might consider in the selection process.

PROJECT MANAGEMENT MOORE HOUSING CONTRACTORS Moore Housing Contractors is negotiating a deal with Countryside Realtors to build six houses in a new development. Countryside wants Moore Contractors to start in late winter or early spring when the weather begins to moderate and build through the summer into the fall. The summer months are a busy time for the realty company, and it believes it can sell the house almost as soon as they are ready sometimes before. The house all have similar floor ready sometimes before. The houses all have similar floor plans and are of approximately equal size; only the exterior are noticeably different. The completion time is so critical for Countryside Realtors that it is insisting a project management network accompany the contractors bid for the job with an estimate of the completion time for a house. The realtor also needs to be able to plan its offerings and marketing for the summer. The realtor wants each house to be completed within 45 days after it is started. If a house is not completed within this time frame, the realtor wants to be able to charge the contractor a penalty. Mary and Sandy Moore, the president and vice president of Moore Housing Contractors, are concerned about the prospect of a penalty. They want to be confident they can meet the deadline for a house before entering into any agreement with a penalty involved. (If there is a reasonable likelihood they cannot finish a house within 45 days, they want to increase their bid to cover potential penalty charges.) The Moores are experienced home builders, so it was not difficult for them to list the activities involved in building a house or to estimate activity times. However, they made their estimates conservatively and tended to increase their pessimistic estimates to compensate for the possibility of bad weather and variations in their workforce. Following is a list of the activities for building a house and the activity time estimates. ACTIVITY a b c d e f g h i j k l m n o p q r s t u v DESCRIPTION PREDECESSORS a b b b c e e f f c, g i j, k, h l n d, o m p q q q t, u TIME (DAYS) a m b 3 2 2 1 1 2 2 2 1 1 3 5 6 2 1 2 3 4 3 2 2 4 4 3 4 2 2 4 3 4 3 2 5 6 8 3 2 3 4 6 5 4 3 6 6 5 5 4 3 5 5 7 4 4 8 10 12 6 5 7 6 10 12 8 6 10

Excavation, pour footers Lay foundation Frame and roof Lay drain tiles Sewer (floor) drains Install insulation Pour basement floor Rough plumbing pipes Install windows Rough electrical wiring Install furnace, air conditioner Exterior brickwork Install plasterboard, mud, plaster Roof shingles, flashing Attach gutter, downspouts Grading Lay subflooring Lay driveway, walks, landscape Finish carpentry Kitchen cabinetry, sink, and appliances Bathroom cabinetry, fixtures Painting (interior and exterior)

w x

Finish wood floors, lay carper Final electrical, light fixtures

v, s v

2 1

5 3

8 4

1. Develop a CPM/PERT network for Moore House Contractors and determine the probability that the contractors can complete a house within 45 days. Does it appear that the Moore might need to increase their bid to compensate for potential penalties? 2. Indicate which project activities Moore Contractors should be particularly diligent to keep on schedule by making sure workers and material are always available. Also indicate which activities the company might shift workers from as the need arises.

SUPPLY CHAIN MANAGEMENT STATELINE SHIPPING AND TRANSPORT COMPANY Rachel Sundusky is the manager of the South-Atlantic office of the Stateline Shipping and Transport Company. She is in the process of negotiating a new shipping contract with Polychem, a company that manufactures chemicals for industrial use. Plychem want Stateline to pick up and transport waste products from its six plants to four waste disposal sites. Rachel is very concerned about this proposed arrangement. The chemical wastes that will be hauled can be hazardous to human and the environment if they leak. In addition, a number of towns and communities in the region where the plants are located prohibit hazardous materials from being shipped through their municipal limits. Thus, not only will the shipments have to be handled carefully and transported at reduced speeds, they will also have to traverse circuitous routes in many cases. Rachel has estimated the cost of shipping a barrel of waste from each of the six plants to each of the three waste disposal sites as shown in the following table: PLANTS Kingsport Danville Macon Selma Columbus Allentown Whitewater $12 14 13 17 7 22 WASTE DISPOSAL SITES Los CanosDuras $15 9 20 16 14 16

$17 10 11 19 12 18

Each week the plants generate amount of waste shown in the following table: PLANT Kingsport Danville Macon Selma Columbus Allentown WASTE PER WEEK (BBL) 35 26 42 53 29 38

