OPERATIONS & PRODUCTION

MANAGEMENT

Muhammad Ahmed Tughlaq Khan - 18470

MBA Morning
Institute of Business Administration Karachi
 OPERATIONS & PRODUCTION MANAGEMENT

MID TERM EXAM – SPRING 2020

AIRVENT FANS CO.

Anshuman Tripathy & Shikha Safaya

CASE ANALYSIS

PROBLEM STATEMENT

Airvent Fans Co., found and established in Rajistan, manufactures ceiling fans for two different OEM
customers, Tropical Fans and WindStar, is dared to fulfil its customer demand. The plant is currently
operating at its maximum capacity and before reaching to out-source some of its operations in long
term, the company is seeking the opportunity to increase its output capacity within the available
resources in order to cater the forecasted increase in demand. The choice now is to either invest in
more capital to meet the demand or outsourcing some of the operations.

CURRENT SCENARIO

The current scenario of the company is elaborated as under:

COMPETITIVE PRIORITY
According to the case, I conclude that the
competitive priority of Airvent Fans Co. lies
between “Quality” and “Flexibility”.

Since, Airvent Fans Co. caters two major players in

the Rajistani region: Tropical Fans and WindStar,
subsequently both of the companies house a
variety of offerings for their customers, Airvent
Fans Co. also holds the capacity to cater the varying
product features required. The fans manufactured
for Tropical Fans are aimed to be energy-saving as
well as affordable while those manufactured for
WindStar were catering the requirement of high performance and high speed of fans. Therefore, Airvent
Fans Co. has designed its capacity on the basis of the 28 variants of required by its two customers.
The company at the time of its inception, expanded in order to form a large capacity in order to
maintain its brand image of being a trusted high-quality fans manufacturer and the market’s favorite
ceiling fan OEM.

PROCESS PRODUCT MATRIX

Airvent Fans Co. lies in between batch
process and assembly type product process
design. The volume is greater than job shop
therefore Airvent Fans Co. follows the batch
process technique more often as more
processes can be utilized in the operations
due to less variation in the product design.

When the product quantity is high enough,

the assembly line is utilized to manufacture
the goods in order to have lesser changeovers
and more productivity.

CURRENT PROCESS FLOW AND RELATED CALCULATIONS

CALCULATIONS

The operation is batch flow with the processing capacity of 1000 – 1300 batch size at steel stamping
station and 1000 batch size of steel cutting station. This is followed by an assembly line setup. Above is
the process flow based on Exhibit 5. The calculations prove that Airvent Fans Co. will not be able to meet
the demand of 2017 based on no changes in the current operating system.

Capacity = 3200 fans/day

Total machines = 24

Total labors = 33

Changeover cost (stator and rotor assembly) = 20 Rs/min; Total cost = Rs 3000 (based on 1300
batch size and 150 mins in changeover)

Changeover cost (blades production) = 20 Rs/min; total cost = Rs 800 (based on 100 batch size
and 40 mins in changeover)

Actual working time = 2.301 * 3200 = 7365.3 min

Available time = 16 * 60 = 960 mins (based on two 8 hours shift)

 Machine utilization = 13152/ (24*960) * 100 = 31.96%

Labor utilization = 13152 / (33*960) * 100 = 23.24%

Total changeover cost = Rs 3800 (3000 + 800)

ANALYSIS

INDUSTRY ANALYSIS
Following is the brief industry analysis of the ceiling fan industry in India and also the standing of Airvent
Fans Co. as a supplier.

 The market share of the ceiling fans is growing due to increasing disposable income of the
masses in India, having a CAGR of 9-10%.
 The annual sale of the ceiling fans in Indian market is estimated to be 50 Million in 2016 due to
the increasing temperatures in the country.
 Ceiling fans constitute the 70% market share of the Indian electric fan industry.
 The organized sector of the ceiling fan industry consists of 45% market share while the
unorganized sector holds 55% market share.
 The barrier to entry of new competitors in low due to lack of monopolistic and oligopolistic
market competition.
 The demand of Indian fan market as of 2014, 2015 and 2016 is 0.712 Mn, 0.72 Mn and 0.767 Mn
respectively. Airvent Fans Co is able to cater to these demands but as the new demands are
forecasted and the growing demand will result in low supply from Airvent Fans Co, the company
needs to expand its capacity.

