Company X

Company X’s process for making single-finger keyboards consists of five operations, each performed at a different work center. Work flows through the work centers in sequence in a production line that is dedicated exclusively to making this product. Data on these operations are below. Demand is 14,000 per day. Each unit has a cost of $9.00 and a selling price of $10.00. There is sufficient labor to operate all equipment to capacity.
Operations and Supply Chain Management for the 21st Century 39

Work Center/Operation Equipment

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Capacity A 12,000 per day

Capacity B 13,000 per day

Capacity C 10,500 per day

Capacity D 12,000 per day

Capacity E 14,000 per day

Answer the following questions using Chapter 4

1. In this system, what is the bottleneck?

2. Assume the system begins every day with appropriate amounts of WIP in each work center’s queue. What is the most output we could expect from the system in a day?

3. What level of equipment utilization should the company strive for at work center 3?

4. Your boss believes that all equipment should be kept busy all the time in order to keep unit costs low. What happens if work centers 1 and 2 are operated at 100 percent utilization? In particular, what is the effect on system output? What is the effect on WIP? What should utilization be at work center 2?

5. An employee team has an idea for a process improvement that will reduce breakdowns at work center 4. This will raise the effective capacity at this work center to 13,500 units per day. The cost of making this improvement is $10,000. Another team has an idea for a process improvement that will reduce breakdowns at work center 3. This will raise the effective capacity at this work center to 11,000 units per day. The cost of making this improvement is $20,000. Which teams idea is better? Explain your answer.
Operations and Supply Chain Management for the 21st Century,

1st Edition – Ken Boyer; Rohit Verma

ISBN-10: 0-618-74933-0 (Cengage Textbook)

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