Company ABC manufactures widgets using a two--stage system in which there is one machine in the first stage and 3 identical machines in the second stage. The machine in the first stage can produce at an average rate of 5 jobs per shift. Each machine in the second stage can produce at an average rate of 2.5 jobs per shift. Each product has to be first processed on the first machine and then on one of the three second stage machines. The demand for widgets is 5 jobs/shift. Recently a Japanese company entered the market and ABC faces severe competition. The CEO of ABC has heard about the Japanese approach to operations and after visits to several facilities in Japan concludes that the key to Japanese cost and time competitiveness is zero inventories. Based on the data supplied by the accountant, the CEO acts as follows:
• He observes that there is excess capacity in the second stage. The first stage produces at 5 jobs/shift and the second stage at 7.5 jobs per shift. To reduce costs, he disposes off one machine in the second stage.
• He dictates that no inventories be carried in the shop floor.
You are hired as a consultant. Preliminary data collection shows that the first machine produces at the rate of 8 jobs per shift 50% of the time and 2 jobs per shift the other 50%; similarly, each machine in the second stage produces at 4 jobs/shift 50% of the time and 1 job/shift the other 50%.
a. What is the effect of CEO's decisions on the output rate of widgets at ABC? Is it less than, equal to, or greater than 5 jobs per shift? Why?
b. How would you approach this problem and achieve the JIT ideal of zero inventories with existing resources. You realize that you cannot make the machines completely reliable overnight.

Question

Company ABC manufactures widgets using a two--stage system in which there is one machine in the first stage and 3 identical machines in the second stage. The machine in the first stage can produce at an average rate of 5 jobs per shift. Each machine in the second stage can produce at an average rate of 2.5 jobs per shift. Each product has to be first processed on the first machine and then on one of the three second stage machines. The demand for widgets is 5 jobs/shift. Recently a Japanese company entered the market and ABC faces severe competition. The CEO of ABC has heard about the Japanese approach to operations and after visits to several facilities in Japan concludes that the key to Japanese cost and time competitiveness is zero inventories. Based on the data supplied by the accountant, the CEO acts as follows:
• He observes that there is excess capacity in the second stage. The first stage produces at 5 jobs/shift and the second stage at 7.5 jobs per shift. To reduce costs, he disposes off one machine in the second stage.
• He dictates that no inventories be carried in the shop floor.
 You are hired as a consultant. Preliminary data collection shows that the first machine produces at the rate of 8 jobs per shift 50% of the time and 2 jobs per shift the other 50%; similarly, each machine in the second stage produces at 4 jobs/shift 50% of the time and 1 job/shift the other 50%.
a. What is the effect of CEO's decisions on the output rate of widgets at ABC? Is it less than, equal to, or greater than 5 jobs per shift? Why?
b. How would you approach this problem and achieve the JIT ideal of zero inventories with existing resources. You realize that you cannot make the machines completely reliable overnight.

Quizplus · Accepted Answer

The Answer of Company ABC manufactures widgets using a two--stage system in which there is one machine in the first stage and 3 identical machines in the second stage. The machine in the first stage can produce at an average rate of 5 jobs per shift. Each machine in the second stage can produce at an average rate of 2.5 jobs per shift. Each product has to be first processed on the first machine and then on one of the three second stage machines. The demand for widgets is 5 jobs/shift. Recently a Japanese company entered the market and ABC faces severe competition. The CEO of ABC has heard about the Japanese approach to operations and after visits to several facilities in Japan concludes that the key to Japanese cost and time competitiveness is zero inventories. Based on the data supplied by the accountant, the CEO acts as follows:
• He observes that there is excess capacity in the second stage. The first stage produces at 5 jobs/shift and the second stage at 7.5 jobs per shift. To reduce costs, he disposes off one machine in the second stage.
• He dictates that no inventories be carried in the shop floor.
 You are hired as a consultant. Preliminary data collection shows that the first machine produces at the rate of 8 jobs per shift 50% of the time and 2 jobs per shift the other 50%; similarly, each machine in the second stage produces at 4 jobs/shift 50% of the time and 1 job/shift the other 50%.
a. What is the effect of CEO's decisions on the output rate of widgets at ABC? Is it less than, equal to, or greater than 5 jobs per shift? Why?
b. How would you approach this problem and achieve the JIT ideal of zero inventories with existing resources. You realize that you cannot make the machines completely reliable overnight.

Company ABC Manufactures Widgets Using a Two--Stage System in Which