Muhammad Umair Iqbal (LUMS, Pakistan)

Sunday, November 15th, 2009

OM-WAC: Blitz Company

Blitz Company
Based on forecasts for the next year, I as the president of the Blitz Company will take the
following steps to optimize the Operations Management of the company so as to ensure meeting
sales targets for Year 4 of our operation:
Design of a normal process flow
Standardization of material flow through processes
Standardization of order size
Addition of appropriate machinery to improve productivity
Addition of man-hours to meet unusually high demand

And

Redesign of facility layout to improve operations

Process Flow Design

To identify the processes involved in most of the customer orders, the following filtering rule
was applied:

Based on this rule, 12 most common processes were selected (see Graphic A on next page).
Other than the raw materials and finished goods inventories at the beginning and end of process
flow respectively, the graphic shows that work-in-process inventory exists before KPR, Plating
and Drilling processes. This is because of the difference in cycle times of processes preceding
and following the WIP inventory points. For example, after a batch of circuit boards has passed
through touch-up and inspection stage, it has to wait for the plating stage to finish its work
because the latter stage has a significantly higher cycle time than the former.

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 Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company

Graphic A

Normal Process Flow for Blitz Companys circuit boards production

Photograph Inspect and shear Drill (location holes)

RM

WIP

Etch Plate Touch-up and KPR

WIP
Inspect

Rout

Shear Drill
WIP Configu Drill
ration Holes

Punch Press

Green Pantographic

FG
Inspect and Pack

Manual

Process RM: Raw Materials

Inventory WIP: Work-in-process

Flow FG: Finished Goods

Decision box
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 Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company

Having designed the normal process flow, Ill move on to the next step of my Year 4 operations
management plan.

Lot Size Decisions

Currently, our company is facing a less-than-August production efficiency because of a number

of factors, the most important of which are:

Were catering to a variety of customer segments ranging from orders as small as 1-10
circuit boards to 800-1000 circuit boards.
We accommodate rush orders that a customer needs within 4 days

Due to these factors, Krebs (our design engineer) and Beck (the foreman) are constantly rushing
to modify the processes to suit the rapid fluctuations in order sizes. To accommodate rush orders,
Hadler (the expediter) does the job of expediting the order through the processes, thus disrupting
other production and causing delays. To rectify these problems, I performed a scenario analysis
using MS Excel (Table 1 and 2) and found out that by catering to some specific type of
customers and specific order sizes, we can improve our productivity and hence meet future sales
targets and delivery deadlines for current and future orders. From exhibit 5 in the case, we know
that about 67% of our sales in September of Year 3 were from order sizes of 800-1050 circuit
boards. Thus, I propose the following three order sizes to be scheduled on our plant which will
improve our monthly production and provide us with economies of scale:
For order size of 120:

For order size of 800:

For order size of 1000:

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 Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company

TABLE 1

Normal Process Flow (Operations Common to most Orders)

September's Total Standard Production
Standard
Production September's
Times (in Production
Operation minutes) (in minutes (in hours)
Setup Run Orders Circuits Setup Run Total Total
Photograph 29 0 59 4690 1711 0 1711 28.51666667
Inspect and Shear 20 0.5 60 5740 1200 358.75 1558.75 25.97916667
Drill (location holes) 10 0.5 60 5740 600 358.75 958.75 15.97916667
KPR 1 10 60 5740 60 7175 7235 120.5833333
Touch up and inspect 10 3 60 5740 600 2152.5 2752.5 45.875
Plate 10 5 52 5616 520 3510 4030 67.16666667
Etch 10 4 59 5739 590 2869.5 3459.5 57.65833333
Shear (into circuit boards) 10 0.5 56 5828 560 364.25 924.25 15.40416667
Drill (location holes) 10 0.5 53 5709 530 2854.5 3384.5 56.40833333
Configuration
Rout 50 1 49 2380 2450 2380 4830 80.5
Punch press 150 0.6 4 3329 600 1997.4 2597.4 43.29

Drill holes
Green pantographic 50 0.05 8 1879 400 9395 9795 163.25
Manual 15 0.1 40 494 600 4940 5540 92.33333333

Inspect and pack 10 1.5 60 5740 600 8610 9210 153.5

Total 11021 46965.65 57986.65 966.4441667

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 Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company

TABLE 2

Cycle time for Cycle time for Cycle time for

Cycle time for Cycle time for order of 120 order of 800 order of 1000
order of 8 boards order of 40 boards boards boards boards

Operation 8 40 120 800 1000

Photograph 29 29 29 29 29
Inspect and Shear 20.5 22.5 27.5 70 82.5
Drill (location
holes) 10.5 12.5 17.5 60 72.5
KPR 11 51 151 1001 1251
Touch up and
inspect 13 25 55 310 385
Plate 15 35 85 510 635
Etch 14 30 70 410 510
Shear (into circuit
boards) 10.5 12.5 17.5 60 72.5
Drill (location
holes) 14 30 70 410 510
Configuration
Rout 58 90 170 850 1050
Punch press 154.8 174 222 630 750
Avg. of
Configuration
alternatives 114.4454721 138.981608 200.3219478 721.7148362 875.0656858

