Company Situation-Production

Evaluate your Production Lines & Labor Force

In order to assess the efficiencies of your plant utilization & capacity levels you will need the production data on page 4 of your Capstone Courier  and the data you calculated in your Demand Analysis...

 

 

 

1) Assess your  Plant Utilization & Automation -

 

 Analyze each of your production lines accordingly:   

For example--

  Production Line=

Traditional

Column 1:Your Current Production Specs

Column 2: Projections & Optimal Specs

Evaluation-Strengths & Weaknesses

Current TOTAL Capacity

 vs.

Forecast "Fair-Share" Demand

CURRENT

(1st + 2nd Shift)

3,600,000

Projected ~Fair Share ~  3rd Round

1,603,000

W: In 3 years--still ~ 2 million units of excess capacity
Line Utilization 66% Optimal= 175+ W: Very low utilization
--- 2nd Shift 0% Optimal= 50+ W: No use of 2nd Shift
Line Automation 4 Optimal= 8 W: Inadequate automation level

 

Row #1: You want optimal levels of production capacity -- so as to meet current as well as near future projected levels of demand for your brand in the segment:

 

Row 1- Column 1= Current Total Capacity = (2 x "Capacity Next Round")

Row 1- Column 2= Projected Fair share 3rd Round =  How much capacity you will need in 3 years to produce your "Fair-Share" (1/6th of the total demand) .... which according to your Demand Analysis = 1,603,000 sensors in the traditional segment--

 

However -- the 1,603,000 figure for your "Fair-Share" of the Traditional segment assumes there are still just 5 other  brands (all equal in design & marketing effort) competing in the segment ... and this "historically" has not been the case... rather the more probable scenario that will unfold is thus:

 

 

 

Row #2 -column 2: You want maximal levels of Plant Utilization:

... as idle capacity incurs  excess labor  & depreciation expense
 

Excellent

Satisfactory Poor
>175% 150-175% <150%

 

Row #3-column 2 - You want to maximize use of a 2nd shift-- although 2nd Shift labor costs are 50% higher and you require a larger labor force... it remains that  your period/fixed costs are paid under the 1st Shift. Anything you produce on 2nd Shift  pays only the additional variable costs...Ergo you will have greater net margins

    SEE:  Human Resources Module  2nd Shift, Overtime & Improving Profit/Employee

 

Row #4- column 2 varies by segment:  You want optimal levels of automation- to reduce labor costs:

OPTIMAL -Automation levels for each segment

  • Traditional 8.0

  • Low End 10.0

  • High End 5.0

  • Performance 6.0

  • Size 6.0

 Capacity Adjustments

NOTE: As this is only a preliminary estimate-- You will need to keep aware of the natural growth of each segment as well as any new products being added to any segment (by you or your competitors)... and make the necessary capacity adjustments every round-- to avoid significant shortages or excesses of capacity.

When you buy capacity---there is a one-year lag before new capacity becomes availableCapacity can be sold by entering a negative number in the "Buy/Sell Capacity" row on your production spreadsheet--to indicate the amount you wish to eliminate.  When capacity is sold, the sale completes immediately and the money is available in the current round. By selling excess capacity you can raise a significant amount of capital-- that could be re-invested in improving the automation levels of your production lines and/or the design & marketing of your products

he sample table below depicts what capacity adjustments one might make-- based on how much capacity you would need for the 1st 4 rounds -- assuming no products are added or dropped within each segment by you or your competitors...

Sample...

2) Assess your Company's HR & Labor Force Productivity:

 

Current vs IDEAL

Evaluation-Strengths & Weaknesses

Productivity

? vs118

Retention/Turnover

? vs <5%