1. Muhammad Salim Martak Peter Ronald Reonard Chandra Effendy
Freeman Biotest Case
Muhammad Salim Martak
Peter Ronald
Reonard Chandra Effendy

2. Layout Planning and Control Capacity Management Company’s Profile
Problem and Solutions
Q and A

3. 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

4. Long, medium, short term planning control
Significance of 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
PLANNING
Weeks/
Months
Days/
The Horizon
Control
Hours/ 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 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

7. 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

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 FBXX
Later on Freeman Biotest developed other products, causing FBXX only contribute 25% revenue to Freeman Biotest.

9. Q1. Calculate Annual Sales Volume
Market Size
Market Share
48%
FBXX Sales
Selling Price
1050
Units Sold (KG)
22.857

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 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

12. 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

13. Measure Aggregate demand and capacity
Market Size $
Market Share
48%
FBXX Sales $
Selling Price
$1050/kg
Annual Units Sold (KG) kg
Units sold (KG/Months)
1.904 kg per month

14. Measure Aggregate demand and capacity
Process line configuration
Brayford
Bi line 8
Capacity (KG/Month)
1,050
1,400
Annual Capacity (KG)
12,600
16,800

15. Identify the alternative capacity plans
Process line config
Brayford
Bi-line 8
Capital cost
$5,900,000
$8,800,000
Processing cost
Fixed
$150,000
$400,000
Variable
$750
$600
Design
1,050 kg/months
1,400 kg/months
Capacity
98%
99.5%
Quality
Manual testing
Automatic testing
Maintenance
Adequate but needs servicing
Not known probably good
After sales services
Very good
Not known unlikely good
Delivery
Three months
Immediate

16. Capacity Scenario per-month
Scenario 1
Scenario 2
Brayford
Bi line 8
Capacity (Kg/Month)
1,050
1,400
Total
2,100
2,450

17. Profit Margin per Unit Pricing Scenario 1 Scenario 2 Brayford
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/months
2,450 kg/months
Cost per Unit
$893/kg
$889/kg
Selling Price
$1050/kg
Profit Margin
$157/kg
$161/kg

18. Recommendations Scenario 1 Scenario 2 Brayford Bi line 8
Scenario 1
Scenario 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.

19. Q4 What are the other options?
Scenario 3
Brayford
Bi-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

20. Question And Answer Session

21. POKOKNYA LU ISI THANK YOU