Operations Project 1 - Assignment for chapter 1 PDF

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Assignment for chapter 1...

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Project #1 Due: March 2, 2017 Executive Summary: In Problem 1.2 with Carbondale Casting, there is a 10 person assembly line. The labor productivity before increasing production was 2 valves per labor hour. When production was increased to 180 units per 8-hour shift, the labor productivity increased to 2.25 valves per labor hour (depicted in Figure 1). Therefore, there was a 12.5% increase in labor productivity for Carbondale Casting. In other words, 12.5% more case bronze valves are able to be produced per labor hour. In problems 1.5 and 1.6, George Kyparisis talks about analyzing his organization’s productivity. In 1.5 the productivities were calculated by using units produced as the base. In other words, the labor, material, capital, and energy used were all compared to the 1,000 that were produced last year and now. Labor productivity increased by 9.3%, meaning 9.3% more units were produced per labor hour. In terms of the pounds of resin used, the productivity increased by 11.1%. This percentage means that 11.1% more units are produced per pound of resin. The capital productivity is the only category that decreased and the productivity loss was 10%. For this category, one more dollar was spent for every unit produced in comparison from last year to now. Finally, the energy productivity increased by 5%, which means for every unit produced, the organization was able to use 5% less energy than the previous year. All of the percentage changes are depicted in Figure 2. While the productivities of each category can be analyzed separately, it is difficult to view the organization’s overall productivity. While each category was compared to the number of units produced, there is still no common base in which the productivities can be combined. In Problem 1.6, the costs involved in each of the categories were provided. Dollar amounts act as the common base in which the productivity categories can be compared. In addition, the overall productivity can now be quantified, making it easier to see how efficient the organization is. Referring to Figure 3, the total costs involved in the production of bowling balls decreased from $4,850 to $4,510. The costs were calculated based on the given costs per hour, pound, month of investment, and BTU. Since all the categories are now in terms of dollars, the overall productivities from last year to now can be compared. The multifactor productivity of one month last year was 0.206, while the multifactor productivity of this year is 0.222 (Figure 4). With these two, the increase in overall productivity is 0.222/0.206=7.8%. Returning to the issue, George wants to know if his organization is maintaining the manufacturing average of 3% increase in productivity. Given the 7.8% productivity increase, this value is better to be used than the separate productivity increases calculated in Problem 1.5. Problem 1.7 is about Hokey Min’s Kleen Karpet service company and its labor and multifactor productivity. The amounts and costs of labor, solvent, and machine rental were given. In reference to Figure 5 of Problem 1.7, the total labor cost was $6,760. In order to calculate labor productivity, the number of rugs cleaned has to be divided by the cost of labor. The labor productivity per dollar comes out to be 0.0096 rugs per dollar (Figure 6). This means 0.0096 rugs can be cleaned for every dollar spent on labor. Meanwhile, the multifactor productivity is based on the total cost of performing the company’s service, or $8,260 (Figure 5). The multifactor productivity comes out to be (65 rugs)/($8,260) = 0.0079 rugs per dollar (Figure 6). In other words, 0.0079 rugs are cleaned per dollar spent by Holey Min’s Kleen Karpet company. Problem 1.2:

