ABCD is a manufacturer of finished products which they supply to only four customers. These customers are all distributors. Each distributor operates a national distribution network throughout Australia supplying the product to a vast array of retailers. The range of products supplied to each of the four customers is identical except for a small logo printed on the product, and the graphics on the cardboard boxes in which the product is packed.
There is only one aggregate product type, but within that aggregate product type, there are variations at individual product level as to color, strength and the type of base. The finished product is assembled from three individual parts on a high speed, automated assembly line and the factory operates with a single shift of 8 hours, 5 days per week. The manufacturing process is as described below:
Part 1 is a bought-in assembly and comes in 5 strengths. This part is placed inside part 2 and the resulting assembly is then sealed.
Part 2 is manufactured by ABCD and comes in two colors.
Part 3, the base, is also manufactured by ABCD and has two variants. The base is attached to one end of the part 1 / part 2 sub-assembly and then sealed.
Following the second sealing stage, a small logo is automatically stamped on the finished product. The changeover of the logo, which includes the customer’s brand and the strength, is fully automated and requires no set up time. Finished products are then placed into individual boxes, which have been clearly labeled as to color, strength, type of base and the customer’s brand. These individual boxes are called inners.
Finally, the individual boxes (inners) are packed into larger cardboard boxes that hold 96 individually packaged products. These larger cardboard boxes are called outers. Like the inners, the larger cardboard boxes are labeled to show color, strength, type of base and the brand name. Note that both the inners and the outers come from an external supplier, who delivers them as flat-packs, pre-printed and labeled. When full, each outer is moved onto a pallet. When a pallet is full and contains 48 outers, it is taken to a small finished goods warehouse where it is shrink-wrapped and stored with other product variants for that customer. When sufficient product is available to fill a customer’s order, the appropriate number of pallets is placed on a truck and delivered to the customer. Note that customer order quantities must be in full pallet lots as ABCD will only supply full pallets.
Until recently, the four customers placed orders on a regular weekly basis. Orders were placed on a Friday and were always delivered on the following Monday week, that is, 10 days later. As of three months ago, ABCD stopped taking weekly orders and all four customers were forced to provide forecasts by week, covering the next 8 weeks. These forecasts had to be at the level of color × strength × base. A new forecast is required on every fourth Friday. Throughout this period of change ABCD has continued to deliver every Monday and now, the quantity delivered is exactly the same as per the customer’s forecast, but with a delivery time of five weeks. A schematic of the forecast and delivery schedule is shown below:
As a customer, you are not happy. Even though ABCD maintained continuity of supply through a transition period and things now are running smoothly, you have had to make changes to your own operations to accommodate the changes made by ABCD. You have been able to confirm that the other three customers, like you, are not happy and also have to wait a minimum of 4 weeks from the time of forecast to the time of delivery.
On a recent visit to ABCD, you noticed that a new building was being constructed and you were told that it was to be a finished goods warehouse. The new building appeared as though it would be many times larger than the old finished goods warehouse. You noticed that the factory floor seemed to have less clutter, especially at the packing end of the assembly line where the packaging is stored.
(a) Draw the process flowchart for the assembly, packing and distribution part of the ABCD business.
(b) In view of the changed ordering and forecasting requirements, what change(s) are most likely to have been made to the ABCD process? Explain your reasoning in detail.
(c) Given your answer to part (b), what changes, if any, would you recommend to the management of ABCD? You must stick with your answer to part (b) and put forward recommendations that will overcome the dissatisfaction expressed by all four customers.
(d) The Australian government is set to remove the 15% import tariff on the range of products made by ABCD. A large international company has recently completed construction of a very large factory in south-east Asia which could be a source of supply for Australia’s requirements for these same products, for about the same price as the local product, but with a two week delivery time on orders. Do you think ABCD will be able to compete profitably in the future? If so, why? If not, why not?
(e) Briefly describe the changes, if any, you have had to make within your own organization following the changes made by ABCD. Your answer should also include a brief assessment of the impact of these changes.
The question belongs to Operations Management and it discusses about the operations in a manufacturing company. The process flowchart for assembly, packing, distribution, etc, the changes made within the process have been discussed in the solution in detail.
Total Word Count 1507
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