INTERNAL ANALYSIS

 3200 fans/day or 0.8 Million fans annually

 Ideal Utilization: 100%
Current Machine Capacity Utilization: 31.96%
Capacity
Current Labor Capacity Utilization: 23.2%
 Shift: 250 days a year with two 8-hour shifts. Third shift can be
started, if needed.
 Different fan designs are manufactured based on the
requirements of two OEM customers: Tropical Fans and WindStar
Facilities  Batch Process to Assembly Line
 Pre-worked

 The products are made of Made-to-Order basis
Product Design
 Original Equipment Manufacturer
Process Technique  The process of manufacturing is modified based on experience,
therefore, the number of workers, stations and the size of the
batch is maintained based on the flow of orders.
Work Force  Highly-skilled workforce.

Procedures/Planning  Procedures are adopted based on the order flow and product
type requirements.
Process Control  Quality control in order to get better products

ECONOMIC PRODUCTION BATCH QUANTITIES AT THE REQUIRED PROCESSES

POSSIBLE ALTERNATIVES

Following alternatives were out forward in order to take care of the existing problem:

1. Out-sourcing some operations in order to increase the rate of output.

2. Increase the hours in the shifts.
3. Invest more capital into the existing system.

OUT-SOURCING SOME OPERATIONS IN ORDER TO INCREASE THE RATE OF OUTPUT

Based on the BOM in Exhibit 6B, the materials S, H and H were made in-house which added a time of 9.9
seconds in the total through put time. If we outsource these materials/part, we will save 9.9 seconds on
the overall manufacturing.

Pros: Reduced time by 9.9 seconds thus increasing the production

Cons: Raw material cost is added and more quality checks will be required for the materials coming from
the outsourced supplier in order for the parts to be internally consistent with the quality standards.

INVEST MORE CAPITAL INTO THE EXISTING SYSTEM

With respect to data given in Exhibit 7, the major bottle neck in the process is in Motor sub-assembly
taking 56 seconds. The copper wire winding alone takes 39 minutes therefore it makes following
processes wait and become idle. We can install three parallel stations of Motor sub-assembly to reduce
the idle time.

Pros: Bottleneck is eliminated and production is increased.

Cons: Capital investment and more maintenance will be required. Also required more labor for
processing.

INCREASE THE HOURS IN THE SHIFTS

We can increase the shifts i.e. to 3 shifts per week. Based on that, observe below calculations:

Effective capacity = 3200 fans / day * 365 days = 1.17 million pieces per year.

The working time will therefore be increased to 6.17 seconds per fan.

Working time: 6.17 * 3200 = 19744 min

Time based on three-shifts: 24 * 60 = 1440 mins

Machine utilization = 19744/ (24*960) * 100 = 85.6%

Labor utilization = 19744 / (33*960) * 100 = 62.3%

RECOMMENDATION AND ACTION PLAN

As a matter of first importance, the organization needs to change their competitive priority from Quality
and Flexibility to Quality and Deliverability, as they need to satisfy the needs of the market or else, they
will miss out on the competition due to the lack of entry barriers in the industry. The lack of supply in
the market will result in suffered brand image of Airvent Fans Co.

Furthermore, Airvent Fans Co. should likewise refresh their process-product matrix by moving to higher
volumes, so as to take into account the developing interest of ceiling fans in the coming years and the
forecasted hype in demand. They should work on more standardization of the product design in order to
get the most out of higher volumes production.

SHORT TERM
 Outsource the Motor sub-assembly (as it is the bottle neck) or add new machinery to the line in order
to cut down the time.
 Adding machines related to fan blades to the metal and plastic paint shop.
 Since the plastic paint shop is labor intensive, adding more labors will help.
 The size of the batch can be increased to make us of time effectively.
 Decrease the wasted time in the transition period.
 The production should be more focused on fan H14XWs & Q4 in the period of time.

LONG TERM
 The complete operational process should be redesigned by the ‘pre-requisites approach’
 The current production capacity can be updated in order to cater the customer demands.