Supply Chain Optimization Case Study MBA PDF
Supply Chain Optimization Case Study MBA PDF
Supply Chain Optimization Case Study MBA PDF
Blitz Company
Based on forecasts for the next year, I as the president of the Blitz Company will take the
following steps to optimize the Operations Management of the company so as to ensure meeting
sales targets for Year 4 of our operation:
Design of a normal process flow
Standardization of material flow through processes
Standardization of order size
Addition of appropriate machinery to improve productivity
Addition of man-hours to meet unusually high demand
And
To identify the processes involved in most of the customer orders, the following filtering rule
was applied:
Based on this rule, 12 most common processes were selected (see Graphic A on next page).
Other than the raw materials and finished goods inventories at the beginning and end of process
flow respectively, the graphic shows that work-in-process inventory exists before KPR, Plating
and Drilling processes. This is because of the difference in cycle times of processes preceding
and following the WIP inventory points. For example, after a batch of circuit boards has passed
through touch-up and inspection stage, it has to wait for the plating stage to finish its work
because the latter stage has a significantly higher cycle time than the former.
1
Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company
Graphic A
WIP
Rout
Shear Drill
WIP Configu Drill
ration Holes
Punch Press
Green Pantographic
FG
Inspect and Pack
Manual
Decision box
2
Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company
Having designed the normal process flow, Ill move on to the next step of my Year 4 operations
management plan.
Were catering to a variety of customer segments ranging from orders as small as 1-10
circuit boards to 800-1000 circuit boards.
We accommodate rush orders that a customer needs within 4 days
Due to these factors, Krebs (our design engineer) and Beck (the foreman) are constantly rushing
to modify the processes to suit the rapid fluctuations in order sizes. To accommodate rush orders,
Hadler (the expediter) does the job of expediting the order through the processes, thus disrupting
other production and causing delays. To rectify these problems, I performed a scenario analysis
using MS Excel (Table 1 and 2) and found out that by catering to some specific type of
customers and specific order sizes, we can improve our productivity and hence meet future sales
targets and delivery deadlines for current and future orders. From exhibit 5 in the case, we know
that about 67% of our sales in September of Year 3 were from order sizes of 800-1050 circuit
boards. Thus, I propose the following three order sizes to be scheduled on our plant which will
improve our monthly production and provide us with economies of scale:
For order size of 120:
3
Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company
TABLE 1
Drill holes
Green pantographic 50 0.05 8 1879 400 9395 9795 163.25
Manual 15 0.1 40 494 600 4940 5540 92.33333333
4
Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company
TABLE 2
Photograph 29 29 29 29 29
Inspect and Shear 20.5 22.5 27.5 70 82.5
Drill (location
holes) 10.5 12.5 17.5 60 72.5
KPR 11 51 151 1001 1251
Touch up and
inspect 13 25 55 310 385
Plate 15 35 85 510 635
Etch 14 30 70 410 510
Shear (into circuit
boards) 10.5 12.5 17.5 60 72.5
Drill (location
holes) 14 30 70 410 510
Configuration
Rout 58 90 170 850 1050
Punch press 154.8 174 222 630 750
Avg. of
Configuration
alternatives 114.4454721 138.981608 200.3219478 721.7148362 875.0656858
Drill holes
Green
pantographic 90 250 216.6666667 1350 1683.333333
Manual 95 415 303.75 2003.75 2503.75
5
Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company
Production (no. of
boards) per 8
hours day 33.55309678 67.52267473 245.3201077 258.3953932 258.8823863
Production (no. of
boards) per 21
days month 704.6150324 1417.976169 5151.722263 5426.303257 5436.530113
As shown in the previous section, standardizing the order size gives better production per month
due to less cycle time (time required to produce each circuit board) and cost-savings due to
economies of scale. As Ive assumed the same batch/order size to be scheduled for all processes,
Id to add machinery to resolve bottle-necks which were causing delays at the Green
pantographic drill press and the Manual drill press. The detail of the machinery added and their
associated costs is as follows:
The addition of these machinery reduces overall cycle time per board production and gives us the
required level of production per month for Year 4. The estimate of circuit boards to be produced
per month in Year 4 is calculated in Table 3 on next page. This estimate was derived from the
sales forecast given in exhibit 4 of the case.
6
Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company
Table 3
Keeping in view the average monthly sales figure of 4,840 boards in Year 4, I developed the
order size scheduling shown in Table 2 above. As sales are expected to fluctuate over the next
year from month to month; and as per Table 2 the developed scheduling algorithm can produce
about 5,100 circuit boards per month; well have to add temporary labour-hours in peak-months
to cater to the hiked demand. Adding one man-hour costs $ 3.44, and workers can exchange most
jobs so overtime scheduling wouldnt be a problem in case the need arises.
As per my proposed scheduling algorithm, the capacity utilization of various processes is given
in Table 4 below:
7
Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company
Table 4
Cycle
Cycle time for Cycle Cycle
Cycle time time for order time for time for
for order order size of Utilization order of Utilization order of Utilization
size of 8 size of 40 120 of 800 of 1000 of
boards boards boards Processes boards Processes boards Processes
Operation 8 40 120 800 1000
Currently, the facility layout is such that workers have to move as many as 72 minutes in an 8-
hour working day between different work-stations, thus wasting about 15% of labour-hours
daily. This can be minimized by placing the relevant cells closer and erecting new walls so as to
ensure corrosion-free environment for the machinery even if sensitive machinery is placed in the
cell next to a chemical-works cell. The cost of erecting new walls is given below:
8
Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company
Total cost of removing current walls and erecting new ones: $ 6,000
Thus, I propose the re-design of facility layout so as to place the cells in a sequence, starting
from first operation/process and ending to the last process.
Conclusion
Taking into consideration the sales forecast for Year 4, Ive developed a comprehensive
operations management plan which will be implemented by Blitz company after its review by the
board of directors. Im confident that implementation of this process will help Blitz Company
achieve and exceed the sales targets in Year 4 and the following years.