Great Northern Bank Beds, Inc.

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Operations Management

Great Northern Bunk Beds, Inc.

Introduction

Deciding whether to invest or not is a complicated task for today’s companies. Managers need to make thorough studies, analysing additional costs and revenues, in order to be able to make the most reasonable decision. A big investment implies a great expenditure and, generally, a late return. If a company does not consider thoroughly the requirements and the outcomes of a particular investment, the organization may suffer a big loss and even be severely prejudiced.

Matt Dorman, manager of Great Northern Bunk Beds, Inc, a high-quality custom-made beds manufacturing company, is considering a new big investment. Currently, Dorman only has a small size factory of 700 square feet located in Beltsville which unable the company to install additional equipment and to perform more than one step at a time. The production capacity is, therefore, limited, and that is the reason why Dorman believes that expanding GNBB to Jessup is an excellent opportunity. Jessup has some advantages when compared with Beltsville such as a lower rent and more usable space. These characteristics will allow the purchase of new equipment and, consequently, a decrease in operating and setup times besides the possibility of multi-tasking.

The report will show the group’s analysis of the manufacturing process, namely, total time per step, per batch and per minutes and the total units produced per week. We will compare the results of Beltsville with Jessup’s, specifically the capacity of production, the flow rate, the sales and the costs. Finally, we will use the payback method that gives us the length of time required to recover the cost of the investment to determine whether GNBB should engage in it or not. An extended payback time probably make us Matt Dorman not to invest, contrary to a short payback time which would attract him to invest.

In the end of the report, we attached 3 tables which were created to calculate important cost for the decision making. Table 1 regards the first location Beltsville, Table 2 regards the new location Jessup and, finally, Table 3 presents us the Profit and Loss account.

2

Group 10

Operations Management

Question 1

Considering the information available on the Beltsville’s factory, we calculated the total operational time of a batch of only one bunk-bed by multiplying the number of operations of each step by the time that each operation takes to be completed. Afterwards, for the two and the three batch sizes, we simply calculated the double and the triple of that amount.

However, to compute the length that one batch takes to be completed, we must take also into account its set-up time. Therefore, after summing the total operational time with the set-up time, we calculated the time that it takes to manufacture one bunk-bed by dividing the total time of a specific batch by the number of the corresponding batch size. Through the analysis of Table 1, we can see that, although the total time per baych increases with a higher number of bunk-beds produced, the total time per bed decreases. This makes sense considering that the batch’s set-up time will be divided by the number of bunk-beds produced, even though the total operational time varies with the quantity produced, the set-up time does not. The worker will, then, save some time as he will not need to waste it setting up the machines for the following bunk-bed.

Additionally, we know that each worker works 40 hours per week which corresponds to 2400 minutes. Considering this last value and the number of bunk-beds produced per week, we achieve the number of bunk-beds that one worker can produce per week in the different batch sizes. Our group decided to use the integer number, without the decimals, because we assume that the maximum number of bunk-beds that GNBB can produce corresponds to the finished beds. Latter, to calculate the revenues that we will obtain with sales, we...
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