After thoroughly analyzing the information available on TI, I have identified three critical issues that need immediate attention. These include the capacity crunch in meeting forecasts, expectation to reduce the cost per watch, and a lack of efficiency of the workers. In order to tackle these issues, I recommend reducing the cycle time, increasing capacity in subsequent years, and increasing worker efficiency. These recommendations will enable you to achieve the targets and put TI on the path of success
Capacity crunch: As per the forecasts for world market demand for electronic watches, the current capacity at TI is insufficient. In order to cater to this increasing demand, the capacity needs to be enhanced. The technological advancements have prompted the business team at TI to set high forecasts and that has added pressure on the production capacity.
Expectations to reduce cost: The current cycle time of 21 seconds and the total number of 48 workers on the assembly line lead to the per unit labor cost of $0.80. In order to persist with TI’s policy of consistent cost reduction with improved efficiency, it is extremely crucial to either reduce the number of workers on assembly line or decrease the cycle time.
Workers’ inefficiency: As per the ideal scenario, only 38 workers are required to efficiently operate the assembly line under consideration. However, there are currently 48 operators operating it. Firstly this is due to few non-standard operations being carried out, and secondly due to the unscheduled breaks taken by the operators. This overall inefficiency leads to an increase in operation time and cost.
Reduce cycle time: The most important thing that TI needs to accomplish is that it needs to reduce the cycle time, which will eventually bring down the labor cost per unit. The cycle time can be reduced to 18 seconds by appropriately adding more workers for certain operations (explained in Appendix 1). This would increase the number of workers to 52 but reduce the labor cost per unit to $0.74. This arrangement would be on immediate basis, when the workforce still isn’t completely efficient.
Increasing capacity: By reducing the cycle time the present annual capacity will increase from 1.3M to 1.5M watches i.e. producing with two assembly lines in two shifts. In order to cater to the demand forecasted for the world market for electronic watches, TI needs to increase the number of shifts to 3 per day from the beginning of 1978, without increasing the number of assembly lines. In 1980 and 1983 the number of assembly lines need to be increased to 5 and 6 respectively and continue with 3 shifts per day.
Improve worker efficiency: Presently the number of operators working on the assembly line is 10 greater than the ideal number of workers required. In the long run, the workers’ efficiency need to be improved in order to reduce the labor cost per unit. When this is achieved, the number of workers would be reduced to 38 per assembly line and the labor cost per unit will go down to $0.55 (refer Appendix 2). Reduction in this cost will lead to huge savings for TI and therefore greater profits. There also needs to be an additional material handler who can supply raw materials. This will help address the problem constant supply of raw materials to the assembly line. A sense of healthy competition needs to be encouraged amongst workers that will make then strive for greater efficiency.
Reduce cycle time:
•The supervisor of the assembly line needs to increase the number of workers at the below mentioned operations: oAt operation numbers 2,3 and 29 increase the number of workers to 2 (refer Appendix 1, Case 3) oDepute additional material handler
•This will increase the number of workers to 52, but reduce the cycle time to 18 seconds
Capacity enhancement: (Refer Appendix 3)
•The reduction of cycle time to 18 seconds will increase the annual capacity to 1.5M
•Continue with 2 assembly lines and 2 shifts till the end of the year 1977
•Introduce 3rd shift from the year 1978 and continue with 2 assembly lines
•In 1980, increase the number of assembly lines to 5 and continue with 3 shifts
•In 1983, increase the number of assembly lines to 6 and continue with 3 shifts
Improve worker efficiency:
•The supervisors need to post performance results for every assembly line in order to boost a culture of healthy competition
•Training program to be designed and implemented to make the workers more efficient in their tasks, in order to reduce the number of operators per assembly line to 38 in the long run
•Set performance goal of measuring the efficiency of the assembly line on the basis of their cycle time
•The performance pay of the supervisors and workers to be linked to labor cost per unit of their respective assembly lines
•Discourage the workers from taking unscheduled breaks by imposing strict instructions
•Set the goal of reducing the workers to 38 per assembly line within a period of 3 years i.e.by the mid of 1980
Courtney from Study Moose
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