CASE STUDY: SPACE AGE FURNITURE COMPANY 1

Introduction

Many companies are now adopting Materials Requirement Planning (MRP) to assist

them in solving issues arising from the manufacturing processes. MRP is a computerized

inventory management system that helps to plan and schedule the purchase of element parts

and raw materials for the manufacturing establishments. The two primary objectives of MRP

is to determine requirements and keep priorities current (Chapman et al., 2017). It allows

inventory managers to maintain proper inventory levels, determines the best cost-effective

measures to take through economic ordering, leads to effective production and purchase

planning, adequate work scheduling, and customer service satisfaction. This study focuses on

the Space Age Furniture Company that manufactures furniture. A new MRP for the company

will be developed, and improvements of over-assemblies in lot sizes of 1,000 will be

addressed. An analysis of the trade-off between overtime and inventory costs, calculation of

new MRP that will improve the base MRP, and comparisons of various production processes.

Strategies review that can be used to monitor operations and recommendations that will be

beneficial to the company and enhance value to the customers at large. The primary point for

the company is to determine a good MRP considering that the current system is an efficient

system of production.

Space Age Furniture manufactures tables and cabinets to hold portable television and

microwave ovens. All the products follow the same production processes except for two

products that are Gemini TV stand and Saturn microwave that have part 3079. The

component in question has two different subassemblies that are no. 435 used in Gemini TV

stand and no. 257, which is used in the Saturn microwave stand. In each assembly, one part

of 3079 is used, and subsequently, one subassembly is used in each final part.
 CASE STUDY: SPACE AGE FURNITURE COMPANY 2

1. Develop an MRP for Space Age Furniture Company using the information

   in the case including the production of sub-assemblies in lot sizes of 1000

MRP is developed in a way in which the entire production environment is evaluated

to allow master schedules to be adjusted and created based on feedback from current

production or purchase conditions (Bedworth and Bailey, 1987). Developing an ideal MRP

will require three critical elements, which are the Bill of Materials (BOM), Master Production

Schedule (MPS), and Gross Requirements (Vonderembse and White, 2013). In line with this,

the master production schedule has been prepared from the available customer orders for the

final products, identifying the required components and the time needed to finalize them. The

MRP that will best suit the company is one that will lead to the reduction of the high load of

extra work being done by Ed the machinist.

The system has been created to computerize the inventory control, and this will

automatically generate the details. It will develop a network of production planning,

scheduling of components that are required in order of production, inventory tracking, and

finally, provides an efficient business environment that is necessary for Space Age Furniture

Company. Below is the recommended design of the proposed MRP system that will help the

company achieve its required objectives (Ptak et al., 2013)

 CASE STUDY: SPACE AGE FURNITURE COMPANY 3

As shown in the diagram above, the calculations of MRP are based on the following

inputs, which include customer orders, forecast demand, Master Production Schedule (MPS),

Bill of Materials, and inventory records.

After the receivable of the inputs by the MRP, outputs are generated, which includes

purchase orders, material plans, work orders, and reports generation. Other relevant MRP

aspects to be considered consists of the preparation of labor productivity and reduction time.

The design will help to increase production efficiency, reduce overtime, increase the levels of

communication, improve supply schedules, faster and accurate materials requirements

calculations, and improve the company's competitive advantage in the market. The results

noticed by adopting the design will be lower components shortages, developed delivery, and

customer service levels, lower inventory levels, increase the productivity of the company,

including superior quality of production, lower costs of purchase and less manufacturing

costs (Heisig, 2002). The inventory of Space Age Furniture Company should be able to

support the creation of 1,000 Gemini TV, and Saturn Microwave stands.

 2. The lot size of 1,000 for sub-assemblies has produced a lumpy demand

   for part 3079. Suggest ways for improvements over sub-assemblies in lot

   sizes of 1,000.

It is essential to have flexibility in the production process to avoid the issues with

lumpy demand that can arise. Volume flexibility measures the ability to handle the variability

in the volumes demanded (Mattsson, 2000). Delivery flexibility measures the ability to

handle variability and changes in open customer orders, for example, changed order quantity

and delivery date (Mattsson, 2000), which decreases the need for large buffers and

inventories.

The production quality of a given product is derived from the performance of the

subassembly product. Most manufacturing companies make use of the mixed-model

 CASE STUDY: SPACE AGE FURNITURE COMPANY 4

assembly line (Li and Li, 2000). Space Age uses two subassemblies in the development of

part 3079. Since Space Age wishes to reduce the change of time, this will be achieved by

setting a limit of 1,000 units per batch, which should not compromise the capacity of the

equipment. Therefore, the elimination of wastage in production time will improve

performance.

Another way of improving the efficiency of the subassemblies is to perform numerous

configurations. Vonderembse and White (2013) suggest that the ability of a subassembly is

realized when the lot volume moves faster. This will further reduce edges on the part of the

machining process. The performance of the respective subassemblies will undoubtedly be

improved through the simplification of the configuration process.

