Operations Management

Crane Manufacturing
Your consultancy company has been called in by Megacorp to improve the performance of their Crane Manufacturing Company. Your junior consultant has visited the company and looked around the factory with the Manufacturing Manager and the Information Systems Manager. Unfortunately he resigned from your company after being head-hunted by one of the larger consultancies. He has left you with a short report (attached) which gives the main details. The brief is to produce a feasibility report for proposed developments to the manufacturing system.
Your tasks are:
1. Determine the company’s competitive priorities and its current position with regards to competitiveness. Identify the most serious problems and issues for urgent action.
2. Describe in outline the solution(s) you would propose for the problems identified. The aim of the document is to secure the contract to do further analysis, design and implementation. It is important not to over promise, but your report should describe the areas you propose to deal with, the existing systems and procedures, the envisaged requirements, the changes you propose, the benefits that the company can expect and the estimated cost of the changes. You should focus mainly on proposals the company can address in the short-term (say 1 year)
Your manager may be able to clarify some of the details of the company and the brief. If you are faced with difficult alternatives you should describe alternative solutions rather than making sweeping assumptions. A clear proposal guiding the managers will be more helpful than a set of options.
You will have (limited) opportunities to discuss the company with your “manager”. You may also e-mail your manager with queries, but don’t expect him to have all the answers.
A report of up to 2000 words is expected. You may wish to represent your ideas using diagrams as well as text.

Operations Management
STO704
Individual Assignment – Crane Manufacturing

Marking Scheme
1.a. Competitive business requirements that the company needs to achieve
10
1. b. Assessment of existing situation, any mismatch with strategy
20
2. a. The areas you propose to deal with (why)
10
2. b. Assessment of existing operational systems and procedures
20
2. c. Future requirements operations must achieve
10
2. d. Changes proposed to improve from the current position
10
2. e. Benefits and Costs of your proposed actions
10
Presentation of report, clarity of analysis, discussion etc.
10
Total
100

Crane Manufacturing Company

Product and Company Background

CMC have been making cranes at this site for fifty years. They are an independent profit centre, part of the multinational MEGACORP. CMC employs 200 people at a cost of £5m. General operating costs (not including staff) total around £1m.Turnover is around £12m.

The product definition used by the company is that an overhead crane is used for picking up large objects from any point in a rectangular area and setting them down again within the area.

The crane consists of a number of key parts. The crane runs on a pair of parallel rails, typically at opposite sides of a building. Rails may be any length, made in sections. On each rail sits a trolley which can be motorised. A beam runs between the trolleys. The thickness of the beam is dependent upon the gap between the rails and the working load of the beam. Beams are commonly up to 15 metres in length. A “crab” runs along the beam, and on the crab is the hoist. The controller is usually a hand held electronic device. There are up to 3 sets of motors on a crane; Trolley, Crab and Hoist. There are also a wide variety of gears associated with the combination of motors. Brakes are sometimes required. There are also a wide variety of safety features which may be built into the product dependent upon customer requirement. The product mix is low volume high variety, with up to 15,000 work items per year. The company considers all end items to be unique and individual to a customer’s requirements.

Customers
Because of the nature of the product, customers often build their factories around the design of an overhead crane. This can lead to problems if a crane takes longer to deliver than a factory takes to build!

The customer base falls into two overlapping sections;

1 Small cranes for steel stockholders, mechanical engineering facilities etc

2 Larger cranes for shipyards, nuclear power stations (where the electronics have to be nuclear hardened) and goods yards.

New developments in computer controlled cranes are currently being tested. These cranes use computers to control the movement of material and to store information on the location of material. Cranes are normally sold as complete products – 20-30 are delivered each year. Crabs, hoists and controllers are also sold separately. Spare parts account for approximately 35-45% of turnover. Geographically, sales are made all over Europe with over half of all production going outside the UK.

Departmental structure
There are 4 main departments.

Design The design department is probably the most powerful department within the company. As the company’s standard work has decreased and its engineer to order work has increased it has become more engineering-driven. They use a standard CAD package. Part designs are added to a database.

Information systems This is a small department controlling purchasing and costing, together with production information.

Production. The machine shop is run as a job shop, with machines ranging from the larger borers, which are over 40 years old, to some modern CNC equipment. The machine shop is arranged according to machine type. Some of the machines are quite special, dealing for example with the machining of very long beams.

In the production department there are facilities for component processing, including saws and equipment for material preparation, machine tools for machining, plant for welding, painting and other operations. It also has facilities for assembly, testing, finish painting, product storage and despatch.

Families of parts that the company uses in large volumes (for example wheels, blocks, arms, shafts) are often chosen for subcontract if time is short.

Marketing This department is responsible for selling the cranes. This process involves generating the price from the price book, developing pricing for any new designs and for keeping an eye on progress of products while in the factory. This department is responsible for the contact between customer and the rest of the company. All requests for changes come through the sales engineer. In common with all capital goods manufacturers, spares play a major role in the business. The marketing department operate Master Scheduling to decide what week work needs to start on each product ordered based on the standard lead time. This seems to often result in lateness.

Costing Costing is carried out on a contract basis. Planned work hours are used to build up the product cost. Feedback on the actual cost is sometimes used to amend the price book after a crane is delivered. Indirect overheads are apportioned on a simple multiplication of labour rate. General overheads and a margin for profit are added as a proportion of final cost.

Master Scheduling All work orders are sent to the shop floor sixteen weeks before assembly is due to start. The parts for a job all have the same due date. Assembly is meant to start immediately after the parts due date and is allowed four weeks. When the parts due date is reached, components are often missing.

Production Management The company is running a production management system that they have developed themselves over the past 20 years. It runs on a PC and is written in Dbase. It is not connected to the design system and fails to produce accurate schedules. There are some items that are produced for stock in volumes of one hundred, however this is very unusual. A usual batch size would be 4-6 with most batches being one, but there are some larger batches of 20+.

Shop Floor Control The control centre of the manufacturing organisation is the despatch office. All the work orders go to this office in the centre of the shop floor and it is from here that the work is distributed to all the machines. The next job to be loaded is decided by date required order. The computer provides this but the supervisor has to balance this suggestion with urgent work requirements and shortage lists for cranes whose assembly is being held up by parts shortages. It is also at this point that work is sent out to sub-contract. Workload is difficult to judge although there is an estimate of the time required for each operation. Deciding how to plan work and which jobs to subcontract causes a great deal of work for the despatch supervisor.

Purchasing The company manages an annual spend of £6m on parts and materials. They use a traditional 3 class a-b-c system for purchasing. Items such as motors and electronics are always purchased, and some have extended lead-times (e.g. electronics for nuclear sites). Some ordering of long lead time parts is done by the Design department to save time, but sometimes not using preferred suppliers. Parts that have a lower value are bought by the Purchasing Department who have arrangements with supply partners.

Production There are approximately 50 different machine tools arranged by function. Some computerised machines can work on design information downloaded from the design department with short set-up time. Lead times for jobs differ, but queues mean that work is waiting most of the time. The value of stock on the shop floor is currently £10m (consequently the return on capital is low). The assembly shop employs a number of fitters to assemble the cranes.

Design Around 20% of CMC’s staff are employed in design. Design is done through 2D CAD. The amount of design required varies from 1 week to approx. 1.5 years full-time work. There are currently approximately 120,000 part designs listed in the Item Master. Many of the parts listed may only be made once in ten years and we suspect that many are never used. This may be because;

1. Part information is never removed from the item master file
2. Most cranes are highly tailored to customer requirements.

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