Materials Push and Materials Pull Systems (LO3, 4)

Data Storage Inc. produces three models of external storage devices for personal computers. Each model is produced on a separate assembly line. Production consists of several operations in separate work centers. Because of a high demand for Data’s products, management is most interested in highproduction volume and operating efficiency. Each work center is evaluated on the basis of its operating efficiency. To avoid idle time caused by defective units, variations in machine times, and machine breakdowns, significant inventories are maintained between each workstation.

At a recent administrative committee meeting, the director of research announced that the firm’s engineers have made a dramatic breakthrough in designing a low-cost, read/write optical storage device.

Data Storage’s president is very enthusiastic, and the vice president of marketing wishes to add an assembly line for optical storage devices as soon as possible. The equipment necessary to manufacture the new product can be purchased and installed in less than 60 days. Unfortunately, all available plant space is currently devoted to the production of conventional storage devices, and expansion is not possible at the current plant location. It appears that adding the new product will require dropping a current product, relocating the entire operation, or manufacturing the optical storage devices at a separate location.

Chapter 7 | Additional Topics in Product Costing 241 The vice president of marketing is opposed to dropping a current product. The vice president of finance is opposed to relocating the entire operation because of financing requirements and the associated financial risks. The vice president of production is opposed to splitting up production activities because of the loss of control and the added costs for various types of overhead.

Required Explain how switching to a materials pull (Kanban) system can help solve Data Storage’s space problems while improving quality and cycle time. Describe how a materials pull system works and the changes required in management attitude toward inventory and efficiency to make it work.