Xyz Small Telephone Manufacturing Company

XYZ Sample Case

XYZ is a small manufacturing company located in Calgary, Alberta, that produces telephone sets. The supply chain manager is preparing for a meeting with his department scheduled for tomorrow morning. The primary topic on tomorrow’s agenda is how supply chain management, specifically the warehousing department, will support the planned production volumes for the new digital telephone set that is scheduled to be released January 1, 2015.

XYZ Back Ground

The XYZ organization is housed in a 125K square foot facility in North East Calgary. The office – executive, research and design laboratories and staff, administrative personnel and cafeteria consume 25K square feet. The manufacturing floor takes up 50K square feet and warehousing/shipping and receiving consuming 50K square feet.

The shipping and receiving department floor and dock areas consumes 5K square feet. The current flow of both raw material and finished goods inventory translates into the current warehouse layout essentially running at approximately 85% capacity. Going beyond the 85% level has proven to result in excessive time and cost to locate and the find the stored items.

The existing manufacturing process is made up of three distinct stages: circuit board assembly, telephone module assembly and final testing. Each stage is physically separated with production loading scheduled in weekly batches; in effect it takes three weeks for a particular model batch to move through the process from beginning in circuit board assembly through to finished goods.

The new digital design has presented XYZ with the ability to reduce the internal manufacturing cycle time from 21 days to 3 days. The introduction of production flow lines along with circuit board and telephone automation has been the primary contributor to the cycle time reduction. There are also phase II plans which will combine the testing operation with the telephone assembly operations resulting in both stages occurring concurrently.

The company is in the later stages of designing a new digital telephone that has projected weekly sales volumes of 3000 sets a week, with a standard deviation of 425 sets per week within 6 months of the new digital telephone set being released. This is a 333% average increase in safety stock over the weekly sales levels of 1500 sets and a standard deviation of 125 sets per week for the current/old telephone product. The old telephone model will be totally shut down the day the new product is released – March 1, 2016.

The current manufacturing process is supported by a time phased material requirements planning system. This system calculates the required number of components that are forecasted for each of the coming weeks. The forecasts extend out from3 to 20 weeks depending on the purchased part – based on the complexity and the geographical location of