Case Study Supreme Inc.

You have just joined the Supreme Company as a financial analyst, reporting to the Controller. Based upon your recent business education at Humber, which included a wide range of subject areas, your new boss has asked you to help her review the recent changes in the manufacturing area.

Until recently, the company had offered only a limited number of standard electric motors for sale. They had purchased raw materials and the lowest level components, but produced most of the subassemblies and all of the finished products in their own plant. The companys profitability had declined over the years and marketing believed that customers needed both more variety of product and lower prices. In early 2014, the manufacturing division had been assigned the task of recommending changes to accomplish this dual goal of increasing variety and reducing costs.

Manufacturing had recommended that they change their strategy to:

• Buy (rather than make in-house) most of the subassemblies.

As tooling-up to produce a much wider variety of subassemblies, would take several million dollars of investment and 2-3 years to implement. Retaining production of existing sub-assemblies in-house was not considered viable as their volumes were expected to drop dramatically, when the variety being offered increased. Also the company needed all the existing space for the more flexible final assembly process needed for the greater variety of products being sold.

• Build final products to customer order.

This plan had been approved in September of 2014. The plan and associated personnel layoffs were announced in October 2014, with the layoffs scheduled for December 31, 2014. The increased variety of products had been announced in October, with the first build-to-order shipments scheduled for Jan 2015.

Selected Historical Results:

Period	Sales ($ '000's)	Labour ($ '000's)	Material ($ '000's)	Other Costs ($ '000's)
Jan 2014	250	63	104	65
Feb	252	62	102	66
Mar	262	65	103	64
April	255	64	106	66
May	263	66	103	63
June	270	69	104	65
July	265	68	102	64
Aug	262	66	108	67
Sept	254	69	107	66
Oct	259	75	109	65
Nov.	265	76	115	69
Dec	268	77	120	70
Jan 2015	255	51	156	64
Feb	265	47	150	63
Mar	275	35	149	64
April	290	31	144	65
May	284	30	146	63
June	286	31	147	65
July	295	29	148	64
Aug	292	29	148	63
Sept	301	31	150	65

Assignment: Compile a report, which includes the following:

2- Calculate Labour, Material and Total Productivity (multifactor of all costs) indices, for each month and present them in a table. IE. Three indices for each month. (15 marks)

3- Present the 3 indices calculated in Point 2, in a line graph format, on one page. (10 Marks)

4- Compare the 3 average productivity indices for the whole of 2014 (12 months) with the 3 average indices of July-September (only 3 months) of 2015. a) What is the percentage change for each index? (12 marks) b) Why do we use only 3 late months in 2015? (3 marks)

5- Did the change in manufacturing strategy deliver improvements? Comment on patterns of Total Productivity, Labour Productivity and Material productivity, before and after the change in strategy and explain the reasons for each of the 3 patterns. IE. Mention the reason(s) that a productivity index went up or down. (10 Marks)

6- Comment on the role of Inspection:

a) In general (One page) (8 marks)

b) When (how often?) and where (which step of their manufacturing process?) should

Supreme inspect (+-half page)? (7 marks)

7- Does higher quality (producing a good or a service with less mistakes/rejects) increase productivity? Explain your answer. (10 marks)

8- Six Sigma

a) Search the Internet to find two organizations that use Six Sigma.

List the specific Website address of each organization. (5 marks)

b) Describe the use of Six Sigma in one