AIC Netbook: Optimizing Product Assembly Case Analysis

Abstract Advanced Integrated Circuitry, Inc. is a Taiwan based company established in year 1992. They manufacture circuit boards and graphic cards for personal computers. By early 2000s, AIC Systems had

evolved into what the industry considered an original design manufacturer (ODM). As an ODM, the company took an active role in innovating and designing each new generation of components. Because of in house designing company was able to foster more exclusive, long term relationships with its customers. The company was also among the first Taiwanese firms to shift all its production volume to China because of cheap labor cost. In 2007, AIC Systems diversified its product

portfolio to include consumer electronics in order to serve customer needs directly and build a new proprietary consumer brand. In March 2008, they began development of the QuiN and Elias Chen was charged with bringing a Netbook to market by the third quarter of 2008. Along with Lapin, he has designed a 16-meter assembly line staffed by 10 operators.
Problem Because of the low cost and quality of the netbook there is a huge demand and the marketing division has projected increase of netbook sales 130,000 units a month in the next month or two. Since Kaizhi plant has not yet moved very far down the experience curve it has still to identify ways to improve productivity of the existing capacity. Currently, the workers are already working 10 or 12 hours

shifts, which is not sustainable. It is also visible that the supervisors are often engaged in firefighting situations which was leading them to look for quick fixes rather than finding permanent solutions. Analysis
Since we have to increase the production and bring the level to 130,000 units a month, below are certain options which can be looked into. First we analyze the present situation and then we move on to the options which AIC have. After analyzing each option we will identify which is the most suitable one.

Present Situation Current Cycle Time: 50 seconds/unit Theoretical Cycle Time: 8*60*60/700 = 41.14 seconds/unit Current output from one line in one shift (including 1 hour break): (8*60*60/50) = 576 Total Output in 1 month with 4 lines, 2 shifts on each day and Sunday off: 576*4*2*25 = 115,200 Production Capacity = 700*4*2*25 = 140000 Labor Cost: 4.8 * 115200 = $552960 in one month Profit: 19.2 * 115200 = 2211840 per month Requirement is: 130000 Option 1 Investing in a new assembly line (assuming that the cycle time and the working hours including the number of workers persist) Output in 1 month would be: 576*5*2*26 = 149,760 units This is much above are requirement of 130000 units. Positives Capacity of the plant will be increased No extra shift are required to produce additional output Further improvement in the cycle time could further increase the present capacity

Drawbacks Variable cost will increase Fixed cost of installing new line will be incurred New workers would need to be hired for the new line Training cost will be incurred to train the new hired workers If CT and process is not improved we are still not answering the question on how to improve

Analysis of option 1 This option is feasible. But this is a long term solution. Since we are required to increase the output within one month, some alternative solution is required.

Option 2 Make all 7 days working. Keep the shift times and everything else same. Output in 1 month would be: 576*5*2*30 = 172,800 units This is much above are requirement of 130000 units. Positives Capacity of the plant will be increased Fixed cost wont increase Cost of installing a new line wont be there

Drawbacks High chances of worker unrest Violation of world labour laws as well We are still not improving the assembly line

Analysis of option 2 This option is not at all feasible. Even though it looks good on paper but when implemented in real life situation it would do more harm than good. The cost associated with working on Sundays out rightly exceeds the benefits.

Option 3 Add an additional worker, maybe a floater. The job of the floater would be to help in Workstation 2, 4, 6, 7, 9, 10. The job of the floater would just be to prepare the tray for the next station. So 6 seconds would be saved at major pain point stations. The new cycle time would become 44 seconds. Output from one line would be: 8*60*60/44 = 654 seconds/units Out in one month would be: 654*4*2*25 = 130800 units This is above our present requirement of 130000 Positives Capacity of the plant will be increased and there is a process improvement as well Cost of installing a new line wont be there Fixed cost wont increase Labour cost wont rise much just due to one worker No extra shift is required and no working Sundays

Drawbacks Extra floater on each line can cause disruption Since we are shifting the task, the workers have to become used to this change W

Analysis of option 3 According to us this option is the best method. This option reduces the cycle time and we are adding only one worker to one line which is not much of a cost. The present demand can be a spike so addition of new assembly line might not be a good short term solution. Recommendation As per the case we can see that AIZ Netbooks demand is on a rise. Option 1 that is building a new assembly line is surely a long term solution. Along with the cycle time improvement and process improvement the capacity can be increased much further. Even though this is a long term solution but we require an increase in production in one or two months. For this short term goal is to improve the process. This can be done by using option 3. In this option by just adding one worker we can improve the cycle time by 6 seconds and hence the output.