Table of Contents

Answers ........................................................................................................................................... 2 Question #1 .................................................................................................................................. 2 Question #2 .................................................................................................................................. 3 Question #3 .................................................................................................................................. 5 Question #4 .................................................................................................................................. 6 Question #5 .................................................................................................................................. 8 Type chapter title (level 1) .............................................................................................................. 9 Exhibit A ....................................................................................................................................... 9 Exhibit B ....................................................................................................................................... 9 Exhibit C ....................................................................................................................................... 9 Exhibit D ..................................................................................................................................... 10 Exhibit E...................................................................................................................................... 10 Exhibit F ...................................................................................................................................... 10

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1.
Yes, They are facing a problem. Metreke is a highly labour intensive company. But currently there is no Industrial Engineer to perform focused improvements, after Tom Hayes left the company. And he was the person who designed both Aero-Sonic Machine-method process and the SingleOperator method. There are three separate methods being used for the same operation at the Boxing Department. Considering the production data from 28th to 30th Dec 1990 they will be facing a card output shortage of approximately 20448 a day if they continue with these three methods (see Exhibit A). But as it mentions this figure will go higher as the efficiency in the Single-Operator method is going down without proper training. Metreke is highly dependent in a single supplier for envelopes. And also because of the order lead time of one week. Thus Metreke has to store a large inventory of envelopes for buffering. The production monitoring system has been ineffective since the absence of the Industrial Engineer; hence there are no enough data available about the three separate methods. In an effort to establish a single system out of the three packing methods, they would face serious monetary issues with the Aero-Sonic Machine; if decided to go with the AeroSonic system they would need at least two more machines to merely meet the next years demand (See Exhibit B). But each of these machines would cost at least $9000, which is almost twice the cost of the first machine. And also, they cannot afford to terminate Aero-Sonic Machine operation to go for other methods as they have already incurred that machine cost and it wont be easy to sell the machine for a reasonable price as its custom tailored.

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2.
I. Six-Operator method Physical System This is, the oldest from the three methods, operates on a line layout using just the conveyor belt as a mechanical aid. Though the card designs and sizes differ, the process is mostly identical and predefined. Even to pack the ten designs which box containers are required, the Six-Operator method can operate only minor changes in some motion elements. A little amount of Work-In-Progress (WIP)can be stacked up between stations as the cycle time of each station vary, but when the sequence is well organize the consequent operators would be pushed to pace as fast as he can to avoid WIP stacking up at their workstations. People System Operators are very much focused on to a few simpler and repetitive set of tasks and having a very little training requirement. Information and decision making system Due to the more of a steady pace operation of this method, capacity planning should be taken care of carefully as the degree of variability with the same state is low. But anyway, there is a higher flexibility in this compared to Aero-Sonic Machine method for increasing the capacity with a lower capital investment as there is no technical limitations applied. Monetary It has more of a fixed costs structure and lower labour content per rupee value of the product as the operators are on daily-wage basis. II. Aero-Sonic Machine Method Physical system This method also has a line layout as the Six-Operator method. The difference here is that it uses a machine aid to make the packer filling process more efficient. It automates several manual motion elements which in turn reduces two operators in the new process. The flow of material through the process is still much regular and predictable, but however one disadvantage is that it will have to deviate from this method when it comes to the ten designs which use the box containers due to their unusual size. People system There is no much difference in the people system from the Six-Operator method rather than some tasks are more simplified (i.e. only the 3rd operator has a filling operation) here and it would need a little more training for the Aero-Sonic Machine operator to precisely do his task in synchronize with the machine efficiently and safely.

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Information and decision making system One major fact that is different from the Six-Operator method is that the maximum capacity of this method is technically limited by the capacity if the Aero-Sonic Machine. It would require a comparatively large investment for a new machine or a modification for a capacity upgrade.

