How Production Lines Are ManagedTerm Paper

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Operations Management

The order cost is $20 per order. Carrying cost is $36 per unit per year and annual demand is estimated to be 476 units. What would the low-cost order quantity be?

Peavler (n.d) in his paper revealed the formula for calculating low-cost order quantity. His formula can be illustrated as follows:

Economic Order Quantity: (2FD/C) 1/2

Here:

F is the fixed cost

D is the demand and C. is the carrying cost per unit per year.

According to this formula and based on the figures above, one comes to the following figures:

Formula: (2)(476)(20)/36 =528.88

In the above formula, 20 is the fixed cost per order; 476 is the unit demand per year; and their carrying cost per year is $36.

Taking square root of 528.88 and Square root of 720 is 23. Therefore, ECQ = 23.

This implies that in case the company orders 23 inventory units each time an order is placed, the company will cut down its inventory costs - both ordering as well as costs for carrying.

Question 2: In many ways, perception is more important than reality. How should operations managers manage their queuing systems so that long waits are perceived to be shorter, psychologically?

In this civilized world, there is a proposed arrangement for each and every planned function, which enables the civil structure to function on its own and maintain order (Milne 1998). There are certain functions of this civil society, without which there would be complete chaos and disorder, and this would make the civil structure weak. One of the most common functions of a society is a "Queue," which is also a very fitting example of behavior of consumer under various needs and forms of requirement (Shaw, Blume, and Greenhalgh 2000). We can see queues everywhere around us, and there is a difference in behavior of each queue from another, which depends upon the service for which a particular queue is maintained (Hockenhull 2000; Larson 1987). Queues bring out a reflection of behavior among individuals under various needs, for instance, if we notice closely, we see how individuals react to different queue formations (Levin 2000). Any person is only bound to wait for a service, standing in a queue, only when there is a dire need for the same service and it is not available through another source. When the same service is available at another source, even at a premium cost, the person would choose it, rather than waiting for it (Zhou & Soman, 2003).

There is a certain level of patience among every individual, and it is mostly inherited naturally (Becker1965; Larson 1987). A customer is bound to renege and choose not to wait for the service for a period longer than usual, which is based on the patience level and frustration level, which acts as a negative motivation (Larson 1987). In a queue, there is asset of individuals, which surround a particular person, and reneging occurs, when the person gets frustrated by the number of people present ahead of the person, and the manner in which they are arranged and to certain extent influence the person. Operations researchers have suggested certain techniques, which guide towards an effective queuing technique that can curtail the act of reneging on part of customers (Zhou & Soman, 2003).

Design Implication

One of the most effective and positive functions in this direction is that of the designing, which is decisive about the effectiveness and enhance the waiting function. It is to be made sure that the surroundings of a queue is designed in a colorful and elaborate manner, which uses bright colors, which is very important to uplift the mood of the customers. Like it is seen in Disney theme parks, where employees dress as characters entertain the customers, to keep them involved and interested (Norman, 2008). The overall layout of the queues is very important and interesting and interactive surroundings can help customers wait for longer period of time.

Eliminate Confusion

Apart from the designing function, there is another function, which is of clarity, which is very important not only in the queue function, but also is very important in overall business operations. When a customer is confused at any point in a business function, it is a very negative point for the business, as the customer reneges from the venture, because it does not trust the venture. Similarly, the queuing function of the business should be very clear and clearly designed for the customers. It should not confuse the customers, but in fact should remove confusion form the customer's mind. Every queue has a beginning point and an eventual point, where the anticipated service is available to be accessed and taken by the customer. This makes the function very intricate in terms of customer response, as there are certain designs, which the customer can find very confusing and repelling. If the access points and direction of movement of the queue is not clear with the customers, they can be led in a wrong direction, based on their informal communication among other customers, and which can lead to act of reneging by the customer, which is basically due to non-availability of direction and prevalent confusion (Norman, 2008).

Question 3: Read the case study entitled "Morton Salt" on pages 16-17 and answer the following question: The company was reluctant to adopt newer and more modern equipment. Why?

This is a take on the salt company by the name of Morton Salt, which produces salt-based product for industrial, agricultural and market use. This is a vast operation and consists of application of certain functions to make the whole process possible. There are certain latest techniques which are required and implemented to recover the basic raw material, salt from under the ground, and to do so there is a need to install pumping techniques. Normally salt is present in abundance, about 2400 feet below the surface of earth, and to obtain it, pump hoses are installed and injected into salt caverns underground. This is very detailed and intricate processes, which is required to extract salt from the depths of the earth. It is done by pumping water into the salt caverns, which converts the salt in brine, which is eventually extracted and pumped out from below the earth, in brine state only. This brine is boiled in order to enable the vaporization process, after which salt is obtained. This is a six-week lengthy process, and salt is pumped continually for six weeks regularly, and at beginning, salt is obtained at the rate of 45 tons per hour, which reduces to 75% of total capacity in sixth week. Then the equipment is set for maintenance for further use.

This is a huge function in terms of production and output in which about 3.8 million cans of salt are produced, of which only 70% of the total produce is used by Morton label. The remaining produce is shipped out for other labels, and packaged differently. In the operations, there are two parallel and high speed production lines, which are implemented by Morton to accommodate its requirement. There is a common line which is shared by both lines in the beginning and eventually, which splits into two different but identical lines, performing the production function. These lines have a high capacity of production about 9600 cans per hour each. Due to the rigidity in nature of the task, the operations are fixed, and not much of a change is required in the production function, which employees about 12 production workers on each line.

Like any other food-based function, it is very important to maintain quality of the produce, and in Morton it is maintained through an expert eye. The primary form of inspection is done through visually identifying the quality and checking the correctness in terms of filling and packaging of the cans, which have to be maintained at a particular level of uniformity and consistency. It is to be ascertained that each can is individually alright and is correct in terms of appearance and weight. Morton uses vintage equipment, which dates back to 1950s, which is although legendary, but still requires huge amount of maintenance and upkeep to keep it running and maintain quality of production. There is a set of highly skilled employees with correct technical knowhow, who have the skill to maintain and repair the machinery and keep operations going (Stevenson, W.J. & Sun, 2010).

Product A consists of two units of Subassembly B, three units of C, and one unit of D. B is composed of four units of E. And three units of F. C is made of two units of H. And three units of D. H is made of five units of E. And two units of G.

a. Construct a simple bill of materials (product structure tree)

The bill of material (BOM) diagram is also referred to as the product structure tree or sometimes as product tree due to the fact that it demonstrates the manner in which… [END OF PREVIEW]

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