CEO John Spychalski is concerned about a problem that has existed at CBN railroad for almost 20 years now. The continuous problem has been that the locomotives used by the company are not very reliable. Even with prior decisions to resolve the problem, there still has not been a change in the reliability of these locomotives. Between 2015 and 2016, 155 new locomotives were purchased and one of CBN’s repair shops was renovated. The renovated shop has been very inefficient. Spychalski estimated that the shop would complete 300 overhauls on a yearly basis, but instead it has only managed to complete an average of160 overhauls per year.The company has also been doing a poor job servicing customers (that is, providing equipment). CBN has averaged only 87–88 percent equipment availability, compared to other railroads with availability figures greater than 90 percent. Increased business in the rail industry has been a reason for trying to reduce the time used for repairing the locomotives. CBN’s mean time between failure rate is low—45 days—compared to other railroads whose mean time between failure rates is higher than 75 days. This factor, Spychalski feels, has contributed to CBN’s poor service record.CBN is considering a new approach to the equipment problem: Spychalski is examining the possibility of leasing 135 locomotives from several sources. The leases would run between 90 days to 5 years. In addition, the equipment sources would maintain the repairs on 469 locomotives currently in CBN’s fleet, but CBN’s employees would do the actual labor on the locomotives. The lease arrangements, known as “power-by-the-mile” arrangements, call for the manufacturers doing the repair work to charge only for maintenance on the actual number of miles that a particular unit operates. The company expects the agreements to last an average of 15 years. John Thomchick, the executive vice president, estimates that CBN would save about $5 million annually because the company will not have to pay for certain parts and materials. Problems with the locomotives exist throughout CBN’s whole system, and delays to customers have been known to last up to five days. Spychalski and Thomchick feel that the leasing arrangement will solve CBN’s problems.CASE QUESTIONS1. What are potential advantages and disadvantages of entering into these “power-by-the-mile” arrangements?2. What should be done if the problem with the locomotives continues even with the agreements?3. Do you think that the decision to lease the locomotives was the best decision for CBN? Explain your answer.
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
CEO John Spychalski is concerned about a problem that has existed at CBN railroad for almost 20 years now. The continuous problem has been that the locomotives used by the company are not very reliable. Even with prior decisions to resolve the problem, there still has not been a change in the reliability of these locomotives. Between 2015 and 2016, 155 new locomotives were purchased and one of CBN’s repair shops was renovated. The renovated shop has been very inefficient. Spychalski estimated that the shop would complete 300 overhauls on a yearly basis, but instead it has only managed to complete an average of
160 overhauls per year.
The company has also been doing a poor job servicing customers (that is, providing equipment). CBN has averaged only 87–88 percent equipment availability, compared to other railroads with availability figures greater than 90 percent. Increased business in the rail industry has been a reason for trying to reduce the time used for repairing the locomotives. CBN’s mean time between failure rate is low—45 days—compared to other railroads whose mean time between failure rates is higher than 75 days. This factor, Spychalski feels, has contributed to CBN’s poor service record.
CBN is considering a new approach to the equipment problem: Spychalski is examining the possibility of leasing 135 locomotives from several sources. The leases would run between 90 days to 5 years. In addition, the equipment sources would maintain the repairs on 469 locomotives currently in CBN’s fleet, but CBN’s employees would do the actual labor on the locomotives. The lease arrangements, known as “power-by-the-mile” arrangements, call for the manufacturers doing the repair work to charge only for maintenance on the actual number of miles that a particular unit operates. The company expects the agreements to last an average of 15 years. John Thomchick, the executive vice president, estimates that CBN would save about $5 million annually because the company will not have to pay for certain parts and materials. Problems with the locomotives exist throughout CBN’s whole system, and delays to customers have been known to last up to five days. Spychalski and Thomchick feel that the leasing arrangement will solve CBN’s problems.
CASE QUESTIONS
1. What are potential advantages and disadvantages of entering into these “power-by-the-mile” arrangements?
2. What should be done if the problem with the locomotives continues even with the agreements?
3. Do you think that the decision to lease the locomotives was the best decision for CBN? Explain your answer.
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