This assignment is to draft a response to a students original Discussion Board posting. The discussion is related to answering questions at the end of a case study which I have attached for reference. The reply to this students post must have 3 resources associated with the reply. Here is the students original post that you are responding to:

Discussion Board Two: H.C. Starck, Inc. Case Study

Question 1

Simchi-Levi, Kaminsky, and Simchi-Levi (2008) explained that lead times at Starck were slightly under seven weeks. However, the median time from goods issuance to goods receipt is under three weeks. Glock (2012) explained that longer lead times impact inventory holding costs and customer service levels. Starck can combat these issues with the implementation of proper shift scheduling and harnessing the power of Systems Applications & Products (SAP) for production planning.

The first problem of the longer lead times is due to poor shift scheduling. The plant is currently running 24 hours per day with two-week cycles which are split between one-week of mill and one-week of finishing. This causes a product that needs to run through the finishing mill to have to wait up to seven days to be finished, instead of running the finishing mill when there is enough material in process for a full shift.

The second problem of longer lead times is due to inadequate production planning. Mike Coscia described this delay as an information black hole. He explained that information does not travel upstream promptly, even though SAP has been implemented at the facility. Also, the sales team is loading their forecast into SAP, but the production planning is still being done manually.

Question 2

First, Starck will change to a schedule that changes over to the finishing mill more frequently. Currently, the plant is running two-week cycles for rolling and finishing. Simchi-Levi et al. (2008) explained that year to date for 1999, 30 percent of the product needed to be produced in the finishing mill. Given that 30 percent of the product needs to be finished at full capacity in the rolling mill, every ten shifts there would be enough product produced for one entire shift of finishing product. Then after that shift, the mill would be changed back to the rolling mill again.

Second, Stark will fully embrace SAP not only for inputting sales forecasting but also for production planning, inputting orders, and all steps of the production process. This long delay is predominately seen between printing job tickets and the issuance of raw materials. Harnessing the power of SAP for all parts of the process will significantly decrease this lead time. Portougal (2005) explained that SAP could be used as an enterprise resource planning (ERP) tool for optimal production planning. The implementation of SAP for production planning based on the sales forecast will eliminate the two-week delay that was previously seen from the manual order processing procedure.

Question 3

The first solution of more changeovers reduces lead times by providing a finished product more often but increases the amount of cost spent yearly on those changeovers. The original production model runs a two-week cycle, with four weeks of downtime a year. That would give a 48-week operating cycle, with 24 weeks of finished and 24 weeks of rolled. This would lead to 48 total changeovers each year. During the transition, it takes two people eight-hours to do this changeover at a loaded wage of $25/hour. This current model has a yearly cost of $19,200 for transitions. However, by performing transitions more often, there would be a negligible annual cost for these changeovers. The same 48-week period would have a total of 720 working shifts. Changing out every 11 shifts would lead to a 14 shift cycle of 11 shifts rolling, one shift changeover, one shift finishing, and one shift changeover before repeating. This would lead to 52 changeovers each year instead of 48, which would be a new yearly changeover cost of $20,800. This additional cost of $1,600 would be worthwhile to Starck because 30 percent of the product would be able to be shipped every four days, instead of waiting up to seven days for the next week’s production finishing run.

The second solution of full embracing the power of SAP will have no upfront cost to Starck. Simchi-Levi et al. (2008) explained that SAP was currently being used for sales forecasting and financial accounting, but not production planning. The monetary cost of reducing this lead time by fully embracing SAP will be training and yearly licensing costs. However, this implementation will reduce the over two-week lead time from order placement to beginning of production.

References

Glock, C. H. (2012). Lead time reduction strategies in a single-vendor–single-buyer integrated inventory model with lot size-dependent lead times and stochastic demand. International Journal of Production Economics, 136(1), 37-44. doi:10.1016/j.ijpe.2011.09.007

Portougal, V. (2005). ERP implementation for production planning at EA cakes ltd. Journal of Cases on Information Technology (JCIT), 7(3), 98-109. doi:10.4018/jcit.2005070106

Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and managing the supply chain: Concepts, strategies and case studies (3rd ed.). New York, NY: Richard D. Irwin, Inc.

 

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