The labor productivity of the line is (160 valves)/[(10-person assembly line)*(8 hour shifts)] = 2 valves per labor-hour. When the manager changed the layout and increased production to 180 units per 8-hour shift, the new labor productivity was (180 units)/[(10-person assembly line)*(8 hour shifts)] = 2.25 valves per labor-hour. The percentage of productivity increase is (2.25 - 2)/ (2) = 0.125, or a 12.5% increase in labor productivity. Figure 1 illustrates the difference between the productivity before and after the manager changed the layout. With the original production rate of 2 valves per labor-hour the factory could only assemble 160 valves in 8 hours. After the new layout was made, productivity increase 12.5%, resulting in 2.25 valves per laborhour, and a total of 180 valves per hour. Problem 1.5: The units produced last year and now are the same, with 1,000 units being produced. The labor productivity last year was (1,000 units produced)/(300 labor hours) = 3.33 units per labor hour. The labor productivity now is (1,000 units produced)/(275 labor hours) = 3.64 units per labor hour. Therefore, the percentage change in labor productivity is (3.64 - 3.33)/(3.33) = 0.093. In other words, there is a 9.3% increase in labor productivity. In terms of material used, George’s productivity last year was (1,000 units produced)/(50 pounds resin used) = 20 units produced per pound of resin. Now, the productivity in terms of material is (1,000 units produced)/(45 pounds resin used) = 22.22 units produced per pound of resin. Therefore, the percentage change in material productivity is (22.22 - 20)/(20) = 0.111. In other words, there is an 11.1% increase in material productivity. The capital productivity last year was ($10,000 invested)/(1,000 units produced) = $10 per unit. The capital productivity now is ($11,000 invested)/(1,000 units produced) = $11 per unit. Therefore, the percentage change in capital productivity is (11 - 10)/(10) = 0.1. In other words, there is a 10% decrease in productivity in terms of capital invested. The energy productivity last year was (3,000 BTU)/(1,000 units produced) = 3 BTU per unit produced. Now, the energy productivity is (2,850 BTU)/(1,000 units produced) = 2.85 BTU per unit. The percentage change in productivity for energy is (2.85 - 3)/(3) = 0.05. In other words, there is a 5% increase in energy productivity. The percent changes among these factors can be observed in Figure 2. Here the differences are able to be compared much easier with the highest percent difference being 11.1% for material productivity and the lowest being a 10% decrease for energy productivity. Based on the percentage changes in the productivities of labor hours, material used, and energy, the conclusion can be reached that George’s organization is maintaining the manufacturing average of a 3% increase. All of the percentage increases in productivity are above 3%, except for capital. However, capital is only one factor with a percentage productivity decrease of 10%.

Problem 1.6:

Last year, the labor cost one month was (300 hours)*($10 per hour) = $3,000. The cost of resin was (50 pounds)*($5 per pound) = $250. The capital expense was ($10,000)*(0.01) = $100. Finally, energy cost (3,000 BTU)*($0.50 per BTU) = $1,500. The total cost of one month last year was ($3,000 + $250 + $100 + $1,500) = $4,850. The multifactor productivity of one month last year was (1,000 units produced)/($4,850) = 0.206 units per dollar. In one month this year, the labor cost is (275 hours)*($10 per hour) = $2,750. The cost of resin is (45 pounds)*($5 per pound) = $225. The capital expense is ($11,000)*(0.01) = $110. Finally, energy cost (2,850 BTU)*($0.50 per BTU) = $1,425. The total cost of one month last year was ($2,750 + $225 + $110 + $1,425) = $4,510. The breakdown of the costs between one month this year and one month last year can be seen in Figure 3. In Figure 4, the multi-factor productivity of one month of each of the two years is compared. This year’s multifactor productivity is calculated as (1,000 units produced)/($4,510) = 0.222 units per dollar. Using last year’s productivity (0.206) as a base, the increase will be (0.222)/(0.206) = 1.078. That is a 7.8% increase in productivity which can be seen in the bar graph of Figure 4. Problem 1.7: The labor productivity per dollar is (65 rugs)/(520 hours * $13 per hour) = 0.0096 rugs per dollar. Using the costs of performing service presented in Figure 5, the multifactor productivity can be calculated by dividing the number of rugs by the total costs. More specifically this is calculated as follows: (65 rugs)/[(520 hours*$13 per hour) + (100 gallons*$5 per gallon) + (20 days*$50 per day)] = 0.0079 rugs per dollar. Figure 6 illustrates the difference in units per dollar between labor productivity and multifactor productivity, which demonstrates that there is actually 21% less units per dollar being made when other factors are taken into consideration.

Appendix:

Figure 1: Value Unit Production By Hour vs. Total Production

Figure 2: Productivity Percentage Change

Total Costs for Each Category

Last Year

Now

Labor

$3,000

$2,750

Resin

$250

$225

Capital Expense

$100

$110

Energy

$1,500

$1,425

Total Cost

$4,850

$4,510 Figure 3: Total Costs for Each Category

Figure 4: Multifactor-Productivity for One Month Cost of Performing Service

Cost Labor

$6,760

Solvent

$500

Machine Rental

$1,000

Total Cost

$8,260 Figure 5: Cost of Performing Services

Figure 6: Productivity Values in Units Per Dollar...