Optimize Production Strategies for RiverTech Manufacturing Group
School
North South University**We aren't endorsed by this school
Course
ACT 201
Subject
Management
Date
Dec 11, 2024
Pages
7
Uploaded by tasminferdous869
Group Assignment GuidelineMGT 314The calculations in this assignment are to be done entirely on Excel. The screenshots of the calculations and final answers are to be pasted on to a single Word Document, where additional comments should be added explaining the output of the calculation in support of answering the question relevant to that part of the assignment. Any graphs and charts required as part of the question should also be generated on Excel, and then pasted on to the Word Document.Once you have completed the assignment on the Word Document, convert it into a PDF. Upload both the Excel file and the PDF document on Canvas in the link that will be given for submitting the assignment.This is a group assignment. The total marks are 20, and it will account for 10% of your final grade. Make sure to have written the names and ID numbers of all the group members at the top of the Word Document, as well as your group name.Ideally all the group members should significantly contribute to the assignment. Consequently, all the group members will receive the same score that is awarded for the submission. Unless the groupmembers agree that a particular member has not contributed enough to the assignment, and feel it would not be fair to award that particular member the same score as the other members who have contributed significantly. In which case, you should approach me to let me know about the situation within your group, so I can adjust the score for that member accordingly. However, it is preferrable to let me know about the non-cooperation of a group member while the work is still going on, so I can mediate and convince that member to cooperate in the assignment while there is still time.The assignment is due on Monday, December 23rdby 11:59 PM at night.
RiverTech Manufacturing Ltd. is a mid-sized company specializing in producing high-quality outdoor furniture. As the company’s market has expanded, demand for their products has increased. However, they have faced challenges in managing production costs, quality control, and customer satisfaction. The CEO is keen on refining the company's production operations, quality assurance, and inventory management to meet growing demand and enhance profitability.The objective of this case study is for you, as a production consultant, to assist RiverTech Manufacturing in developing strategies and operational models to optimize its production processes.1.Operations Strategy DevelopmentRiverTech Manufacturing Ltd. is experiencing increased demand. However, their current operational strategy is not sufficient to meet these growing needs. The company must develop an operations strategy that will allow it to improve productivity, manage costs, and maintain high product quality. The company is currently exploring two strategic options:Cost Leadership Strategy: Focus on reducing production costs while maintaining competitive pricing.Quality-Focused Differentiation Strategy: Increase product quality to justify a higher price, thereby improving market share in premium segments.They currently operate 8 hours a day for 5 days a week. The material cost per unit is $30, the labor cost per unit is $20, and the overhead cost per week is $4,000. The current selling price per unit of their furniture is $75, and their current production volume is selling 10,000 units per quarter.Cost Leadership: Simulate the impact of scaling production through economies of scale by reducing labor and material costs. The company can reduce material costs by 5% through better supplier negotiation and reduce labor costs by 10% by automating certain production tasks, helping to increase their production output by 50%.Differentiation: The focus is on enhancing product quality, which will allow the company to charge a premium price for the higher-quality product. The material costs increase by 10%, and implementinga more rigorous quality control process adds a fixed cost of $5,000 per month for quality assurance. As a result of the higher product quality, the selling price per unit is increased by 20%.i.Simulate the different operational strategies, assess the impact of each strategy on the company’s profitability, and provide a recommendation.[1]2.Productivity AnalysisRiverTech Manufacturing is concerned about declining productivity. Management wants to measure current productivity levels and explore ways to improve them. They are currently producing 200 units of outdoor furniture weekly, working a weekly total of 800 labor hours. As before, the material cost per unit is $30, the labor cost per unit is $20, the overhead cost per week is $4,000, and the selling price per unit of product is $75.i.Analyze current productivity measures by calculating the labor productivity, material productivity, and multifactor productivity, commenting on the findings for each measure. [1]The company considers two strategies to improve productivity:
Automation: Invest $50,000 in new machinery to reduce labor time per unit from 4 hours to 3 hours and overhead costs by $1,000 weekly.Training Program: Spend $10,000 on staff training to increase labor productivity by 20%.ii.Now simulate the productivity improvements under each of the two strategies, calculating labor productivity, material productivity and multifactor productivity. Compare each metric for both strategies with each other, and also with the metric calculated under the previous system. Identify whether any improvements can be made by implementing either of the strategies, and if so, which strategy would be recommended to enhance productivity overall.[2]3.Demand ForecastingRiverTech Manufacturing wants to forecast demand for outdoor furniture for the upcoming quarter to inform production planning. The goal is to ensure production aligns with anticipated demand while avoiding overproduction or stockouts.Historical Quarterly Sales Data (Units):YearQ1Q2Q3Q4Year 18,0009,00011,000 10,000Year 29,00010,000 12,000 11,000Year 310,000 11,000 13,000 12,000The objective is to use the historical sales data to forecast demand for Q1 of Year 4 using three forecasting methods: 8-quarter moving averageExponential smoothing with α=0.5, starting from Q1 of Year 2 and assuming an initial forecast equal to the average of the sales data of the previous periods.Linear trend analysis starting from Q1 of Year 2i.Forecast using each of the methods, then plot all three forecasts together on a single graph.[2]ii.Then compare the results to determine the most accurate method, by calculating the MAD, MSE, and MAPE for each method over a period of two years from Q1 of Year 2 to Q1 of Year 4. Assume that the actual sales in Q1 of Year 4 turns out to be 12,000.[1]iii.Finally, plot control charts of errors for all three forecasts with 2s limits, to determine whether each of the forecasts are working.[1]4.Capacity PlanningRiverTech Manufacturing is experiencing increased demand for outdoor furniture. The production facility currently operates 5 days a week with one shift of 8 hours per day. Each unit takes 1.5 hours to produce.