The three waste disposal sites at Whitewater, Los Canos, and Duras can accommodate a maximum of 65. 80, and 105 barrels per week, respectively. The estimated shipping cost per barrel between each of the three waste disposal sites is shown in the following table: WASTE DISPOSAL SITE Whitewater Los Canos Duras WHITEWATER $12 10 LOS CANOS $12 15 DURAS $10 15 -

In addition to shipping directly from each of the six plants to one of the three disposal sites, Rachel is also considering using each of the plants and waste disposal sites as intermediate shipping points. Trucks would be able to drop a load at a plant or disposal site to be picked up and carried on the final destination by another truck, and vice versa. Stateline would not incur any handling costs since Polychem has agreed to take care of the local handling of the waste materials at the plants and the waste disposals sites. In other words, the only cost Stateline incurs is the actual transportation cost. So Rachel wants to be able to consider the possibility that it may be cheaper to drop and pick up loads at intermediate point rather that shipping them directly. The table at the bottom of this page shows how much Rachel estimates the shipping costs per barrel between each of the six plants to be. Rachel wants to determine the shipping routes that will minimize Statelines total cost in order to develop a contract proposal to submit to Polychem for waste disposal. She particularly wants to know if it is cheaper to ship directly from the plants to the waste sites or if she should drop and pick up some loads at the various plants and waste sites. Develop a model to assist Rachel and solve the model to determine the optimal routes. PLANTS Kingsport Danville Macon Selma Columbus Allentown KINGSPORT $6 5 9 7 8 DANVILLE $6 11 10 12 7 MACON $4 11 3 7 15 SELMA $9 10 3 3 16 COLUMBUS ALLENTOWN $7 $8 12 7 7 15 3 16 14 14 -

FORECASTING THE UNIVERSITY BOOKSTORE STUDENT COMPUTER PURCHASE PROGRAM The University Bookstore is owned and operated by State University through an independent corporation with its own board of directors. The bookstore has three locations on or near the State University campus. It stocks a range of items, including textbooks, trade books, logo apparel, drawing and educational supplies, and computer and related products such as printers, modems, and software. The bookstore has a program to sell personal computers to incoming freshmen and other students at a substantial educational discount partly passed on from computer manufacturers. This means that the bookstore just covers computer costs with a very small profit margin remaining. Each summer all incoming freshmen and their parents come to the State campus for a 3-day orientation program. The students come in groups of 100 throughout the summer. During their visit the student and their parents are given details about the bookstores computer purchase program. Some students place their computer for the fall semester at this time, while others wait until later in the summer. The bookstore also receives orders from returning students throughout the summer this program presents a challenging supply chain management problem for the bookstore. Orders come in throughout the summer, many only a few weeks before school starts in the fall, and the computer suppliers require at least 6 weeks for delivery. Thus, the bookstore must forecast computer demand to build up inventory to meet student demand in the fall. The student has repercussions all along the bookstore supply chain. The bookstore has a warehouse near campus where it must store all computers since it has no storage space at its retail locations. Ordering too many computers not only ties up the bookstores cash reserves, but also takes up limited storage space and limits inventories for other bookstore products during the bookstores busiest sales period. Since the bookstore has such a low profit margin on computer, its bottom line depends on these other product. As competition for good students has increased, the university has become very qualityconscious and insists that all university facilities provide exemplary student demands for computers when the fall semester starts. The number of computers ordered also affects the number of temporary warehouse and bookstore workers that must be hired for handling and assisting with PC installations. The number of truck trips from the warehouse to the bookstore each day of all registration is also affected by computer sales. The bookstore students computers purchase program has been in place for 14 years. Although the student population has remained stable during this period, computer sales have been somewhat volatile. Following is the historical sales data for computers during the first month of all registration: COMPUTERS YEAR YEAR SOLID 1 518 8 792 2 651 9 877 3 708 10 693 4 921 11 841 5 775 12 1,009 6 810 13 902 7 856 14 1,103 Develop an appropriate forecast model for bookstore management to use the forecast computer demand for the next fall semester and indicate how accurate it appears to be. What other forecast might be useful to the bookstore in managing its supply chain? COMPUTERS SOLID