Space Age should also have plenty of reusable subassemblies hence enhancing

efficiency through saving as part (Li and Li, 2000). This technique is believed to eliminate

unwanted details in the manufacturing process, thereby improving the performance.

Removing all degrees of freedom is a technique that ensures the full performance of

subassemblies is realized. Li and Li (2000) clarifies the importance of having additional

mates for the subassemblies to help in eliminating the negative signs that arise as a result of

the procedure being carried out.

Another way in which the subassemblies can be improved is by ensuring that the

product is produced in the least amount of time. If one lot of 1,000 is created, which is the

maximum required, the final item will save $0.25 a unit for every week equalling $300. Ed is

paid $22/ hour in his consistent shift and an extra $33 for every hour provided that he did the

work in spare additional time. To generate the 1000 parts for the week, Ed will be paid about

$440 for the extra hours required. By eliminating the extra time element and selecting to

stock the surplus materials, the company will recover $440. A talented alternative machinist

can be hired; hence there will be no requirement for the extra time, thus reducing costs. More
 CASE STUDY: SPACE AGE FURNITURE COMPANY 5

so, Ed will not be required to perform additional hours, therefore, encouraging motivation

and improvement of the production process due to the new workforce.

   3. Analyze the trade-off between overtime costs and inventory costs.

The trade-off between inventory and overtime costs analysis is an approach through

which many manufacturing companies fulfill their stochastic demands. Manufacturing

companies are required to meet excess demands through overtime production (Hamraz et al.,

2014). Consequently, the cost flows down to the inventory since labor and materials are

required for the excess demand to be produced. Due to the trade-off involved in overtime and

inventory costs, the company requires a management approach to schedule the productions

per its requirements. The costs of holding large inventories are always greater than the

overtime costs. They can be resolved through production schedules improvements as well as

ensuring the manufacturing process is enhanced to cope with such trade-offs. According to

Space Age Furniture Company, the production of part 3079 is limited to 0.03hr per unit to

process, the number of units to be produced in an hour will be 60/0.03= 2,000 units.

Therefore one hour will produce 1,000 units. Ed overtime earnings per hour will be $22 plus

50% which is $11 = 22+11 = $33 while the costs of holding each inventory is $0.75,

therefore 2,000 units = $1,500. In this scenario, the trade-off is that the company will incur

$1,500 of inventory holding costs expenses while the overtime costs incurred will be $33.

These clearly show that the company should prefer paying overtime labor rather than

ordering the production of required units at the moment. The consideration of these costs is

relevant for a company to make important decisions for evaluating trade-off among overtime

labor costs and costs for holding large inventories.

The development of multiples algorithms has been designed to help in the distribution

of constrained resources to several different activities for proper scheduling. These

 CASE STUDY: SPACE AGE FURNITURE COMPANY 6

algorithms generate optimal schedules for the manufacturing time as well as minimization of

completion time. If overtime is imposed, a planning algorithm is proposed that requires less

information on future demand than a linear programming model.

   4. Calculate a new MRP that improves the base MRP.

The existing Space Age Furniture MRP needs improvement by incorporating

additional elements in the calculations. The base MRP can be enhanced through obtaining the

total number of stands made per week and the inclusion of various labor costs. The table

below highlights the expense of space for part 3079 as = $0.25 per week for each unit. The

cost of space for sub gathering 435 and 257 is = $0.75 per unit per week. Storage charges for

each Genesis part are $1.25 per week, and for each Saturn, a part is = $1.50 per week. Below

is the table plan of arrangement for six weeks, which demonstrates the amount of each

completed unit of Saturn and Genesis:

Table 1:

The Plan Table of Arrangement

Item Week 1 Week 2 Week 3 Week 4 Week 5 Week 6

Gemini 600 400 700 500 400 600 3200
Storage @ $750 $500 $875 $625 $500 $750
$1.25/week
Saturn 300 400 400 600 300 300 2300
Storage @ $450 $600 $600 $900 $450 $450
$1.50/week
Total 3079 900 800 1100 1100 700 900 5500
Storage @ $225 $200 $275 $275 $175 $225
$0.25/week
Storage for Sub $675 $600 $825 $825 $393.75 $675
435 and 257
@$0.75/unit/week

Table 2:
 CASE STUDY: SPACE AGE FURNITURE COMPANY 7

Production capacity /week

Item Week 1 Week 2 Week 3 Week 4 Week 5 Week 6

Gemini 533 533 533 533 533 533 3198
Saturn 383 383 383 383 383 383 2298
3079 916 916 916 916 916 916 5496

The above table illustrates the storage holding costs for each unit and subassembly

with part 3079. The subassembly storage costs are cheaper than the completed item. For six

weeks, $4000 was paid for 1000 units of finalized Gemini furniture and $3450 for another

1000 units of Saturn furniture, both totaling to $7450 while the subassembly storage costs for

the same period will be $4125. An order of 2000 must be produced to meet the requirements,

amounting to $5280 for six weeks and which must be distributed in the plan. With this regard

Space Age should focus more on overtime rather than storage costs since it is more cost-

effective.

