After reading the excerpt below, (1) prepare the case for an optimistic sales manager who suggests that you should move…
After reading the excerpt below, (1) prepare the case for an optimistic sales manager who suggests that you should move ahead with the FMS now, and (2) as a production manager for RMC, what do you recommend? Why? (Use 450-750 words for each question.) Rochester Manufacturing Corporation Rochester Manufacturing Corporation (RMC) is considering moving some of its production from traditional numerically controlled machines to a flexible manufacturing system (FMS). Its computer numerical control machines have been operating in a high-variety, low-volume, intermittent manner. Machine utilization, as near as it can determine, is hovering around 10%. The machine tool salespeople and a consulting firm want to put the machines together in an FMS. They believe that a $3 million expenditure on machinery and will, of course, be transition and startup costs in addition to this. The firm has not yet entered all its parts into a comprehensive group technology system, but believes that the 30% is a good estimate of products suitable for the FMS. This 30% should fit very nicely into a “family.” A reduction, because of higher utilization, should take place in the number of pieces of machinery. The firm should be able to go from 15 to about 4 machines and personnel should go from 15 to perhaps as low as 3. Similarly, floor space reduction will go from 20,000 square feet to about 6,000. Throughput of orders should also improve with processing of this family of parts in 1 to 2 days rather than 7 to 10. Inventory reduction is estimated to yield a one-time $750,000 savings, and annual labor savings should be in the neighborhood of $300,000. Although the projections all look very positive, an analysis of the project’s return on investment showed it to be between 10% and 15% per year. The company has traditionally had an expectation that projects should yield well over 15% and have payback periods of substantially less than 5 years.
