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Delta Synthetic Fibres is a company in England which produce some man-made fibre. Its main product is Britlene which is used in heavy-duty clothing and to produce industrial good. The company had thought of introducing a new product: Britlon. This product is the same that the first with added qualities such as heat-resistant. DSF has already five plants in three different sites, but it will need to convert and build new plants to meet its forecast demand for the two products.
This report is made to provide DSF’s managers with advises in order to make decisions for the order of schedule to convert and new plant, for the possible location of these new plants. It also analyse the main dangers that DSF may be facing in the future.
This report could be more deeply analysed but a word limit was imposed. And, as the firm is fictional it was difficult to get more information needed to analyse in depth advises given.
In order to make this report it was assumed that the data given were accurate, that both products can be kept in stock, and that each plant is producing at its maximal output from 1996 to 2002.
2. Order of schedule proposed for conversions and new plant.
In this case there are already five plants established. Three possible solutions to integrate Britlon into the process will be considered. First there is the conversion of plants that already exist, second the building of new plants and the third a combination of both.
A conversion would consist on transforming a plant that actually produces some Britlene into a plant that would produce some Britlon.
The major advantages of a conversion are:
* It keeps the management together
* It reduces the construction time and cost
* It avoids splitting up operations
But in case of over expanding the plant, poor material handling may occur as well as an increase in the complexity of the production control and often lack of space.
In this particular case, Teesside has three plants so one of them could be converted first. To convert a plant, the plant has to close down. Polymer unit will then be installed and be connected to the extrusion unit which would require minor conversion as well.
The company has forecast that to convert a plant it would take two years. But Delta synthetic fibres still need to meet its demand. So, if Teesside closes one of the plants in 1997, there will be only four plants left for production, producing 20 million of kilogram of Britlene a year during 1997 and 1998. Which means that the forecast sales for those two years will not be achieved and the other ones neither if an other plant is converted in 1999 and 2000.
For the above reasons, it would not be recommendable to use conversions, at least by itself, for this project.
2.2 New plant
This would mean creating a whole new plant at a selected location.
The major advantages of creating new plant are:
* The firm does not have to rely on the production of the existing sites
* It can hire new and possibly more productive and more skilled people.
* It can modernize the process with new technology
* It can reduce transportation cost.
But creating new plant could also mean, as the Chief Executive Officer of DSF said, that I would increase “the complexity of multi site operation” to an incontrollable level.
Creating a new plant will mean that a new location must be found, then, the new plant would be built from 1997 to 1998. In 1999, DSF will have four plants that produce some Britlene after the closure of one where a lot of investments have been lost and one plant that is ready to produce some Britlon. In order to meet the forecast sales in 1999, DSF needs three plants to produce Britlene and one plant to produce some Britlon. So one of the plant will be ineffective and if the company closes two plants, there will be major loses.
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