A company manufactures particle boards in a production facility. With recent increases in input costs, the company has implemented new machines that lower raw material waste and reduce en- ergy consumption. The new machines also have improved automation and therefore lower the labour requirements for the same level of production. The company believes that if a 3% improve- ment productivity (with respect to each input) is achieved it will offset the increased raw material costs. The company calculated the following information | LAST YEAR CURRENT YEAR 10,000 Boards produced Labour (hours) Wood chips (kg) Resin (kg) Energy (kWh) Labour cost (S/hour) Wood chips cost (S/kg) Resin (S/kg) Energy (S/kWh) 10,000 15,250 10,150 16,000 10,750 500 470 30,000 28,500 20.00 21.50 15.15 15.35 3.55 3.50 0.09 0.10

A company manufactures particle boards in a production facility. With recent increases in input costs, the company has implemented new machines that lower raw material waste and reduce en- ergy consumption. The new machines also have improved automation and therefore lower the labour requirements for the same level of production. The company believes that if a 3% improve- ment productivity (with respect to each input) is achieved it will offset the increased raw material costs. The company calculated the following information | LAST YEAR CURRENT YEAR 10,000 Boards produced Labour (hours) Wood chips (kg) Resin (kg) Energy (kWh) Labour cost (S/hour) Wood chips cost (S/kg) Resin (S/kg) Energy (S/kWh) 10,000 15,250 10,150 16,000 10,750 500 470 30,000 28,500 20.00 21.50 15.15 15.35 3.55 3.50 0.09 0.10

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Concept explainers

Overall Equipment Effectiveness

Overall equipment effectiveness or OEE as it is known can be defined as a widely standard to measure manufacturing productivity. In other words, it can also be defined as the exact percentage of time which is productive. If the score of overall equipment effectiveness is 100%, it is an indication that only good parts are being manufactured with no stop time. Hence OEE of 100% means 100% quality, performance & also availability.

Question

a. Evaluate the productivity of boards per each of the four manufacturing inputs (labour, wood
chips, resin and energy) for each year. Do the separate measures indicate a 3% improvement?
b. Evaluate the same productivity measures as in step (a) but in terms of monetary cost. Is the
3% improvement (for each input) still present?
c. Calculate the multi-factor (boards per cost of all inputs) productivity improvement. Is the
ultimate goal of offsetting rises in input costs achieved?
d. A significant investment was made to acquire the new machines. Engineers believe that
further improvements can still be made. In which area (labour use, wood chip or resin waste,
energy usage) should the company concentrate future investment towards improvement?

A company manufactures particle boards in a production facility. With recent increases in input
costs, the company has implemented new machines that lower raw material waste and reduce en-
ergy consumption. The new machines also have improved automation and therefore lower the
labour requirements for the same level of production. The company believes that if a 3% improve-
ment productivity (with respect to each input) is achieved it will offset the increased raw material
costs. The company calculated the following information
|LAST YEAR CURRENT YEAR
10,000
15,250
10,150
Boards produced
Labour (hours)
Wood chips (kg)
Resin (kg)
Energy (kWh)
Labour cost (S/hour)
Wood chips cost (S/kg)
Resin (S/kg)
Energy (S/kWh)
10,000
16,000
10,750
500
470
30,000
28,500
20.00
21.50
15.15
15.35
3.50
3.55
0.09
0.10

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