Question

Rochester Manufacturing’s Process Decision

Rochester Manufacturing Corporation (RMC) is considering moving some of its production from traditional numerically controlled machines to a flexible manufacturing system (FMS). Its computer numerical control machines have been operating in a high-variety, low-volume manner. Machine utilization, as near as it can determine, is hovering around 10%. The machine tool salespeople and a consulting firm want to put the machines together in an FMS. They believe that a $3 million expenditure on machinery and the transfer machines will handle about 30% of RMC’s work. There will, of course, be transition and startup costs in addition to this.

The firm has not yet entered all its parts into a comprehensive group technology system, but believes that the 30% is a good estimate of products suitable for the FMS. This 30% should fit very nicely into a “family.” A reduction, because of higher utilization, should take place in the number of pieces of machinery. The firm should be able to go from 15 to about 4 machines, and personnel should go from 15 to perhaps as low as 3. Similarly, floor space reduction will go from 20,000 square feet to about 6,000. Throughput of orders should also improve with processing of this family of parts in 1 to 2 days rather than 7 to 10. Inventory reduction is estimated to yield a one-time $750,000 savings, and annual labor savings should be in the neighborhood of $300,000.

Although the projections all look very positive, an analysis of the project’s return on investment showed it to be between 10% and 15% per year. The company has traditionally had an expectation that projects should yield well over 15% and have payback periods of substantially less than 5 years.

Discussion Questions

1. As a production manager for RMC, what do you recommend? Why?

2. Prepare a case by a conservative plant manager for maintaining the status quo until the returns are more obvious.

Please answer both questions With long and reasonable answer. Short answers will not be accepted.

Answer 1

1. Being production manager supposing flexible machining system’s intrinsic compensations must take decisions which have possible favorability towards FMS so that managerial tasks/ missions become easier and consequently becomes healthier because that might linked with managerial responsibility in relation with development, human resource empowerment, continuance, and organization should necessitate less track and easily control over. You would be accountable to inquire the “numbers people” to be certain them incorporated all of these comparatively inconsequential shop floor subjects in the decision. Your management task should be easier and therefore better.Your task will be easier and better because those parts of your workday that are related to scheduling, manpower,maintenance, and housekeeping should require less direction and be easier to control. You would be inclined to ask the“numbers people” to be sure they included all of these rela- tively minor shop floor issues in the decision.

2. In this decision making process an individual with conservative frame of mind plant manager is required who could be questioned for ROI. This responsibility of plants manager to talk about ROI is considered on top rank but if numbers don’t support your change requirements then it is best for you not to change because it might increase cost of overall organization and plant manager has strong repo so could be in danger due to such decision.