Required 3 (4 Marks)

Based on the cost weight (Percentage) criterion, complete the following report:

Ranking among all activities	Ranking among value-added activities	Ranking among non-value- added activities
Activities Ranking	Activities Ranking	Activities Ranking
Engineering support 1 Assembling 2 Misc. activities 3	Engineering support 1 Assembling 2	Inventorying 1 Material handling 2 Inspection 3

Although it is ideal to eliminate all the non-value-added activities, only top two critical non-value-added activities have been focused for improvement. Benchmarking is the preferable approach from the management side to improve not eliminate the top two critical non-value -added activities. Benchmarking includes comparing the activities of the company with the best practices followed by other companies in the industry/ or competitors.

Inventorying

Analyzing the inventory level and inventory related activities it is observed that presently the company is maintaining stock at a high level and there is no specifically assigned person for monitoring the stock related activities resulting in huge amount of inventory and inventory carrying cost. The Competitor is following Just-In-Time (JIT) principle for inventory purchasing using EDI (Electronic Data Interchange) system for giving purchase order and for other related communications with the vendor so that it can get the desired inventory at the desired time.

Suggested improvement

Castle Machine Company, Inc. Can eliminate maintaining any inventory by implementing JIT system. But to implement a perfect JIT system it needs to establish a quick system of ordering and other communication like EDI system. it needs to develop a vendors' base that have got the ability to supply required quantity, with required quality, immediately after providing the order. All these has got time and cost involvement.

The implementing JIT system will result the following financial impacts:

1- the inventorying cost will be reduced to $ 3,000 per month from $ 58,944 per month.

2- To implement the JIT system Castle Machine Company, Inc. has to invest $ 180,000 for electronics equipment (for EDI), which is to be depreciated in five years using straight-line method and $ 24,000 per year other fixed expenses.

Material Handling

As per present practice of the company, material is moved from warehouse to various processing stations e.g. from warehouse to drilling station, drilling station to milling station, milling station to turning station. And the material is moved manually by laborer. It is also observed the layout of the processing stations is distant from one to another and in a straight-line shape; therefore, materials need to be moved over much longer routes within the factory premises.

The competitor is using multi-purpose robotic machines for carrying the materials from one processing stations to the next. Also, the layout of the processing stations has been designed in a round shape, so that robotic machines can carry the material quickly moving around small distance.

The using of multi-purpose robot will result the following financial impacts:

1- reduced the number of material movements to 1/4th (i.e. from 1020 to 255 movements).

2- Depreciation of the robot per month will be $ 1,800.

Required 6 (3 Marks)

How much is the monthly net material handling cost after using a multi-purpose robot?