Answer to the first question: Determine through calculation whether the market i

Question

Answer to the first question: Determine through calculation whether the market is the constraint or not. If it isn’t, where IS the constraint?

Solution:

We know that each of the workcentre has 2400 hours per week of operational hours.

Now, in order to determine the constraint we need to compute the aggregate workload at each of the station assuming that the manufacturing process wants to meet full demand of product S & product T.

Calculating Workloads:

At Workcentre X:

Time to process Raw Materials for Product S = No. of units multiplied by time to process RM#1= 110*15 = 1650Min

Time to process Raw Materials for Product T = No. of units multiplied by time to process RM#3= 60*10 = 600Min

Total Workload = 1650+600 = 2250 Minutes.

Similarly, calculating workloads at each of workcenter Y,W& Z, we have the following table:

Now, As we can see that the workload at Workcentre W exceeds the available worktime of 2400 minutes/Week.

This implies that Workcentre W is the constraint.

If the Market would have been the contraint, we would have Workloads at each of the workcentre less that 2400 minutes/week in order to meet the demand.

Thanks.

Workcentre Load for Product S Load for Product T Total Load ( Minutes) X 1650 Minutes 600 Minutes 2250 Y 15*110 =1650 Minutes 5*60=300 Minutes 1950 W 10*110=1100 Minutes 25*60=1500 Minutes 2600 Z 10*110=1100 Minutes 5*60= 300 Minutes 1400

Explanation / Answer

The flow for a small production system for manufacturing two products, S and T, is shown below. The goal of the system is to maximize profit. Each week there are customer demands for 110 units of product S and 60 units of product T. Sales prices are $90 and $100 per unit of S and T respectively. The production of 1 unit of product S requires 1 unit of raw material #1 (RM#1) at a cost of $20, 1 unit of RM#2 at a cost of $20, and 1 unit of a purchased part at a cost of $5. The production of 1 unit of product T requires 1 unit of RM#2 at a cost of $20 and 1 unit of RM#3 at a cost of $25.

Each of the four work centers, W, X, Y, and Z, must accomplish two tasks. For example, work center X processes both the RM#1 needed for Product S (taking 15 minutes per unit) and RM#3 needed for product T (taking 10 minutes per unit. Note that 1 unit of component #2 is required at the final assembly (work center Z) for each of the finished goods, S and T. The time available at each work center is 2400 minutes per week.

In addition to the cost of the raw materials and purchased parts, it takes $6000 to operate the system. (This figure includes all labor costs, utility costs, etc. Product mix does not affect this total operating expense.)

Determine through calculation whether the market is the constraint or not. If it isn’t, where IS the constraint?

Assume you know where the constraint is but are unaware of “TOC-thinking”: thus you are still immersed in the traditional world where the appropriate “product mix” (i.e. how much of each product should be produced) is based primarily on a product’s contribution to profits and overhead. Show and explain how you would determine the traditional “product mix” and the resulting amount of profit you think the company will achieve.

Now assume you know where the constraint is and understand how “TOC-thinking” impacts that product mix decision-making. Show and explain how you would determine the correct, throughput-based “product mix” and the resulting amount of profit you think the company will achieve

Product T Demand 60 units/week Product S Demand 110 units/week Z10 minutes Z5 minutes Purchased Part $5/unit Y 10 minutes Y5 minutes W25 minutes X15 minutes W 10 minutes X 10 minutes : Raw Material #1 | : Raw Material #2 | : Raw Material #3 | Component #1 Component#2 Component #3

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