Unit 8: Sales and Operations Planning; Resource Planning
As a representative and consultant for firm your task is to use your expertise in Operations Management to assist Albatross Anchor.
Albatross Anchor is a small family owned business that began in 1976 with
four family members. Albatross anchor has grown exponentially and now employs one hundred and thirty people. Their one location/facility is situated
on twelve acres of land located in a rural suburb of Smalltown, USA. The
manufacturing plant and the main office are located in the same building
with the manufacturing. The administrative offices are in the front of the
building and the manufacturing area is in the back of the building. The
manufacturing part of the building is antiquated, worn, dirty, technology
deprived and it no longer meets all US safety and environmental standards
and the administrative offices are shabby and inefficient.
The owners of this small business have added on various processes as
needed within the limited space provided within the plant. When Albatross
Anchor first opened its doors their expertise laid in the manufacture of the
bell/mushroom anchor (using a foundry process). Because of international
competition in 1989 the owners of Albatross Anchor made the decision to
expand their product line to include fabricated snag hook anchors.
Products
The bell anchor is used primarily by fresh water marine craft. They are
manufactured primarily through a foundry process in which ore is
transformed into a liquid state and poured into molds for production.
The snag hook anchor is used primarily for small to medium sized saltwater
marine craft. The snag hook anchor is fabricated through the bending and
welding of iron rods and flat iron into a hook design so that bedrock and
seaweed can be snagged to hold the marine craft at anchor.
Each anchor is produced in multiple sizes to accommodate the type of craft
requiring the anchor.
Manufacturing
Each anchor type requires its own unique equipment and manufacturing
process. Both manufacturing areas share the same shipping and receiving
area, the warehouse area and administration. The manufacturing area of the
plant has had to change to accommodate the manufacture of the two
separate types of anchors. As each anchor requires its own manufacturing
challenges the manufacturing line must be completely changed over each
time the anchor type is changed. The time to switch over from one
manufacturing process/operation to the other manufacturing
process/operation is 36 hours.
The plant space is at a premium and warehousing space for raw materials
and finished product is limited and located at the far south end of the building.
Plant antiquation and safety issues result in small batch production only. As
a result lead time for large bulk orders is three to four weeks.
Costs and shipping challenges
Current manufacturing costs are $12.00 per pound for mushroom/bell
anchors and $6.00 per pound for snag hook anchors. While Albatross Anchor
charges the same per unit as their competitors their profit margin is as much
as 30% less due to operations inefficiencies.
Product size, bulk and weight (either anchor) requires shipment by rail and
by specialized ground transportation (large trucks). Domestic orders are
shipped by truck and international orders are shipped by rail and then by
large freighter. These are the only two methods of shipment of product to
customer.
Receipt of raw materials is by rail. Prior to the sale of anchors into the
international market all shipments of finished product went out completely
by truck and therefore all shipping activities were limited to the east side of
the building. Now, because of the limitation of shipping product into the
international marketplace all product shipments for international delivery go
out of the receiving dock for shipment for transportation by rail and then by
large freighter. Whereas prior to expansion into the international
marketplace shipping had been limited to the shipping department and
receiving was limited to the receiving area, now the receiving area must do
double duty–shipping of international orders and receipt of all raw
materials.