Monetary system The labour cost is much static and decisions must be taken with a higher attention on the capital cost controlling. The labour content per rupee value of the product has been further reduced but with an addition of machinery cost. III. Single-Operator method Physical System This method stands out from other two with its physical layout. This process has been designed in a way that each of the tasks of Six-Operator method would be carried out by a single operator. At a time the operator would have to handle 360 cards and same amount of envelopes, 30 packers and a shipper on his/her table (more WIP at a given time). The material flow is predefined but can get alternated to a certain degree (Ex. Changes to the sequence can be made by operator on his easement). People System The labour training is fairly higher that the other two as one operator handles all the tasks in limited space. And also process wont be as steady as the previous methods as it solely depend on the individual performance (i.e. worker discretion is high), resulting the need of more supervision. Information and decision making system Because of the above mentioned reason, day to-day monitoring and improvements should have a major concern than other two methods. Monetary This method carries a process which results a finished good by a single operator. Such that, a piece rate payment system would be much suitable and also it would help in resolving some of the performance issues now having with this system (Ex. It would persuade operators for self-improvements to earn more). But it would create a higher portion of variable costs in the cost structure. Considering all the above facts, it can be considered that the Six-Operator method and the Aero-Sonic Machine method lie mostly on the Line floe production system part of the spectrum and the Single-Operator method shows Batch process characteristics. Page 4 of 10

3.
Cycle time is the time a workstation (or a process) takes to produce a unit of output. When it comes to a multi-workstation process with multi operators, the process cycle time becomes the cycle time of the bottleneck workstation. Single-Operator method: According to the MTM calculation this method has an standard cycle time of 0.1262 mins./ Packer. This means it has a maximum capacity of approximately 3407 packers/day ( See Exhibit C). Such that, to produce the daily Everyday cards demand of 416,000 (i.e. 800,000 x 52%) Boxing Department requires 11 operators . But this is not the practical scenario. Above calculations assumes that the operator efficiency is 100%. According to the actual production data available that ate running below 50% efficiency(See Exhibit D). And also, the efficiency has been further reduced because of the improper training received by new operators. When we consider in there element level (Ref: Exhibit 3), it is observed that the handling of shippers take the longest element times, which must probably be a result of ineffective storing of empty shippers under the table and finish good stacking setup. And also, this may be ergonomically stressful to reach for the shippers which intern makes the operator exhausted quickly and reduce the efficiency. Aero-Sonic Machine Method: The bottleneck of this process is at the 2n operator. Thus the cycle time of the process is 0.042 and the maximum capacity is 10238 packers/day. And also it can be calculated that the production per labour per day of this process is 2559 packers/day per labour, which is by calculation lower that the Single-Operator method capacity of 3407 packers/day per labour. Currently the recorded maximum efficiency if this process is 65% (See Exhibit E)

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4.
As the case mentions, the retailers have a major control on the amount of sales each card company gets from them. Thus, to make the Metreke cards more competitive is to give a higher profit margin to the retailers. This can be accommodated by reducing the manufacturing cost. The following, discusses a proposal to reduce the operations cost in the Boxing Department . The management is concerned that the higher labour cost might set off the savings they gained by the introduction of paper packers. Such that here its focused on to reducing the labour cost. Proposal Goal: increase the production capacity to meet the forecasted demand of 416000 cards per day in the Everyday cards category. Assumptions: There are no MTM data available for the Six-Operator method. Its assumed that it was difficult to be improved and not cost effective (as they had to seek for other options) and has not been considered in the following proposal. Company is in a position to recruit a new competent Industrial Engineer Proposed method: The maximum capacities of the two new methods Single-Operator method and Aero-Sonic Machine are; Method Single-Operator method Aero-Sonic Machine Maximum Production (Packers/day, per labour) 3407 2559
Table 1

