Topic: TOC based Operational Measures 1. What specific problems or undesirable effects (UDEs) make achieving more "money" so difficult for the Bearington Plant? I like you to think from the perspective of your declared major (If you have not decided about your major, then choose Operations as your major). Based on your reading of the first ten chapters of The Goal and our discussion in the class, identify at least one such problem or undesirable effect (UDE). Explain why the problem you identified is "undesirable") and how it affects your chosen functional area specifically (e.g., operations), and other functional areas of the Bearington plant in general. Explain the opposite) desired effect you would like to see. Guideline: It must be a problem that currently affects your chosen functional area in the Bearington Plant. It must be a complete statement of a negative effect. It must not be a presumed cause or solution. And you should try to validate the impact of your problem on the other parts of the Bearington plant as a system. Example: My major is Operations Management, Bob Donavan, the production manager in The Goal, complains about machine set ups. He often feels pressure to break set ups on the machines. IF "we frequently break set ups". THEN "we are not maximizing the efficiency of the resource (eg, NCX-10 machine)". IF" we are not maximizing the efficiency of that resource" AND "IF that resource is a Bottleneck (constraint), THEN "we do not ship products on time" and "We loose sales". The Desired Effect Bob might want is not to have frequent set ups. 2. Select a company of your choice (preferably, where you are currently employed or might have worked in the recent past), identify and discuss the TOC operational measures (Throughput, Inventory, and Operating Expenses). You do not need to have exact financial numbers for this exercise. How would you categorize this company in terms of throughput or cost world thinking? Give your rationale? 3. Leggelt and Plant is a world leader in the manufacturing of a broad line of components for the home, office and institutional furnishings and has a plant located in Simpsonville, KY. The following financial information of this plant is modified (for obvious reasons) in order to illustrate some of TOC concepts related to financial and operational measures. $50,000,000 $35,000,000 Partial information from Income Statement: Sales Revenue Cost of Goods Sold (COGS) (Direct Material - 40%, Labor and overheads = 60%) Selling & Marketing Expenses General Administrative Expenses $ 500,000 $ 2,000,000 Partial information from Balance Sheet: Inventory (Direct Material, Work-in-progress and Finished Goods) $10,000,000 Other Assets (Machinery, Computers, Buildings etc.) $25,000,000 Notes: Assume that (i) Direct Material portion of Cost of Goods Sold is about 40%, and (ii) Direct material portion of Inventory as appeared in Balance Sheet is about 50%. Based on the above limited financial information gathered from Balance Sheet and Income Statement: 1. Calculate following financial and operational measures as we have discussed in the class: (i) Throughout, (ii) Inventory, (iii) Operating Expenses, (iv) Net Profit, and (v) Return on Inventory 2. Prepare Throughput Accounting Income Statement