Current production capacity is insufficient to meet the forecasted demand for the next quarter, which is expected to be 12,000 units. The company needs to evaluate alternatives to increase capacity while balancing costs and operational efficiency.The company is considering three alternatives to increase capacity:Add a second 8-hour shift/day, 5 days/week, incurring an additional cost of $10,000/month for labor and overheadInvest in automation, installing automated machinery to reduce production time per unit from 1.5 hours to 1 hour, incurring an upfront investment cost of $50,000Outsource production, contracting with an external manufacturer to produce the excess demand, incurring an outsourcing cost of $20/uniti.Determine the best option for increasing capacity to meet growing demand while minimizingcosts.[2]5.Quality ControlRiverTech Manufacturing aims to monitor and improve the quality of its outdoor furniture products. Recent data shows an increase in defects, and management wants to implement SPC techniques to identify and address quality issues. The company will use control charts to monitor production processes and conduct run tests to detect non-random patterns.Furniture is produced in batches of 10 units, and out of the last 10 batches, the number of defectivesin each batch was: {3, 4, 2, 5, 6, 3, 4, 5, 2, 1}.In a particular batch, the number of defects found in each unit was: {3, 5, 2, 6, 4, 3, 4, 5, 2, 3}.The weight of each unit (in kilograms) was also measured in the 10 batches, the results are listed below.Sample1505253504954554850512525149504953545251503535554565150525354514504849515247495048515515352545551535250546525053515249545051537485150495251535049528555453525153545251509495048514752535049511053545552515053545251
i.Given all the data above, create four control charts (x-bar chart, R-chart, p-chart, c-chart) to assess quality levels, analyzing each chart to identify any points or patterns indicating qualityissues. [2]ii.Then, perform two run tests (A/B, U/D) on the mean weights of furniture to detect patterns in the data that suggest non-random behavior.[1]6.Inventory ManagementRiverTech Manufacturing needs to optimize its inventory management to minimize costs while ensuring uninterrupted production. The company uses raw materials for furniture manufacturing, and fluctuating demand makes balancing order costs and holding costs challenging. Their annual demand for raw materials is 12,000 units, which they purchase from suppliers. The ordering cost is $60 per order, and the holding cost is 4% per unit per year of the price at which they purchase the raw materials. The supplier offers discounts for bulk purchases, with the price schedule below being followed:QuantityPriceQ < 1,000$501,000 < Q < 2,000$482,000 < Q < 3,000$46Q > 3,000$44i.Find the optimal order quantity of raw materials, and the total cost at the optimal order quantity. [1]RiverTech uses the raw materials to produce outdoor furniture. They want to optimize their production runs to balance setup costs, holding costs, and production efficiency. Suppose that the annual demand for their finished product is also 12,000 units, which they are producing in-house. The production rate is 5,000 units/month and the usage rate is 1,000 units/month. The setup costs are $100 per set up, and their holding cost is at the optimal order quantity found in the previous part. ii.Find the optimal production quantity of final furniture products, and the total cost at the optimal production quantity.[1]RiverTech also needs to know their reorder point, to ensure there is enough raw materials available to continue production during lead time to avoid stockouts. Their lead time is 7 days, they try to maintain a safety stock that is 5% of weekly demand, and they operate for 300 days in a year. iii.Find at what level they should place a new order for raw materials.[1]
7.Waiting Line ManagementRiverTech Manufacturing’s retail stores are experiencing increased customer wait times when customers arrive to purchase furniture. To improve customer satisfaction, the company analyzes its waiting line system using queuing models.Their current system has a single staff who is responsible for assisting customers with their purchase.The staff can serve a customer in an average of 3 minutes, and the service time is assumed to be exponentially distributed. Customers arrive at the store at a rate of 15 per hour, with arrivals assuming a Poisson distribution. i.Analyze the performance of the current system by evaluating the system utilization, the average number of customers waiting in the queue and in the system, the average time spent waiting in the queue and in the system, and the probability that there are 0 customersin the system, 3 customers in the system, and less than 3 customers in the system.[1]To optimize customer experience and reduce wait times, RiverTech is contemplating replacing their staff with an advanced AI robot which can assist customers with their purchase and check-out, thus automating the entire process. The robot serves each customer in an automatic 3-minute operation. ii.Analyze the performance of the new system by evaluating the same metrics computed under the previous system. Compare each metric under the two systems, and determine how much of a change automation has had in reducing each of the metrics.[1]8.Project Management and Scheduling
RiverTech Manufacturing is setting up a new production line to meet increased demand for its outdoor furniture. The project involves multiple phases, with the goal being to complete the project efficiently, minimizing delays and costs. Effective scheduling and resource allocation are critical to ensure timely completion.TaskDescriptionDuration (days)DependenciesASite preparation7–BProcure machinery10–CProcure raw materials5–DInstall machinery6A, BESet up safety protocols3AFTrain staff on safety4EGTrain staff on machinery5DHCalibrate machinery3DIPerform safety inspections2F, HJRun test production4G, IKConduct quality testing3JLBegin full-scale production2Ki.Create a Gantt Chart and a Network Diagram.[1]ii.Perform Critical Path Analysis (CPA), calculating the Earliest Start (ES), Earliest Finish (EF), Latest Start (LS), Latest Finish (LF), and Slack for each task.[1]