5. Compare and contrast the types of production processing—job shop, batch,

repetitive, or continuous—and determine which the primary mode of operation is and

why.

Job Shop is a process that involves the manufacture of small batches of custom made

orders one at a time. This leads to a set of unique step processes and stages that fall one after

another in a sequence. Once a specific task is completed, a job shop can carry out a different

assignment from a different customer (Llewellyn and Tappin, 2003). This is a highly flexible

system where the rate of expanding facility is high, flexibility in items produced exists, and it

uses multipurpose machines.

Batch is a manufacturing process that carries out automated tasks without any manual

interference or human intervention (Llewellyn and Tappin, 2003). The production line is fed
 CASE STUDY: SPACE AGE FURNITURE COMPANY 8

with a series of instructions that are required to perform the tasks automatically. It provides

better results in the production process and produces large quantities of products.

Repetitive is a process where a series of identical products are manufactured. Goods

are created through the same manufacturing process flows in a sequence, and this process is

used for mass production. It leads to the realization of a reduced cost of inventory and

production costs.

Continuous is a manufacturing process where the materials are always in a state of

motion from one condition to another to produce the final product.

The primary mode of operation of the company is job shop. The primary job of

production is where the major processing takes place (Vonderembse and White, 2013). This

is provided by the fact that a job shop is responsible for the production of various parts, albeit

repeatedly, and the orders are custom made. A job shop can be described as the central unit of

production and can produce any product in bulk (Heim et al., 2013). Therefore, the primary

mode of production in Space Age Furniture should be identified from the basis of the content

produced than time used.

6. Describe ways that management can keep track of job status and

   location during production.

Job-status and locations are essential in evaluating a company's production line

efficiency. It is, therefore, necessary for a company to define the job status by creating a

proper production plan. This will lead to appropriate tracking of job status hence improving

timely deliveries, customer satisfaction, and reduction of inventory costs. Furthermore,

managers can get first-hand information on production status by making calls and personally

visiting the factories to check on the state and location.

 CASE STUDY: SPACE AGE FURNITURE COMPANY 9

The management can make use of tracking software to effectively determine the

manufacturing procedures and the phases it goes through for the production of the final

product. Inventory audits need to be carried out to ensure the efficiency of the production

process. The product location is vital in establishing the delivery times to customers, whereby

the managers can use computer software that is automated monitoring techniques to estimate

the areas. Automation is fast and cost-effective.

7. Recommend any changes that might be beneficial to the company and/or

   add value for the customer.

Space Age Furniture Company has two products that have a component that requires

machining on a special lathe. One-person Ed, can only operate this machine. The resulting

problem is the overtime required by Ed to work to meet the necessary orders. Snodgrass, the

operations manager at Space Age, should, therefore, seek to employ another machinist to

assist in the process. This will alienate the dependency on one employee and remove the need

for overtime hence eliminating the associated costs.

Furthermore, the management can purchase a new lathe machine where the extra

employee can carry out the required tasks, and this will lead to the realization of performance

optimization through the use of multiple devices. Another option will be for the company to

fully utilize Ed in the lathe machine operation where he will work full time. This will enable

him to complete the required tasks on time hence saving on overtime costs and improving his

morale, which is already down.

The company's supply management and the sales force should be strengthened as

it is not currently efficient. There needs to be an increase in the quantities as the current lot of

1,000 is not sufficient for any management change. The company should have automated

mechanical engineering processes so that human resources dependency balances out with the
 CASE STUDY: SPACE AGE FURNITURE COMPANY 10

technology together with the equipment that the company installs, which will significantly

lower the operations costs in the long run.

Conclusion

The discussion has demonstrated the importance of an MRP system in achieving

effective performance by reduction of labor and inventory costs, eliminating wastes and

improving the production efficiency. The MRP developed for Space Age Furniture is

essential in establishing the materials required for the production and the related associated

costs. It can be noted that MRP benefits far outweigh its costs. It helps in proper

manufacturing processes, smooth communication among all levels, ensuring a timely and

efficient manner in ensuring processes are being performed, and keeping tabs with the

production processes through proper execution. Therefore, MRP is very critical in the

improvement of production efficiency and can always be adjusted to meet the company

requirements.

References
 CASE STUDY: SPACE AGE FURNITURE COMPANY 11

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Vonderembse, M. A., & White, G. P. (2013). Operations management. San Diego:

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Ptak, C. A., Smith, C., & Orlicky, J. (2013). Orlicky's material requirements planning. New

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Mattsson, S.-A. (2000). Embracing change: Management strategies in the e-economy era.

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