Question

A certain custom engraving shop has traditionally had orders for between 1 and 50 units of whatever a customer orders. Typically, a single worker would work all of the tasks needed for these traditional orders.

A large company has contacted this shop about engraving “ league-team-individual reward” plaques ( which are essentially identical to each other - but leagues have different logos, teams different names, etc.). It wants the shop to place a bid for this order. The expected volume is 12,000 units per year and will most likely last four years.

1. To successfully bid ( low enough price) for such an order, what will the shop likely have to do?

2. Describe a manufacturing process from the chapter that might be considered for the new process.

3. Mention the advantages and disadvantages of the process you describe.

Answer 1

To successfully bid ( low enough price) for such an order, what will the shop likely have to do?

A possible option that the shop may consider to place a bid is as follows:

The shop management must carry out a breakeven analysis of the proposed bid, which will provide the specifics of the estimated recovery of the investment amount. It will help to identify the scenario's favorable and unfavourable circumstances. If the breakeven analysis is favourable, the amount invested will likely be recovered in early years, then they will definitely place the offer. If the results happen to be otherwise, the bid will be refused.

Nevertheless, other possible analyzes of decision-making can also be carried out to make a decision on the placing of the bid.

Shop will consider all potential manufacturing costs which will be incurred before placing a bid. This is because the output between 1 and 50 will be considerably high from the earlier. Shop will have to make manufacturing plans according to requirement. This will reduce cycle time, improve capacity utilization and lower costs. When making an offer and at the lowest possible rates, Shop will weigh all of these options to get the bid in its favor.

The custom engraving shop is getting an order for 12,000*4 = 48,000 units spread evenly over a period of 4 years. To get the order, the bid will have to be low enough.

Describe a manufacturing process from the chapter that might be considered for the new process.

To fulfill the order the manufacturing process will need to be scaled up by the shop. Later orders were small -1 to 50 units so the shop used sporadic production processes. Now the volumes have increased manifold and there is a need for cerrtain degree of change in each plaque, the shop should consider using continuous manufacturing system but on the basis of the make to order.

Mention the advantages and disadvantages of the process you describe.

The advantages will be higher production capacity with reduced cycle time, higher capacity utilization leading to lower costs, lower production cost per unit of inventory. The disadvantages are production planning process can become expensive.