FM - Assignment 1 - F & M

TOC Assignment on F&M, Sudipto Sarkar, TOCLBJ 22 - 2 1
Name: Ajinkya Vidhate Roll No: BL23009
You are a plant manager responsible to maximize the throughput for the company as a whole.
Your plant is one of a number of plants that produce many different types of steel. Over the last
year TOC DBR and distribution has been implemented and the load on the constraint in the plant
is now only 58%. The ton per hour performance of the plant has never been this low. Tables 1
and 2 provide the current best information available from the management accounting system.
TABLE 1: Price, Material Cost, and Demand

Product Price Material Cost Weekly Demand (tons)
A 90 30 120
B 91 28 100
C 101 35 100
D 224 84 30
E 146 80 50
TABLE 2: Machine requirements (mins/ton) and Machine Availability (hrs)

Product Work Center 1 Work Center 2 Work Center 3 Work Center 4
A 12 0 20 6
B 10 7 10 10
C 10 7 13 10
D 0 40 3 4
E 0 23 15 6
Time available 120 120 160 120
The marketing and sales team is working hard at elevating the market constraint and has
developed the following new opportunities:
TABLE 3: New sales opportunities
Product Selling price Quantity per week
D 200 40
A 100 60
E 140 40
Which opportunity(s) should you accept? The policy of the plant is that no resource should be
loaded more than 75% to be able to maintain the promise of no stock outs made to the
customers. Your marketing offer promises that you will pay penalties to your customer based on
the TRD performance measure. [10 marks]
Solution:-
First, we will calculate current capacity utilizations of the work centers.
TABLE 2: Machine requirements (mins/ton)

and Machine Availability (hrs) Current capacity utilization
Work Work Work Work Work Work Work Work
Product Center Center Center Center Center Center Center Center
1 2 3 4 1 2 3 4
A 12 0 20 6 1440 0 2400 720
B 10 7 10 10 1000 700 1000 1000
C 10 7 13 10 1000 700 1300 1000
D 0 40 3 4 0 1200 90 120
E 0 23 15 6 0 1150 750 300
Time
availabl 7200 7200 9600 7200 Time
e taken 3440 3750 5540 3140
Time
availabl 7200 7200 9600 7200
e
resourc
e
utilized 47.78% 52.08% 57.71% 43.61%
With this we come to the conclusion that work center 3 is the most utilized one currently with
57.71% capacity utilized. However is we consider all the sales opportunities that are given to us by
the sales team, the capacity utilized is given below:
new capacity utilization

Work Work Work Work
new product Center Center Center Center
demands 1 2 3 4
A 180 2160 0 3600 1080
B 100 1000 700 1000 1000
C 100 1000 700 1300 1000
D 70 0 2800 210 280
E 90 0 2070 1350 540
Time
taken 4160 6270 7460 3900
Time
availabl 7200 7200 9600 7200
e
resource
utilized 57.78% 87.08% 77.71% 54.17%
at 75 %
Time taken by capacity
work Center 2 utilization 5400 870 We have to reduce time by this much
Thus, we need to find the product with lowest contribution / constrained resourced so that we can
reduce their production.
TABLE 3: New sales opportunities
Sellin Quantit
Produc Materia Contributio contribution/
g y per
t l Cost n constrained resource
price week
D 200 40 84 116 2.9
A 100 60 30 70 no difference
E 140 40 80 60 2.608696
Lowest Contribution/ constrained resource is at E
Thus we try to maximize the production of A and D first and then produce E to fill the remaining time
till the capacity utilization hits 75%.
new capacity utilization

Work Work Work Work
new product Center Center Center Center
demands 1 2 3 4
A 180 2160 0 3600 1080
B 100 1000 700 1000 1000
C 100 1000 700 1300 1000
D 70 0 2800 210 280
E 52 0 1196 780 312
Time
taken 4160 5396 6890 3672
Time
availabl 7200 7200 9600 7200
e
resource
utilized 57.78% 74.94% 71.77% 51.00%
So we get the final results that , the demand for A and D will be fulfilled completely and we can only
sell 2 more tons of product E. Thus the new sales to be done is:-
New sales to be
done
Weekly
total
Produc Materi Deman contributio
Price contributio
t al Cost d n
n
(tons)
A 90 30 120 60 7200
B 91 28 100 63 6300
C 101 35 100 66 6600
D 224 84 30 140 4200
E 146 80 50 66 3300
A 100 30 60 70 4200
D 200 84 40 116 4640
E 140 80 2 60 120
Total 36560
We will accept the opportunity to produce A 60 Tons and D 40 Tons while E will be limited to 2
Tons.

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TOC Assignment on F&M, Sudipto Sarkar, TOCLBJ 22 - 2 1

Name: Ajinkya Vidhate Roll No: BL23009

TABLE 1: Price, Material Cost, and Demand

TABLE 2: Machine requirements (mins/ton) and Machine Availability (hrs)

First, we will calculate current capacity utilizations of the work centers.

TABLE 2: Machine requirements (mins/ton)

new capacity utilization

TABLE 3: New sales opportunities

D 200 40 84 116 2.9

new capacity utilization

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