vector consulting 2

8/10/2019 Vector Consulting 2

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TITLE SLIDE


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ANALYSIS OF PROBLEMOrders

Rawmaterials

WIP Shearing Punching Welding Painting

fabrication

Packaging

Outsourced

Finishgood

inventoSimilar orders Prepared in Batches

Idle RawMaterial

Work In processInventory

Absence of complete parts oforder in paint shop

Absence of complete parts oforder for Packaging

KEY ISSUES

Process Problems De-synchronization

of Process in theFinal Stages

Improper/inappropriate Batch ordersprocessed in initialstages

Key Reasons forproblems Local cost

reduction efforts Local Efficiency

maximization

Supporti Local

order aWIP(Braw mproces

Ordersto the

KEY OBSERVATIONS Idle Raw Material & High WIP/FGI:

Orders are not processed as perdemand

Efforts for cost reduction by enablingprocessing in batches leads to de-synchronization

Waiting time in the final stages issignificantly high

Incomplete/missing parts occur inthe final stages lead to flowbacks inthe initial stages thereby disruptingits flow and adversely effecting itscapacity


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PROPOSED

Operate Midway between the two extremes Reduce the amount of work available to the shop processes based on the release date

Lesser WIP available to the initial stages would reduce the batch size and would put a cap onthe local cost reduction and efficiency maximization initiatives

Effects Orders where batch size is not significant would also be taken up into the process and made

available to the final stages

Batch Processing oforders

Processing solely onthe basis of demand

Reduced costs Increased Efficiency

High Idle Decr

Maintain a fixed level of inventory at the end of each process to avoid delays

The level of inventory to be decided based on the demand As the inventory between the 2 processes reaches the fixed level, stop the preceding processes As the inventory between the 2 processes falls below the fixed level, start the preceding processes to bridge the

gap

EFFECTS: Improvement in Flow line

Shearing PunchingInventoryFor tile Punching: a units

For Fascia Punching: b unitsFor Frame Punching: c Units


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STRATEGIC MODIFICATIONS PROPOSED

Target : Smaller Office spaces Cost : Low cost, since standardized

items can help reduce costs Contribution to Revenues : 35-40% Product offering : The list of

standardized items would be basedon a market study of this segmentand product line of competitors

PROPOSAL WITH RESPECT TOSTANDARDIZATION/CUSTOMIZATION

Purely Standardized ProductsCustomizable from a company

specified De-coupling PointCustomizable fr

specified De-c

BENEFITS OF LIMITED CUSTOMIZATION

Target : Medium size office spaces Decoupling Point : Before the welding

Process Achieve standardization in raw

material procurement and initialstages

Nearly all variations demanded bycustomer lie after this process

Cost : Blend of standardization andcustomization would help reduce costs

Contribution to Revenues : 30-35%

Target : Large size Decoupling point

user. A premium wbased on its proximmaterials

Cost : High, since Only taken for larg

Contribution to Re

The Business would be able to cater to small office spaces offering its standardized products The revenue lost due to limited customization would be compensated by additional revenue from small office spaces Efficiency lost in paint shops due to flow-backs and emergency orders would be reduced due to better synchronization be

stages. The variation in batches however would increase the setup time(non-value added) of the painting process and may incof paints. However better flow and reduced flow-backs would reduce the wastage of paints occurring due to priority orders.

Premium customers could be retained by offering a totally customizable solutions to loyal customers at a premium price. This would cater tlarge office spaces with a minimum batch size

The minimum work in progress inventory for each of the parts before each process could be effectively maintained in case of standardi

products.


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Improvement in Inventory Management System

Office Solutions Order

Current Situation

10% factory made 90% sourced from vendors

Company warehouse Packaged and sourced to site for assembling

Problems1. 20 days of finished goods inventory at warehouse2. Delay from vendors exacerbates when sent via

company ware house

Proposed Solution

Office Solutions Order

Package anddeliver

directly to sitefor assembling

10% factory made 90% sourced from vendo

Package anddeliver

directly to sitefor assembling

ADVANTAGES1. Less inventory costs2. Less probability of lost items

Inventory Control system to track items

Manage Items sourced from vendors

Finished Goods Company warehouse

The standardized product offering helps to reduceinventory problems:1. Items are stored part wise2. Count maintained by use of a appropriate checkin/check out systems3. Separate inventory data base for vendors(bothshipped and work-in-progress4. Stamping

ADVANTAGES1. Easy tracking of units when required

2. Less probability of lost items

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