Case Solution & Analysis for AIC Netbooks: Optimizing Product Assembly by Steven C. Wheelwright, Sunru YongFull description
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AIC Netbooks
AIC Netbooks: Optimizing Product Assembly
Diyora Hitesh V Regd No. PA1110
1
AIC Netbooks Abstract
AIC Systems is a producer of printed circuit boards, focusing on motherboards and graphics cards for the personal computer industry. The company is involved in Original design manufacturer and so the company took an active role in innovating and designing each new generation of components. The firm decides to diversify its portfolio to include consumer electronics with a particular focus on mobile technology. The new netbook market provides an opportunity for AIC Systems to design and manufacture a branded product in the mobile electronics industry. The production manager has created an assembly line for producing the new netbooks.
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AIC Netbooks
PROBLEM
Now to meet the demand employees are working for 10 to 12 hours which is not sustainable for long time. The Chief Strategy Officer is expecting the demand of Netbook over 130,000 units in next one or two months. The problem faced by company is to meet the demand of Netbooks by improving the assembly method and by managing production activity. And also problem faced by company is of Labour efficiency Variance.
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AIC Netbooks ANALYSIS For increasing production of Netbook to cop up demand two options are available: First option: Increasing Shift. FOR:
Production will increase and also time of one shift is reduce to 8 hours.
Cost of installing new line will saved.
Optimum utilization of capacity of plant.
Fixed cost will not increase much.
On regular interval expense is to be incurred.
AGAINST:
Training expense will increase.
Variable cost will increase.
Management is not ready to start third shift.
Second option: Increasing a new line of production. FOR:
Production will increase.
Variable cost will be less.
Capacity of plant will increase.
Only one time expense is required.
AGAINST:
Fixed cost will increase.
Capacity of plant is not utilized optimum.
Cost of Installation will increase.
4
AIC Netbooks
INTERPRETATION
FOR OPTION ONE: Increase Third Shift.
Production will be 145,152 units per month if one shift timing is set upto 8 hours including 1 hours for break and lunch time.
Here salary is to be paid at regular interval of time and so it will increase monthly expenditure.
Also training is to be given to employees which will increase an additional burden of expense.
Management is not ready to increase one more shift.
FOR OPTION TWO: Increase a new line of production.
Production will be 138,240 units per month.
Here salary of only one panel of worker will increase.
This expenditure is non-recurring in nature.
Less training expenditure will be there.
5
AIC Netbooks
SYNTHESIS
The best solution according to me is option second:
As the production units are higher in option one, also the salary and training expenses will also be higher.
Only one time expense is required in installing new line of production.
As comparing to option one, second is more suitable.
If employees will be less it will be easy to manage them.
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AIC Netbooks
LEARNING
Understand the concept of labour efficiency and cost variance.
Selecting optimum way of increasing production.
Calculation of production units by different methods.
Study about the variation in standard time and actual time.