CAPACITY AND AGREEMENT PLANNING ERINS ENERGY PLAN The discussion was getting heated. A brightly colored chart at the front of the room told the story all too well. At Waylan Industries sales were up, profits down. Larry, theres no way we can hit our profit objective with your high cost of production. Youve got to cut back. Why pick on me? Were running bare bones as it is. Last winters energy prices really killed us. How can you cut costs with a 250 percent increase in energy prices? Everyone started at Erin. Erin swallowed hard and spoke up. You know, weve never had to stockpile fuel before and Im not sure how far we can go bin managing demand, but Ive been collecting data on purchase options. Well, lets see it then. Although its not how we purchase energy, Ive converted the prices to millions of BTUs for comparison. Coal costs $8 per million BTUs, but we can only burn 500 million per quarter to stay within our environmental air standards. Natural gas costs $ 32 per million BTUs, and petroleum $ 46. We can burn 1000 million BTUs of each per quarter. Coal and natural gas can be stored for later use at holding cost of 30 percent of purchase price per quarter. The holding-cost for petroleum is 20 percent. Electricity cannot be stored, but it can be reserved in advance. The cost of electricity also varies considerably by season of the year. As do our energy needs. The cost of electricity from the local utility is $20 per million BTUs in the spring, $40 in the summer, $24 in the fall, and $70 in the winter. These are averages from last year. A nearby utility quotes slightly higher prices at $22, $44, $26, and $75 for spring, summer, fall, and winter. As far as availability is concerned, 4000 million BTUs of electricity are available in the spring and fall, 5000 in the summer and winter. We can save some money by contracting with the utilities in advance of the season. Ive summarized the options in the table here, along with our energy needs. What I need now is some help analyzing the data. Larry, could you . Before Erin could finish, Tom spoke up. Yes, Larry you and Erin work up an energy plan like those aggregate production plans youre always bringing in. and have it ready by Thursday. _____________________ Source: This case was developed with the help of Richard Hirsh, Professor of Science and Technology at Virginia Tech. USED IN PURCHASED Spring Summer Fall IN Utility A Utility B Utility A Utility B Utility A Utility B Spring $20 $22 $40 $44 $20 $22 Summer $40 $44 $22 $24 Fall $24 $26 Winter Demand 1500 5000 5000 Use Erins data to develop an aggregate energy plan for Waylan Industries.

Winter Utility A Utility B $45 $50 $50 $60 $60 $65 $70 $75 10,000

JUST IN TIME AND LEAN PRODUCTION THE BLITZ IS ON Tina Rossi looked at the pile of papers in front of her and sighed. She had been preparing material for her companys first Kaizen Blitz and wondered if she had thought of everything. The process they had chosen to kaizen had been the subject of numerous customer complaints and employee grumblings. Tinas list of reported problems, goals for the kaizen process, and team objectives were statedin the team charter. Tina had planned for the group to review the charter first, then tour theprocess, measure overall cycle time, and complete a process map. From there the team would break complete up into four subgroups to perform a muda walk and 5S scan, conduct gripe interviews, and analyze process flow. Tina provided forms for each activity and a digital camera for visually documenting the current process and future improvements. The second day of the blitz was less directed. Team members would regroup to go over the data collected in the previous day and suggest improvements to be tried out on the third day. This is when Tina would have to prod the team to take action to transform the process or the layout, to improve quality or safety to try something and analyze the results. On day four, the team would observe the new process in action, review cycle times, identify problems, and make adjustments. After on the parameters of the new process, the team would record their kaizen results by drawing standard operation sheets, training operators, and establishing visual controls tools. All those things in one week. Tina was ready and anxious to begin. Use the material Tina has developed (see kaizen Blitz. xls on your student CD) to kaizen a process at your university or place of work. To simulate the Blitz experience, conduct your analysis with a team of four to six people in just 5 days time. Is Tinas material complete? What other aids would you find helpful in conducting a Kaizen Blitz? __________________ Source: The material for this case was contributed by Mike McMillan and Jeffery Porada, Certified Six-Sigma Black Belts at Solectron.

