Presentation on theme: "Muhammad Salim Martak Peter Ronald Reonard Chandra Effendy"— Presentation transcript:
1 Muhammad Salim Martak Peter Ronald Reonard Chandra Effendy Freeman Biotest CaseMuhammad Salim MartakPeter RonaldReonard Chandra Effendy
2 Layout Planning and Control Capacity Management Company’s Profile Problem and SolutionsQ and A
3 Planning ControlPlanning and Control is concerned with the activities that attempt to reconcile the demands of the market and the ability of the operation recources to deliver
4 Long, medium, short term planning control Significance of Planning ControlLong termDemand forecastObjectives: Financial termsMedium TermPartially disaggregated demand forecastObjectives: Financial and Operations termsShort termActual demandObjectives: OperationsMonth/ yearsPLANNINGWeeks/MonthsDays/The HorizonControlHours/ Days
5 Capacity Management Definition: Maximum level of value added activity over a period of time that the process can achieve under normal operating conditions
6 Objectives of Capacity Management Costs,demand under utilization of capacity, high unit costRevenues,ensure all demand satisfied, no revenue lostWorking capital,inventory funding to meet demandQualitylarge fluctuation in capacity level affect the quality (temporary staff)SpeedSurplus capacity to avoid queuingDependabilityAbility to cope unexpected disruptionFlexibilityAbility to respond unexpected increase in demand
7 Steps of Capacity Management Step 1 Measure Aggregate demand and capacityStep 2 Identify the alternative capacity plansStep 3 Choose the most appropriate capacity plans
8 Company’s Profile of The Case Freeman Biotest was one of the largest companies supplying the food-processing industries.Its success came with a food preservative usually used for meat called FBXXLater on Freeman Biotest developed other products, causing FBXX only contribute 25% revenue to Freeman Biotest.
10 Q2. What is the problem of Freeman Biotest? The problem for Freeman Biotest is the controversy whether Freeman Biotest should replace one of the process lines with the same product lines (Brayford) or a new product lines (Bi-line 8)The V.P of Marketing and Technology want to use the Bi-Line 8 when V.P of Finance and Operations still want to use the Brayford.
11 Q2. What is the problem of Freeman Biotest? V.P Marketing:Higher demand in the futureV.P Technology:By using Bi-Line 8, V.P Technology predicts an increase in market share for FBXXV.P Operations:High fixed costNo evidence in increase for demandStaff ReactionsV.P Finance:Freeman Biotest had financed all its recent capital investment in other parts of the firmIf there is a significant increase in demand, 3 lines of Brayford will be better than using Bi-Line 8
12 Q3 Should Freeman Biotest invest in a Brayford or a Bi-line 8 facility? Step 1 Measure Aggregate demand and capacityStep 2 Identify the alternative capacity plansStep 3 Choose the most appropriate capacity plans
13 Measure Aggregate demand and capacity Market Size$Market Share48%FBXX Sales$Selling Price$1050/kgAnnual Units Sold (KG)kgUnits sold (KG/Months)1.904 kg per month
14 Measure Aggregate demand and capacity Process line configurationBrayfordBi line 8Capacity (KG/Month)1,0501,400Annual Capacity (KG)12,60016,800
15 Identify the alternative capacity plans Process line configBrayfordBi-line 8Capital cost$5,900,000$8,800,000Processing costFixed$150,000$400,000Variable$750$600Design1,050 kg/months1,400 kg/monthsCapacity98%99.5%QualityManual testingAutomatic testingMaintenanceAdequate but needs servicingNot known probably goodAfter sales servicesVery goodNot known unlikely goodDeliveryThree monthsImmediate
16 Capacity Scenario per-month Scenario 1Scenario 2BrayfordBi line 8Capacity (Kg/Month)1,0501,400Total2,1002,450
17 Profit Margin per Unit Pricing Scenario 1 Scenario 2 Brayford BrayfordBi-line 8Variable$787,500$840,000Fixed$150,000$400,000Total cost$1,875,000$2,177,500Total capacity2,100 kg/months2,450 kg/monthsCost per Unit$893/kg$889/kgSelling Price$1050/kgProfit Margin$157/kg$161/kg
18 Recommendations Scenario 1 Scenario 2 Brayford Bi line 8 Scenario 1Scenario 2BrayfordBi line 8Capacity (Kg/Month)1,0501,400Total2,1002,450Actual Demand1,905Forecasting Demand2,286We recommend that Freeman Biotest should buy the Bi-Line8, because:Profit margin higher, hence Freeman Biotest can lower the price of the FBXXLowering price of FBXX, resulting in higher demandTo cope up with demand, which forecasted by the V.P MarketingBi-Line 8 delivery is right away, when Brayford need to wait 3 months to deliver.
19 Q4 What are the other options? Scenario 3BrayfordBi-line 8Variable cost$840,000Fixed$400,000Total cost$2,480,000Total capacity$2,800Cost per unit$886Margin per unit$164The 3rd Scenario (Change both Brayford with Bi-Line 8):Positive ImpactHigher MarginAbility to decrease sales price, which will increase the demand of FBXXNegative ImpactNeed a huge sum of money to investHave to throw away a good condition Brayford machine