Drill holes
Green
pantographic 90 250 216.6666667 1350 1683.333333
Manual 95 415 303.75 2003.75 2503.75

Avg. of Drill holes

alternatives 91.04087653 284.3489254 234.7952662 1486.094606 1854.123824
Inspect and pack 22 70 190 1210 1510
Cycle time per
order 114.4454721 284.3489254 234.7952662 1486.094606 1854.123824

Minutes per board 14.30568401 7.108723135 1.956627218 1.857618257 1.854123824

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 Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company

Production (no. of
boards) per 8
hours day 33.55309678 67.52267473 245.3201077 258.3953932 258.8823863

Production (no. of
boards) per 21
days month 704.6150324 1417.976169 5151.722263 5426.303257 5436.530113

Order Size Scheduling

As shown in the previous section, standardizing the order size gives better production per month
due to less cycle time (time required to produce each circuit board) and cost-savings due to
economies of scale. As Ive assumed the same batch/order size to be scheduled for all processes,
Id to add machinery to resolve bottle-necks which were causing delays at the Green
pantographic drill press and the Manual drill press. The detail of the machinery added and their
associated costs is as follows:

Green pantographic press: 2 nos.

o Cost: $6,000 (@ $3,000 per unit)
Manual drill press: 3 nos.
o Cost: $1,800 (@ $600 per unit)

The addition of these machinery reduces overall cycle time per board production and gives us the
required level of production per month for Year 4. The estimate of circuit boards to be produced
per month in Year 4 is calculated in Table 3 on next page. This estimate was derived from the
sales forecast given in exhibit 4 of the case.

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 Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company

Table 3

Future Sales of Boards

Sales in September, Year 3: $66,402
No. of boards sold: 5739
Avg. Selling price per board: $11.57

Sales forecast for Year 4: $672,000

No. of boards expected to
be sold in Year 4: 58080
Avg. No. of boards
expected to be sold per
month in Year 4: 4840

Keeping in view the average monthly sales figure of 4,840 boards in Year 4, I developed the
order size scheduling shown in Table 2 above. As sales are expected to fluctuate over the next
year from month to month; and as per Table 2 the developed scheduling algorithm can produce
about 5,100 circuit boards per month; well have to add temporary labour-hours in peak-months
to cater to the hiked demand. Adding one man-hour costs $ 3.44, and workers can exchange most
jobs so overtime scheduling wouldnt be a problem in case the need arises.

As per my proposed scheduling algorithm, the capacity utilization of various processes is given
in Table 4 below:

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 Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company

Table 4

Cycle
Cycle time for Cycle Cycle
Cycle time time for order time for time for
for order order size of Utilization order of Utilization order of Utilization
size of 8 size of 40 120 of 800 of 1000 of
boards boards boards Processes boards Processes boards Processes
Operation 8 40 120 800 1000

Photograph 29 29 29 0.1235119 29 0.01951424 29 0.01564081

Inspect and Shear 20.5 22.5 27.5 0.1171233 70 0.04710333 82.5 0.04449541
Drill (location holes) 10.5 12.5 17.5 0.074533 60 0.04037428 72.5 0.03910203
KPR 11 51 151 0.6431135 1001 0.67357757 1251 0.67471222
Touch up and inspect 13 25 55 0.2342466 310 0.20860045 385 0.20764525
Plate 15 35 85 0.3620175 510 0.34318138 635 0.34247982
Etch 14 30 70 0.2981321 410 0.27589091 510 0.27506254
Shear (into circuit
boards) 10.5 12.5 17.5 0.074533 60 0.04037428 72.5 0.03910203
Drill (location holes) 14 30 70 0.2981321 410 0.27589091 510 0.27506254
Configuration
Rout 58 90 170 0.724035 850 0.57196897 1050 0.56630522
Punch press 154.8 174 222 0.9455046 630 0.42392994 750 0.40450373
Drill holes
Green pantographic 90 250 216.6667 0.9227898 1350 0.9084213 1683.333 0.90788615
Avg. of Drill holes
alternatives 91.0408765 284.3489 234.7953 1 1486.095 1 1854.124 1
Inspect and pack 22 70 190 0.8092156 1210 0.81421465 1510 0.81440084

Facility Layout Decisions

Currently, the facility layout is such that workers have to move as many as 72 minutes in an 8-
hour working day between different work-stations, thus wasting about 15% of labour-hours
daily. This can be minimized by placing the relevant cells closer and erecting new walls so as to
ensure corrosion-free environment for the machinery even if sensitive machinery is placed in the
cell next to a chemical-works cell. The cost of erecting new walls is given below:

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 Muhammad Umair Iqbal (LUMS, Pakistan)
Sunday, November 15th, 2009
OM-WAC: Blitz Company

Total cost of removing current walls and erecting new ones: $ 6,000

Thus, I propose the re-design of facility layout so as to place the cells in a sequence, starting
from first operation/process and ending to the last process.

Conclusion

Taking into consideration the sales forecast for Year 4, Ive developed a comprehensive
operations management plan which will be implemented by Blitz company after its review by the
board of directors. Im confident that implementation of this process will help Blitz Company
achieve and exceed the sales targets in Year 4 and the following years.