What Mr. Clean & Company does in order to increase its production at least to 600pcs of t-shirt per day to meet the $234 potential revenue?
• To decrease idle time by improving facility layout allowing for faster processing. • To allocate the time for arranging & pressing in the machines to meet the 75shirts/hour, to produce 600 t-shirts/day. • To determine whether additional operators are needed. • To determine whether to re-arrange the machines according to its activity importance to increase production.
Areas of consideration:
• Mr. Clean is a small dry cleaning & shirt laundering company serving the metropolitan New York area. • The company does its own shirt washing & pressing on its premises, but send out dry cleaning to other operators. • Mr. Clean & company, by zoning regulations is limited to no more than 5 employees. • Charges its wholesale customers 39c per shirt.
• Two operators were used to operate their four machines. Each is paid $3.75/hr for an eight hour day. • Only 526 shirts were finished. Revenue was down $29 from expected full production of 600.
Alternative Courses of Actions:
1. Add additional operator without changing the original machine position but increasing the production to 600-750/day. 2. Add additional operators and at the same time change the original machine positions & ensuring the production to 75 shirts/day. 3. To maintain the number of operators present in the workplace, changing its machine position and its operator’s machine holding.
ANALYSIS AND CONCLUSION
Adding new machine operators will incur additional $60 per day labor cost. It may yield a fair return if the company would also increase its target production to 80 shirts/hr. An additional 5 shirts an hour. It is not proven that they can meet the proposed additional production but risk is always present. In order to have gain, it is quite logical if Mr. Clean would try the alternative. In addition to this, the idle time would not be eliminated but would be minimized given if the workplace will remain as is.
It does provide additional income and hiring additional operators would increase the probability of achieving the 600 shirts/day but would mean incurring additional labor cost of $30 but hastening up production. So maybe on the company’s side the most reachable target is still 75/hour and ensuring to meet this required production to yield a fair return. (see appendix for diagram)
It does not need outflow of money, it did not result to additional $30/day labor cost but experiment on the company’s side to rearrange the machine and its operators in order to lessen idle time and hasten production.
The group then would recommend ACA 2. It is very practical to choose this alternative for upon further analysis the group finds out that the two additional workers would eradicate if not to minimize the idle time and would have the probability of achieving the 600/shirts per day thus having a much greater chance of surpassing the target production each day.
This would also yield to a much greater profit. The 88% efficiency of production that the company is experiencing before would increase to 100% or more when this alternative course of action is taken into action. In lieu with the facts the group is stating. It would be very evident and safe to conclude that Mr. Clean and company would not experience any loss in applying this kind of strategy.
Original 75 X .39 = $29.25 x 8 = $234/day = revenue per day
Change 94 X .39 = $31.20 X 8 = $293.28 = revenue per day
2 additional operator = $120/day
$173.28/day = revenue less cost
Original = $205/day
Labor = $60/day
$145.14/day add revenue = 59.28