Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Alpha Engineering ( AE ) produces and sells, among many other products, a portable scanner. AE faces challenges in its factory and retail store. Your
Alpha Engineering AE produces and sells, among many other products, a portable scanner. AE faces
challenges in its factory and retail store. Your team is hired to help.
AE has employees in its factory. They are categorized by their expertise into three categories:
expert E experienced P and beginner B The number of employees in each category is given in
Table
These three categories differ in their monthly productivity, and employees can team up to raise
productivity. For example, an expert working alone can make products per month, while an expert
and an experienced employee working together EP can produce products per month. There are
a total of seven possible team configurations, shown in Table
Each team occupies a machine an employee working individually is also considered a team The
company has machines, three of which are old and can only be operated by one employee of any
category All the employees are hired on salary and the company does not want to recruit or lay off
any of them. Assume that labor is a sunk cost and can be ignored in this analysis. Finding a way to
form teams for these employees to maximize the factorys monthly productivity becomes AEs first
key objective.
AE has two opportunities to improve its productivity. AE can choose to take one of the opportunities
or neither, but not both.
First, a competitor proposes a process redesign that involves improving the workflow and factory
layout. If AE takes this offer, the redesign can reduce the number of singleoperator machines from
to The cost for this offer is five products per month given to the competitor.
The second opportunity to improve productivity is a strategic alliance. If this strategic alliance is
formed, there is a chance that it will be successful. If it is successful, it will increase the
productivity of EB and PB If it is unsuccessful, then the alliance will only increase the
productivity of EB Forming the strategic alliance does not change productivity of any other team
configuration. The resulting productivity of these teams is given in Table The cost of this
opportunity is ten products per month given to the strategic ally. This cost is incurred regardless of
the alliances success.
AE also faces challenges in its store. First, AE produces at its maximum productivity in every month
and uses the produced product to meet demand only in that month. For simplicity, assume that all
the product will be produced and available for sale at the beginning of each month. Any unsold
inventory in that month will be discarded so that inventory does not carry over to next month. For
example, if AEs monthly productivity as a result of the decision on team formation is units,
then units are available at the beginning of each month at its store to meet the demand in that
month and any unsold inventory at the end of month will be discarded.
The net profit per unit is $ Based on historical data, the number of customers per month is a
normal distribution mu s The number of products purchased by each customer follows a
triangular distribution with a minimum of zero, maximum of and most likely purchase of
units.
When AE cannot satisfy a customers demand, there is a chance that the customer will file a
complaint. In that case, AE will pay the customer a penalty ie store credit or coupon of $ per
unsatisfied demand. For example, suppose a customer demands units and AE has only units of
inventory available, then this customer has units of unsatisfied demand. In this case AE will earn
$$ from this customer. If the customer files a complaint likely then AE will incur a
penalty cost of $$ for this customer, meaning that AEs revenue from this customer will be
$$$
AEs sale of the portable is on the rise. As mentioned earlier, it faces an average demand of
customers per month. A recent market research finds that its average number of customers per month
will increase over time, as shown in Table Assume that Year is the current year and that all other
parameters remain constant.
Once optimized, the maximum productivity is fixed for the next five years. Since maximum
productivity is fixed while store demand is projected to increase, AE anticipates paying more penalties
due to unsatisfied demand each year.
You will prepare a report that addresses the following topics:
The most productive way to organize the employees in the factory
Your recommendation on which, if any, opportunity to take
Projection of future losses
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started