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

Page 1 of 10
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 Single-
Operator 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 Aero-
Sonic 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.

Page 2 of 10
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.

Page 3 of 10
 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)

Page 5 of 10
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 Maximum Production (Packers/day, per

labour)
Single-Operator method 3407
Aero-Sonic Machine 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 Single-
Operator 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.

Page 7 of 10
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.

Page 8 of 10
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

Page 9 of 10
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

= = 10238 packers/day
Capacity per labour = 10238 / 4 = 2559 packers/day

Maximum efficiency (on 29th)= x 100% 65%

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

Page 10 of 10