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Excellent Manufacturing Company’s Capacity Report

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Updated: Jul 14th, 2020

Introduction

Excellent Manufacturing Company has exhibited great performance as evidenced by the large number of repeat customers who have continued to generate more revenue for the company to the tune of $13,000,000 in a year. According to the forecast records by Mike Finch, the company is well on the way to even greater sales in the future. In the next years, the current production levels could have increased by more than three-quarters of the present value.

Due to this the company has to brace itself for any changes in capacity shortly. It can employ short-term measures such as the application of an additional shift and long-term such as the purchase of new equipment. Whatever the strategy applied, critical analysis has to be made to ensure the company does not end up losing from the venture than gaining. Loss can be due to the production of substandard goods that drive the company’s established customers away.

Current capacity

The plastic-brack production process consists of four major processes: the bracket pressing, molding, assembly, and packaging. In the Bracket presses, the customs rate of production is 96000pcs per week from the two-400 ton presses. Six progressive dies are availed for each of the parts in due process. The die should be changed over after approximately three and a half hours. The molding process occurs simultaneously with the bracket presses. Its production level ranges from 25600-64000pcs per week depending on the size of the product. The smaller the product the larger the number of pieces produced. During the process, six dies are allocated for each part and the die change overdone every four hours.

The products of the two processes are taken for assembly, where the faulty ones are returned and the right ones fitted together before packaging into the 10 cu.ft tubs. The capacity at this stage is 19200 pcs per week from the seven stations, each with one operator. At this stage, the ability to identify the defective brackets is vital to ensure the sustained quality of the products. The personnel in charge should also work with reasonable speed to maintain the capacity of 8pcs per minute.

Lastly, we have the packaging stage where the capacity is pegged at 96000pcs per week. There is a large packaging area in terms of width and height to allow for the storage of the products as they await customer delivery and crosschecking of the existent orders. The packaging boxes required are at least 192 pcs per week to accommodate the actual production level.

As observed from the capacity level, the least is at the assembly area with a capacity of 19200pcs per week. This becomes the bottleneck of the plastic-brack production line as the overall production rate can only assume the speed of the slowest process (Goldman, n.d.). The company’s actual production is bound to be 20,870pcs per week since it operates at a capacity utilization of 92%. This can increase the rate of wear and tear of the equipment and rendering them obsolete earlier than expected.

Implications of the forecast to the capacity needs

The forecast expects an increase in capacity that would necessitate a change of the usual routine of operations by the employees or an increase in the number of capital investments. In case the forecast is too high, unnecessary costs may arise which would have the effect of reducing the company’s return. For instance, an introduction of two shifts would increase wages.

However, the new sales may not be sufficient to cover the added expenses. The staff may also become idle in the process. If the forecast is low, then the customers may lose confidence in the company due to the long delay in the processing of orders. It could cause employee exhaustion that in turn leads to the development of low morale. The speedup of the wear and tear process could also lead to the collapse of the machines.

Ways of increasing capacity

Short-term

The most immediate reaction is to increase the shifts to two. This would lead to increased fixed costs due to lighting and the required 15% shift premium. However, it would result in restored customer confidence and attract better sales.

Long-term

In the long run, the company can increase the number of machines –bracket presses and molding apparatus besides securing a large area to locate this equipment. Employment of new staff could also come in handy to reduce exhaustion amongst the employees. The implication of this includes an investment of a large amount of capital that could exhibit a low return rate. The expenses of employing and training new graduates are increased.

Plan

To ensure the capacity of the company is sufficient and the company maintains high sales both in the short run and in the long run, it should employ the following strategies. It should increase the shifts to two. Two shifts can help double the assembly capacity to about 38400pcs per week. The resultant additional costs will be covered by the extra revenue generated from the additional workforce.

Should the demand persist as per the forecast, the company should consider the purchase of new equipment to reduce the effect of wear and tear on the older equipment. It should also increase the number of employees to ensure no employee is overworked. The additional returns from these changes are more than sufficient to cater for any resultant additional costs.

Conclusion

By increasing its capacity through the implementation of the above plan, the company will ensure all the orders of its loyal customers are satisfied and thus mold repeat customers. It will realize greater revenues for fewer expenses and improve the opportunities of expansion to different locations. This leaves the investors satisfied and the employees contented since they work under an appropriate environment.

Reference

Goldman, A. (n.d.). Gaebler Ventures. Resources for Entrepreneurs. Web.

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IvyPanda. 2020. "Excellent Manufacturing Company's Capacity." July 14, 2020. https://ivypanda.com/essays/excellent-manufacturing-companys-capacity/.

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