wriston case LMS

Wriston Manufacturing

S. Chopra/Operations/Strategy

1

Wriston Manufacturing
Burden Rates (total overhead cost / direct labor cost)
7
6
5
4
3
2
1
0

Sanduski

Detroit

Lima

Lebanon

Saginaw

Essex

Tiffin

Freemont

Tiffin

Freemont

Maysville

Free capacity and Throughput
160
140
120
100
80
60
40
20
0
Sanduski

S. Chopra/Operations/Strategy

Detroit

Lima

Lebanon

Saginaw

Essex

Maysville

2

Wriston Manufacturing Corp:
OH Burden rates: Economies of Scale?
Sales vs. burden
7

Detroit
(20, 34.8)

6

Essex
Lima (4, 22.6)
(4, 12)

5

Saginaw
(10, 94.2)

Sandusky
(5, 66.8)

Burden

4

Tiffin
(6, 91.6)

3

Lebenon
(2, 72.6)

2

Fremont
(10, 158)
Maysville
(2, 110)

1

0
0

20

S. Chopra/Operations/Strategy

40

60

80

100
Sales

120

140

160

3

180

Wriston Manufacturing Corporation
Exp. Burden = 4.37658 - 0.01730*Sales + 0.13084 # Families
(R. Sq. = .82, p-value = 1.29% {families}, 0.95%{Sales}).

Wriston Manufacturing Corporation


If Detroit production is moved to Maysville
– Families = 22, Sales = 144.8



Implied burden rate at Maysville = 4.75 (at 100% effectiveness) or 4.75/1.17 = 4.06 (at 117% effectiveness)

Burden rate on 20 families from Detroit would decline but burden rate on the two families at Mayville (representing
$110 million in sales) would increase significantly

S. Chopra/Operations/Strategy

5

Wriston Manufacturing Takeaways






Required capabilities change with market segment and product life cycle. As a result firm may need to develop conflicting capabilities
Key drivers of overhead include variety and scale.
Overhead per unit increases with variety and decrease with scale.
Focused factories, each focused on a single capability, handle conflicting capabilities better than a single factory trying to provide all capabilities

S. Chopra/Operations/Strategy

6