Managerial Economics/ Unit 3 Assignment

1655 words - 7 pages

Introduction
We at KU Consulting are here to help Albatross Anchors make the necessary improvements and adjustments to continue to grow and maintain a prosperous business. We understand that there are challenges that you must overcome in order to take the steps to become a business that is on top in every aspect including production, safety and customer satisfaction. We will identify and provide the essential guidance to get you where you need to be.
We thank you for this opportunity and are looking forward to building a productive and valuable relationship with Albatross Anchors.
Question One
Based on the information presented in the scenario/case study discuss Albatross Anchor’s ...view middle of the document...

Albatross can achieve this through operating efficiencies such as increases as their workers gain experience, through receiving discounts that are available through purchases and spreading fixed costs over a large number of units. This may be difficult and hard to meet or at least gage under the current circumstances of operating the two different types of anchors and the fact that the batches they produce are small. If adjustments are made it may be easier to recognize depending on what those adjustments will be for their business. One suggestion could be increase inventory, but that could lead to other problems if the warehouse is not expanded. Once the expansion has been completed, the increase will allow for larger purchases to achieve economies of scale.
c) Cost of Raw Materials Sitting Idle in the Warehouse:
Howes , speaks of how it is not affordable to have your production lines sitting idle and that you must have a delicate balance keeping the right amount of inventory of raw materials and finished goods. Raw materials will become costly if they are just sitting. A company must have the right mix because supply and demand must match-up. When it comes to Albatross, they have limited space which means they would not be fully utilizing or maximizing the space that they have available. Even though they are producing in small batches, they must still be mindful of the space that they are using and the cost that will occur when products just sit.
To combat this problem Albatross must purchase products based on the needs of the company once adjustments have been made.
d) Cost of Finished Goods Sitting Idle in the Warehouse:
The same holds true for finished goods. Just in time (JIT) (MindTools) is used to reduce inventory, minimizing waste and responding to the customer. With limited space, Albatross could greatly benefit from this method. This method allows them to maximize their space to what is needed and when it will be needed. They really don’t have the space to just allow products to sit, especially when too much because the facility would not be able to accommodate.
Again this is why we stress expansion of the warehouse. With an increase in production, turnaround time and reduction in raw materials that would sit idle; the JIT method would be very effective.
2. Speed of manufacturing process from order to finished product.
At the design and limitations of the facility Albatross is unable to increase their speed of the manufacturing process from order to the finished product. With improvements with the design of the building and expansion of the space, there will be noticeable turnaround times for this process.
3. Flexibility in filling order(s)
What is putting Albatross at a great disadvantage is the fact that instead of using two different types of manufacturing machinery divisions, they are using one for both. This is causing the turnaround to take way too long, 36 hours; this will never work if flexibility is to be...

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