SCHEDULING FROM A DIFFERENT PERSPECTIVE And do you have the answer to Problem 6, Pete? asked Professor Grasso. Yes sir, I have the answer according to the textbook, but Im not sure I get it , replied Pete. You dont understand how to get the solution? Oh, I understand the numbers, but I dont know what theyre good for. Where I work, nobody ever sequences anything. You dont have time to calculate things like slack andcritical ratio. You do whats next in line or on top of the stack, unless you see a red tag on something that needs to be rushed though. Or maybe you run whats most like what youve just finished working on so the machine doesnt have to be changed. Or you run what can get done the fastest because when you produce more you get paid more Pete, it sounds to me like you are using sequencing rules FCFS, highest priority, minimum setup, and SPT. Pete hesitated. Maybe youre right, but theres still something that bothers me. If youre going to go to all the trouble to rearrange a stack of jobs, youd want more information than what were working with: What do you mean? I mean, theres no use rushing a job at one station to let it sit and wait at the next. Its like those maniacs who break their neck to pass you on the road, but they never get anywhere. A few minutes later youre right behind them at a stoplight. I see. You need some way of looking at the entire job, where its going next, what resources its going to use, if it has to be assembled with something else, things like that. Youve got a point, Pete. Why dont you give us a real example we can work with? You talk, Ill write it on the board. Pete talked for about 10 more minutes, and when he was finished, Professor Grasso had the following diagram on the board.

Okay, class, lets take this home and work on it. A, B, C, and D are product that comprise a customers order. They must all the completed before the order can be shipped. The circles represent operations that must be performed to make each product. Weve labeled them A1 for the first operation of product A, A2 the second operations, and so on. The numbers inside the circles are the machines that are used to perform each operation. We have only three machines 1, 2 and 3. Your job is to decide the sequence in which the product should be processed on each machine. There is no setup time between processes, no inventory on hand, and nothing on order. Assume the customer has ordered 100 units and a transfer batch of one. Make a Gantt chart for each machine to show us how quickly you can ship the customers order. Earliest shipment gets 5 extra points on the final exam.

QUALITY MANAGEMET TQM AT STATE UNIVERSITY As a result of several years of severe cuts to its operating budget by state legislature, the administration at State University has raised tuition annually for the past 5 years. Five years ago an education at State was a bargain for both in-state and out-of-state student; now it is one of the more expensive state universities. An immediate repercussion has been a decline in applications for admission. Since a portion of state funding is tied to enrollments, State has kept its enrollments up at a constant level by going deeper into its pool of applications, taking some less-qualified students. The increase in the cost of a State degree has also caused legislators, parents, and Students to be more conscious of the value of State education that is, the value parent and students are receiving for their money. This increased scrutiny has been fueled by numerous media reports about the decreased emphasis on teaching in universities, low teaching loads by faculty, and the large number of courses taught by graduate students. This, in turn, has led the state legislature committee on higher education to call for an outcomes assessment program to determine how well State University is achieving its mission of producing highquality graduates. On top of those problems, a substantial increase in the college-age population is expected this decade, resulting from a baby boom during the 1980s. Key members of the state legislature have told the university administration that they will be expected to absorb their share of the additional students during the next decade. However, because of the budget situation, they should not expect any funding increase for additional facilities, classrooms, or faculty. In effect, they will be expected to do more with their existing resource. State already faces a classroom deficit, and faculty have teaching loads above the average of its peer institutions. Legislators are fond of citing a study that shows that if the university simply get all the students to graduate within a 4-year period or reduces the number of hours required for graduation. They can accommodate the extra students. This entire scenario has made the university president, Fred McMahan, consider retirement. He has summarized the problems to his administration staff as having to do more, better, with less. One of the first things he did to address these problems was to set up a number of task forces made up of faculty and administrators to brainstorm a variety of topics. Among the topics and problems these task forces addressed were quality in education, educational success, graduation rates, success rate in courses,(i.e., the percentage of students passing), teaching, the time of graduation, faculty issues, students issues, facilities, class scheduling, admissions, and classroom space. Several of the task forces included faculty from engineering and business. These individuals noted that many of the problems the university faced would benefit from the principle and practices of a total quality management (TQM) approach. This recommendation appealed to Fred McMillan and the academic vice president, Anne Baker. Discuss in general terms how TQM philosophy and practices might be instituted at State University.