Case Study ― U.S.

Strollers

A. Synopsis
개요 설명

B. Analysis or Answer to questions.

evaluate current system

find alternative methods

evaluate each alternatives

choose one of the alternatives

C. Terminologies

1. Master Production Schedule (MPS, 기준생산계획)

 schedule (usually weekly) for the end item production.

2. 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.

3. Inventory TurnOver (재고자산회전율)

총매출액 4558
재고자산회전율 =   3.2
재고자산 1424
생산원가 3418
재고자산회전율 =   2.4
 재고자산 1424

4. EOQ (Economic Order Quantity, Economic Production Quantity)

 maximum inventory level : Dx

total inventory cost = inventory holding cost + ordering cost (setup cost)

1
 Dx D 1 D / p D
TC = iC  S  iC QS
2 Q 2 Q
2SD
Q* 
iC (1  D / p )

 For Regular stroller (Lotsizing rule is Lot-For-Lot)

 setup time = 4.2 + 2.4 + 1.6 + 0.5 + 2.3 = 11 hour, setup cost = $15 * 11 = $165

 manufacturing cost = $21, inventory holding cost = .25 / yr

 weekly demand = 5400 / 52 = 1040, weekly production rate = 2500

2  165  54000
 2410.8
 EPQ for Regular =
.25  21 (1  1040 / 2500)

1. Safety Stock (s)

5. 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

D. Answers

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, 91/4558=.02)

2
  Currently the company uses an MRP system.
Now considers JIT and GT.

 Explanation of EXHIBIT 7

a) Shopping for Week2

 average of setup times = 11 / 5 = 2.2 hour

 available time = 5 (days)― 1150 / 2000 * 5(days) ― 2(hours) / 8 = 1.875

 scheduled production = 1.9 * 1800 / 5 = 684

b) Shopping for Week 3 = 960 (EOQ) ― 684 = 276

c) Regular for Week 3

 available time = 5(days) ― 276 / 1800 * 5(days) ― 2(hours) / 8 = 3.98

 scheduled production = 4 * 2500 / 5 = 2000

d) Regular for Week 4 = 2400 ― 2000 = 400

e) Shopping for Week 4

 available time = 5(days) ― 400 / 2500 * 5(days) ― 2(hours) / 8 = 3..9

= 4(days) ― 1150 / 2000 * 5(days) ― 2 (days)/ 8 = 0.875

 scheduled production = 0.9 * 1800 / 5 = 324

6. Discuss pros and cons of the two options

 Option 1 (JIT)

 Three assembly lines. Each process divides equipment for dedicated use.

 1 Tube cutting, 1 tube bending, 1 Tube drilling machine need changeover.

 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)

Holding charge = 997.000 * 0.25 = $249,250

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

 dedicated assembly line ⇒ better quality

 Layout : Exhibit 9

3
  Storages for purchased parts and tube can be eliminated

 cons :

 purchase of 2 assembly lines ($200,000) == lose production during changeover

 more training and management required, cooperation with supplies is needed

 lose flexibility

 Layout : Exhibit 9

 1 Tube cutting, 1 tube bending, 1 Tube drilling, and Wood cutting still
needs changeover.

 Option 2 (cell production)

 One manufacturing cell for each product.

 1 Tube cutting, 1 Tube bending, 1 Tube drilling machine need to be purchased.

 pros :

 same savings in inventory cost

 visual control possible, takes less space

 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

7. 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.
If the sales are stable as forecasted, we can think of a new system.

8. Which option to recommend?

 proceed with option 1 and then move to option 2, if demand and product changes
are relatively stable

 After implementing option 1, they will have time to evaluate whether a further
move to option 2 is also desirable.