Unit three Written Assignment Astrid Deliz MT435 Operations Management Kaplan University March 22, 2011

Introduction The case study presented deals with a small family owned business called Albatross Anchor. Albatross Anchor case study deals with operational challenges that are being confronted. Some of the problems that are being faced are due to operational inefficiencies such as shabby and disorganized administrative offices and antiquated, worn, and technology deprived plant. In order to achieve company profit these operational challenges must be dealt with accordingly.

Question One Based on the information presented in the scenario/case study discuss Albatross Anchors competitiveness in relation to (please address all items in the below list and provide support for your conclusions): 1. Cost a) Cost or Production: $8 per pound for mushroom/bell anchors $11 per pound on for snag hook anchor

b) Economies of Scale: The firm is not able to realize economies since they are not able to produce larger orders as easy. They are not able to meet capacity utilization within the plant due to operational inefficiencies. They can only produce small batches.

c) Cost of Raw Materials Sitting Idle in the Warehouse: The raw materials sit idle until they are ready to ship out which leads to large cost of holding raw material in inventory.

d) Cost of Finished Goods Sitting Idle in the Warehouse: They are able to ship out finished products effectively.

2. Speed of manufacturing process from order to finished product. The speed of manufacturing process from order to finish product is very challenging since each anchor requires its own unique equipment. Currently they have to completely change the over the manufacturing line for each type of anchor. This process makes it more time consuming and creates more work for employees.

3. Flexibility in filling order(s) They are not too flexible in filling orders. This is due to limitation space. For example large bulk orders can take up to three to four weeks to complete. The manufacturing has to be changed in order to accommodate the two separate types of anchors.

4. Technology

They are technology deprived. They are still working with older technology and only making changes if necessarily needed. They need to be able to work with more moderate technology.

5. Capacity and facilities The current floor plan is inefficient. They do not have a good flow provided for effective manufacturing. For example the warehousing space for raw materials and finished product is located at the far south end of the building. Also they have very limited space. They need ample space in order to become more efficient and productive.

6. Service to customers (what types of services would an anchor company provide to marine wholesalers? They sell only at wholesale level. Albatross Anchors only sale their products by distributors or OEM customers. The anchors are accepted at large distribution centers which then are delivered to individual retail locations. They also have the OEM customers that purchase the anchors in large batches.

Question Two There are many ways that mushroom/bell anchors may be manufactured. Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs. Analysis of the information below will help determine which process has the lowest breakeven point (this validates the process is more cost effective).

For each process the following fixed costs and variable costs are identified below:

Anchor and Process Sale price per anchor Total Fixed cost Variable cost per anchor

Process A $ 42.00 $ 650,000.00 $ 36.00

Process B $ 42.00 $950,000.00 $ 29.99

Based on the information in the table above complete the table below:

Anchor and Process (a) Fixed costs per anchor (b) The total number of anchors to attain breakeven point for Process A and Process B

Process A 650,000 108,333

Process B 950,000 79,100.75

(c) Based on your calculations which Process (A or B) that you would recommend for adoption (you can select only one). Please make sure to explain how you arrived at your conclusion. Based on the calculations I would recommend process B. Overall it really comes down to the amount of orders they have.

Conclusion

Albatross Anchors is a small family owned business that has the potential of becoming a more profitable and effective manufacturing company. It is important for this company to take into consideration the value and importance of having an effective operational plant. The company needs to work on overall updating to more moderate technology, re organizing their floor plan, and meeting US safety and environmental standards. They need to focus on purchasing new equipment in order to be able to process more orders and become more profitable. Albatross Anchors has a challenging task to conquer in order to continue a successful business.

References

Torek, Robert; Cordon, Patrick J.(2002). Operational profitability:Systematic Approaches for Continuous Improvement. New York: John Wiley & Sons.

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