Presentation on theme: "Muhammad Salim Martak Peter Ronald Reonard Chandra Effendy."— Presentation transcript:
Muhammad Salim Martak Peter Ronald Reonard Chandra Effendy
Layout Planning and Control Capacity Management Company’s Profile Problem and Solutions Q and A
Planning Control Planning 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
Long, medium, short term planning control Long term Demand forecast Objectives: Financial terms Medium Term Partially disaggregated demand forecast Objectives: Financial and Operations terms Short term Actual demand Objectives: Operations Month/ years Days/ Weeks/ Months Hours/ Days The Horizon PLANNING Control Significance of Planning Control
Capacity Management Definition: Maximum level of value added activity over a period of time that the process can achieve under normal operating conditions
Objectives of Capacity Management Costs, demand under utilization of capacity, high unit cost Revenues, ensure all demand satisfied, no revenue lost Working capital, inventory funding to meet demand Quality large fluctuation in capacity level affect the quality (temporary staff) Speed Surplus capacity to avoid queuing Dependability Ability to cope unexpected disruption Flexibility Ability to respond unexpected increase in demand
Steps of Capacity Management Step 1 Measure Aggregate demand and capacity Step 2 Identify the alternative capacity plans Step 3 Choose the most appropriate capacity plans
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 FBXX Later on Freeman Biotest developed other products, causing FBXX only contribute 25% revenue to Freeman Biotest.
Q1. Calculate Annual Sales Volume Market Size50.000.000 Market Share48% FBXX Sales24.000.000 Selling Price1050 Units Sold (KG)22.857
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.
Q2. What is the problem of Freeman Biotest? V.P Marketing: Higher demand in the future V.P Technology: By using Bi-Line 8, V.P Technology predicts an increase in market share for FBXX V.P Operations: High fixed cost No evidence in increase for demand Staff Reactions V.P Finance: Freeman Biotest had financed all its recent capital investment in other parts of the firm If there is a significant increase in demand, 3 lines of Brayford will be better than using Bi-Line 8
Q3 Should Freeman Biotest invest in a Brayford or a Bi-line 8 facility? Step 1 Measure Aggregate demand and capacity Step 2 Identify the alternative capacity plans Step 3 Choose the most appropriate capacity plans
Measure Aggregate demand and capacity Demand Market Size$50.000.000 Market Share48% FBXX Sales$24.000.000 Selling Price$1050/kg Annual Units Sold (KG)22.857 kg Units sold (KG/Months) 1.904 kg per month
Measure Aggregate demand and capacity Process line configuration BrayfordBi line 8 Capacity (KG/Month) 1,0501,400 Annual Capacity (KG) 12,60016,800 CAPACITY
Identify the alternative capacity plans Process line config BrayfordBi-line 8 Capital cost $5,900,000 $8,800,000 Processing costFixed $150,000 $400,000 Variable $750 $600 Design 1,050 kg/months 1,400 kg/months Capacity 98% +- 0.799.5% +- 0.2 Quality Manual testingAutomatic testing Maintenance Adequate but needs servicing Not known probably good After sales services Very good Not known unlikely good Delivery Three monthsImmediate
Capacity Scenario per-month Scenario 1Scenario 2 Brayford Bi line 8 Capacity (Kg/Month)1,050 1,400 Total2,1002,450
Profit Margin per Unit Pricing Scenario 1Scenario 2 Brayford Bi-line 8 Variable $787,500 $840,000 Fixed $150,000 $400,000 Total cost $1,875,000$2,177,500 Total capacity 2,100 kg/months2,450 kg/months Cost per Unit $893/kg$889/kg Selling Price $1050/kg Profit Margin $157/kg$161/kg
Recommendations Scenario 1Scenario 2 Brayford Bi line 8 Capacity (Kg/Month) 1,050 1,400 Total 2,100 2,450 Actual Demand 1,905 Forecasting Demand 2,286 We recommend that Freeman Biotest should buy the Bi-Line8, because: Profit margin higher, hence Freeman Biotest can lower the price of the FBXX Lowering price of FBXX, resulting in higher demand To cope up with demand, which forecasted by the V.P Marketing Bi-Line 8 delivery is right away, when Brayford need to wait 3 months to deliver.
Q4 What are the other options? Scenario 3 BrayfordBi-line 8 Variable cost$840,000 Fixed$400,000 Total cost$2,480,000 Total capacity$2,800 Cost per unit$886 Margin per unit$164 The 3rd Scenario (Change both Brayford with Bi-Line 8): Positive Impact Higher Margin Ability to decrease sales price, which will increase the demand of FBXX Negative Impact Need a huge sum of money to invest Have to throw away a good condition Brayford machine