CAPACITY PLANNING CASE STUDY

Upendra Lele (July 2010)

A-One Electricals is an upcoming manufacturer of Electrical Distribution Boards, with their superior
technology and processes as compared to their competitors. The top management of A-One is a
team of technocrats with an uncompromising attitude towards quality. The company is expecting a
substantial growth in its business in the coming years.

Electrical distribution boards are essentially fabricated panels in which switchgear are mounted and
wired as per power distribution requirements of the customer. The distribution boards are designed
for both in-house and outdoor use. One of the major requirements in both cases is an airtight panel
door which provides protection to electrical components against dust and moisture. It is achieved by
way of a rubber gasket between the door and the panel body. There are stringent quality standards
governing this aspect.

The existing process of sticking the gasket to the panel door is a manual one. The gasket is made of
special neoprene rubber which can withstand extreme weather conditions without losing its
resilience. The gasket is cut to the required length and pasted on the panel door with a special
adhesive. It is then kept pressed to the door with the help of clamps. The operation requires 2.5
minutes of three workers for each door. The company has developed a vendor for this operation
who charges Rs. 10 per panel door. Any workload beyond existing capacity is offloaded to the
vendor.

A-One Electricals is in the processing of entering into a business contract with Schneider Electric, a
global leader in power distribution systems. With this contract, the business of A-One is likely to be
tripled within next six months. While the existing manufacturing facilities appear to be adequate for
the proposed workload, gasketing operation could be a bottleneck. Schneider also expects a better
quality in this operation.

In view of the above opportunity, A-One is considering investment in a robotic gasketing machine
which pours PU foam gasket on the panel. The operation takes 0.5 minutes with two operators
working. The molten gasket dries within a minute after pouring. The cost of the machine is Rs.
900,000, and it has a life of 5 years. The delivery period of the machine is three months.

A typical order for power distribution system requires six panels with one door each for accessing
the switchgear and its controls. The order projection for the coming year is as follows:

Apr-June July-Sept October onwards

No. of systems 150 600 1800

per month

The labour efficiency of the in-house operations is 90%, and labour rate is Rs. 30 per hour. The
machine hour rate for the robotic operation is Rs. 60 per hour which includes power, maintenance
and consumables cost. The fixed cost of tooling for the manual operation is Rs. 2500 per month. The
material cost of the gasket is almost same in manual and automated operations.
Question:
Evaluate the different options for capacity planning for gasketing and make your recommendations.