As the cost for the Aero-Sonic Machine has already been incurred, it has to be utilized in an optimum manner. But as the cost for a 2nd and 3rd machine would be very high (i.e. USD 9000 per machine minimum), the best solution would be to go for a combination of methods. It is proposed to recruit a new competent Industrial Engineer to start a strong focused improvement process to increase the efficiencies of these two methods at least up to 80%, which is a reasonable target. This can be done after improve the motions and operator ergonomics of the processes and establishing a systematic and effective training system and a monitoring system as well. Assuming this target is achieved, it can be calculated that the required number of SingleOperator workstations is 10 and 4 more operators on the Aero-Sonic Machine. This number, topped up with and extra Single Operator method workstation for safety would sum up to a labour requirement of 15 operators. Compared to the current situation where 22 Page 6 of 10

operators are used, this is a saving of 7 operators. This in turn gives a monetary saving of $ 525 per day. (see Exhibit F) And also, Industrial engineer has to perform this kind of focused improvements throughout the manufacturing process to save labour minutes and increase efficiency. But this system has a short come that, Aero-Sonic Machine cannot operate with the box containers and it would be difficult for the single operator setup to adjust to box containers in the case where 10 designs which cannot fit into packers come for production. But as this is only a very small portion (0.25% of all the card designs) it can be produced as a special order and stock, but there will be an added holding cost and changeover losses.

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5.
Canadian Affiliate has achieved an average of 175 packers per hour for each worker using the packers. But as it mentions Metreke has been getting 212 boxes per hour for each worker with the same method and layout as the Canadian affiliate. Given that both box and packer contains the same amount of cards; 12, this gives a clue that usage of packers cause the efficiency to go down despite of its resource savings (assuming that all the other conditions not mentioned here are the same). Its about a 17% reduction of efficiency. Decrease of the efficiency means, in turn the number of labour hours required to achieve a set production target gets higher. As Metrekes labour cost is already high (i.e. $10 per hour per worker), this can cause the savings they expect from the packers to set off. As Meterke has taken a risk by starting to use packers which requires major focused improvement strategies to be implemented in order to compensate for the efficiency losses they have to anticipate, they could have taken contingencies against a sudden drop in the Industrial Engineering aspect of their company and should have been more thorough with the cycle time calculations before going for major investments such as the Aero-Sonic Machine.

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Calculations Exhibit A Average capacity o Aero-Sonic Machine

= (6700+6178) 2 ; First operation days is = 6439 packers/day excluded o Single-Operator method = (1415+ 1332+1610) 3 = 1452 packer/day Single-Operator method with 12 workers = 1452 x 12 = 17424 o Six-Operator method = 9100 packers/day

Total average daily capacity = 6439+17424+9100 = 32963 Shortage from daily demand = (34667 - 32963)packers x12 = 20448 cards

Exhibit B Everyday-cards demand (in packers)= 800000 x 52% x (1/12) =34667 packers/day Aero-Sonic Machine Capacity = 430 0.0374 = 11497 Minimum requirement of Aero-Sonic= 34667 11497 = 3.02 Machines to cater the demand

Exhibit C Daily capacity per workstation = 430mins 0.1262 = 3407 packers Number of operators to cater daily demand = = (41600 / 12) 3407 11 operators

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Exhibit D Daily Efficiency of Single-Operator method o On 28th = (1415/3407) x 100% = 41% o On 29th = (1332/3407) x 100% = 39% o On 30th = (1610/3407) x 100% = 47%

Exhibit E Maximum MTM capacity = Capacity per labour = 10238 / 4

= 10238 packers/day
= 2559 packers/day x 100% 65%

Maximum efficiency (on 29th)=

Exhibit F 1) Production at 80% efficiency o Single-Operator method = 3407 x 80% = 2725 o Aero-Sonic Machine = 2559 x 80% = 2047 2) Number of Single-Operator workstations required (N) to cater the daily demand 34667 = (2047 x 4) + (2725 x N) N 10 3) Total operator requirement = (Single-Operator method operators) + (Aero-Sonic Machine operators) +1x safety tolerance = 15 operators 4) Daily labour cost saving = (22 - 7) x $10 x 7.5 = $525 per day

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