Mini case 3: XY Enterprises1 XY Enterprises runs in a perfect business environment. That means that Murphy does not exist (i.e. there is no uncertainty or unexpected, negative events, nothing can or will go wrong). Everything is known exactly, and no deviation from the known numbers occurs. This should make it a very easy environment to manage. Incidentally, most management time in real life is aimed at removing Murphy through firefighting, crises management, TQM, improvement initiatives, Six Sigma, ERP etc. Demand Selling Price Product X 60 units/week R95.00/unit Product Y 60 units/week R105.00/unit The above table is the master delivery schedule (a planned schedule of which products to produce at what time) for the company based on information from the market itself. The demand for the products is constant, i.e. the demand does not increase or decrease over time. The selling prices charged are at an optimum as a cent increase in either of the selling prices will cause the demand for both products to drop to zero. Also, if the selling price of any product is reduced, the volume will stay exactly the same. 1. There is one of each resource A, B, C and D (in other words there are four resources doing the work); each resource performs two tasks (e.g. resource A is responsible for and performs tasks A-1 and A-2). A resource can only work on one task at a time i.e., working on two tasks simultaneously by a single resource is not possible. However, a resource does not lose any time when switching over from one task to another. 2. Resources cannot substitute for each other i.e.; a resource cannot do a task somebody else is responsible for. 3. Task times are constant (there is no task time variation). 4. Each resource is available for work for 2400 minutes per week. There are no delays, quality problems, no strikes, no setups, and no public holidays. 5. Fixed cost is R1 500.00 per resource per week or R6 000.00 total cost per week. 6. There are no other overhead costs. 7. Raw material (RM) supply is instantaneous (zero lead time) and the quality and quantity are always perfect. The raw material cost is constant, and the supplier will not raise (nor drop) the price of raw material. 8. The raw material for process B-1, Process B-1 and C-2 are required for both products. If one of product X and one of product Y are required, then process B-1 and C-2 must be executed twice, and the raw material will be required twice. 1) The two products are equally profitable for XY Enterprises 2) Neither of the two products is profitable for XY Enterprises 3) Product X is the most profitable product for XY Enterprises 4) Product Y is the most profitable product for XY Enterprises Which one of the two products, X or Y is the most profitable product for XY Enterprises? Two consultants have been tasked to improve the productivity of the resources responsible for the tasks to produce products X and Y. After devoting time to this, they each come up with a project proposal. The first consultants project proposal (Proposal 1) Change task C-2 to take 8 (eight) minutes instead of it taking 5 (five) minutes. Change task B-1 to take 14 (fourteen) minutes instead of 15 (fifteen) minutes. Total task time of the centre section will thus increase from 20 (twenty) to 22 (twenty-two) minutes. Total cost to implement the change will be a onceoff R5 000.00. All this will be done without compromising quality. Everything else stays the same. The second consultants project proposal (Proposal 2) Reduce the task times of task C-1 and A-1 in the left-hand section to take 5 (five) minutes for task A-1 and 15 (fifteen) minutes for task C-1. Total task time of the left-hand section is reduced from 40 (forty) to 20 (twenty) minutes. At the same time in the right-hand section, the task time on task A-2 is reduced to 5 (five) minutes. Total task time in the right-hand section is reduced from 25 (twenty-five) to 20 (twenty) minutes. Total cost to implement the change will be a once-off R3 000.00. This will be done without compromising quality. Everything else stays the same. Which one of the two project proposals will you implement? You also have the option of implementing both or neither of the two.