Case study in Operations Management
Upendra Lele (July 2011)
“Roadking” Tyre Manufacturing company have their manufacturing facilities in Noida. Majority of their sales are concentrated in North and East zones, however, they have seen an increasing demand from West zone and there is a good market potential in West zone. The Sales forecast is given below: Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011 onwards
No. of tyres 40000 60000 80000 100000 120000
Their existing manufacturing facilities at Noida are already running to full capacity and so they need to set up a new tyre manufacturing plant in West zone, to meet the above sales projections. Annexure “A” provides the information about the product and the manufacturing processes. After installation of the necessary machines, the overall capacity utilization of the plant is expected to be 90%, with a material wastage or rejection rate of around 5%.
The average labour rate is Rs. 30 per hour and the average efficiency of labour is 90%. The overheads for managing the plant and workforce are 25% of labour cost.
A transport truck carries around 200 tyres per trip and the average cost per trip is Rs. 1200.
1. Prepare appropriate charts to show the Operations and material flow. What type of layout is recommended for this facility?
2. What will be the production per shift at each stage of production? How many machines will be required to meet the demand?
3. Prepare the overall production plan and production schedule for each operation.
4. What will be the production cost (including overheads & transport) per tyre in each quarter? What will be the total cost per tyre including material?
5. A new Vulcanizing Compound has been developed by a research laboratory which brings down the tyre curing time by 25%. However, it is expensive and the cost of Chemicals per tyre goes up by 12% if the new compound is used. Is it profitable to use this new compound?
6. The Management employed a team of Work Study experts to study the overall operations. Their recommendations helped in bringing 15% productivity improvement in Tyre building operation. What will be its impact on cost of operations? How many tyre building machines could be disposed off or shifted to another plant if these recommendations are implemented?
The tyre assembly comprises a tyre and a tube. They are made of vulcanized rubber. The main components of the tyre are:
a) Tread – this is the outer periphery of the tyre which is in contact with the ground
b) Plies – these are made of rubber impregnated nylon fabric which form the body of the tyre. There could be 2, 3 or 4 plies in a tyre depending upon the design.
c) Beading – These are metallic rings forming the inside periphery of the tyre. Beading helps the tyre to hold on to the rim of the wheel.
d) Tube – the rubber tube which goes inside the tyre, in which compressed air is filled.
The raw materials of the tyre and their costs are given below:
The manufacturing process of tyre making involves the following stages: a) Mixing of rubber and chemicals and rolling b) Rolling of mixed rubber into sheets c) Extrusion (drawing out) of treads d) Extrusion of tubes and fitment of valves e) Impregnation of nylon fabric with rubber sheets f) Bead making g) Tyre building – assembly of tread, plies, beads and tube h) Curing of tyres and tubes
The production rate and other details of these processes are give below:
Tyre manufacturing machinery
Production rate tyre assemblies/per shift
Qty per tyre assembly
Machine running cost Rs./hr
Rolling of mixed rubber
Helpers required per shift 6
No. of shifts that will be run = 2
Working hours per shift = 8
No. of working days per month = 25