PRODUCTION AND OPERATIONS

MANAGEMENT (MBA-G519)

CASE REPORT ON

AIC Netbooks: Optimizing Product Assembly

SUBMITTED TO
Dr. RAJESH MATAI

Department of Management BITS Pilani, Pilani

Campus

SUBMITTED BY: GROUP 7

MEDHA PANT 2019H1490805P

NIDHI JAIN 2019H1490811P
NISARG BUCH 2019H1490868P
DEV RISHABH JAIN 2019H1490836P
SATYARTH KUMAR 2019H1490856P
 Introduction

Advanced Integrated Circuitry, Inc.—later renamed AIC Systems was established in Taiwan in the year 1992,
It was recognized as the producer of printed circuit board maker for the PC business. They had some expertise
in motherboards and graphics cards for the personal computer industry also.AIC also supplied branded
manufacturers of desktop and laptop computers such as Dell, HP, and Compaq.
By the year 2000, organization AIC had developed itself into an Original Design Manufacturer (ODM)
empowering advancement and the new era of outlines as well the company took the active role in innovating
and designing the new generation of components. Advanced Integrated Circuitry, Inc also protected its
position in the industry as the low-cost supplier by opening a new plant at Kaizhi in early 2001 when the
Taiwanese government relaxed restrictions on investments in the mainland China.
In the year 2007, the organization AIC broadened into the generation of Netbooks and embarked on a new
strategy: - diversifying the product portfolio to include consumer electronics, with a particular focus on
mobile technology as well.
In any case, AIC can't take care of demand within the present operations going in in the plant. The production
is neither proficient nor viable. The organization has a couple of alternatives to enhance sequential
construction system by either expanding the movements or the mechanical production systems. Each of these
choices will expand work cost for the organization yet encourage in meeting objectives production and
process duration.
Q1. How efficient is notebook assembly at kazhi plant?
Kazhi plant is efficient enough as we can see their monthly production and design of plant assembly. The
setup of this plant was due to relaxed government taxation. It also had an added advantage of having its
own warehouse for incoming material, outsourced parts & components.

(A). What is monthly output of the plant?

Answer:

As given in the case, by Nov 2008 each assembly line was producing 1 netbook in 50 seconds.
That brings monthly output of plant to:

8 working hours shift = 8*60*60 = 28800 seconds,

Number of shifts in a day = 2,
Number of working days in a week = 6,
Number of assembly lines = 4,
Number of Netbooks produced per assembly line per shift per day = (28800/50)
= 576 Netbooks /line/shift/day
Number of Netbooks produced in total in a day = 576*2*4
= 4608 Netbooks/day
Number of Netbooks in a month = 4608 * 6 * (52/12) = 119,808 Netbooks/Month

(B). What is theoretical efficiency of the planned line, looking only at direct labor on
the assembly line?
Answer:

As, Chen & Lapen designed this process to give an output of 700 units per shift per line. Thus, planned
Cycle time for 8 working hours shift comes out to be:

Cycle time planned = 8*60*60/700 = 41.14 Seconds / Netbook

Theoretical efficiency (In terms of Netbook/ Labor hour) of planned line

= Planned Output (monthly) / No. of operatives * No. of working hours
= 145600 / 10 * 8
= 1820 Netbooks / Labor hour
Also,
Sum of task times (T)
Efficiency =
Actual number of workstations (Na) x Cycle time (C)

Theoretical efficiency (In terms of percentage) of planned line

= sum of task times (Planned)/ Number of workstations* Cycle time(planned)
= 396 seconds (as per exhibit 3)/ 10 * 41.14
= 0.955 = 95.5%

(C). What is the actual efficiency of the assembly line?

Answer:

Cycle time planned 50 Seconds / Netbook (Given in case Page 5, Para 3)

Actual efficiency of line (In terms of Netbook/ Labor hour)
= Actual Output (monthly) / No. of operatives * No. of working hours
= 119808 / 12 * 8
= 1248 Netbooks / Labor hour
Actual efficiency (In terms of percentage) of planned line
= sum of task times (Actual)/ Number of workstations* Cycle time (Actual)
= 443 seconds (as per exhibit 3)/ 10 * 50
= 0.886 = 88.6%

Theoretical Actual
Task time 396 443

Cycle time 41.14 50

Efficiency (per labor 1820 1248

hour)

Efficiency (%) 95.5% 88.6%

Q.2 How effective is the current operations?

Effectiveness is defined as the degree to which something is successful in producing a desired result. The
current operations of AIC are not successful in producing desired results, what are the criteria that leads to
this are given below.

(A). What are the right criteria by which to evaluate it?

Answer:

Criteria to evaluate effectiveness for production of netbooks are:

1- Cycle time: As we have seen planned cycle time to be 41.14 sec and actual to be 50 secs, we can tell
that current operations are not effective using this criterion.
2- Number of labors: In a planned production each station was allotted only 1 labor, but in actual
production there are 1.2 labors per station accounting to a total of 12 labor instead of 10.
3- Mean Variation per station: Mean extra time taken per station can also be the measure of effectiveness
of operations. As given below +4.7 secs is the mean time taken extra at every station.

Station Sum of Sum of Time taken

planned actual extra per
time time station(Te)
station station
wise wise
1 40 40 0
2 40 50 10
3 39 39 0
4 40 45 5
5 39 39 0
6 40 50 10
7 40 49 9
8 37 37 0
9 41 48 7
10 40 46 6

Sum 396 443 47

Mean 4.7
(Te)
(B). Is the operation designed appropriately to meet demand?
Answer:

• NO, according to the design operations are not well appropriate to meet the design as according to
planned time cycle each line should produce 700 netbooks per 8 working hour shift with 1 hour of
relaxation.
They can produce monthly output of
= 700 * 2 * 4 * 6 * (52/12)
= 145,600 Netbooks/month
Where, Number of shifts = 2
Number of lines = 4
Number of working days in a week = 6
Number of weeks in a year = 52/12 = 4.33

Which is well over the estimated demand of 130,000 /month.

• But they are currently producing only 119,808 netbooks / month, which is not as expected.
• Also, the labor planned was 10 working labor per line, but Actual operations uses 12 direct labors
per line.

The main bottleneck is formed on the station 2 & 6 as it takes 50 secs each to complete its operations.
The only ways to achieve this target are:
1. Either to increase the labor force so as to decrease extra time taken per station to meet planned
cycle time of 41.1 seconds rather than current actual cycle time of 50 seconds.
2. To setup an extra line to increase total production.

Q.3 What is the financial impact of bringing the operation closer to "full potential"
and achieving planned production levels?

(A). What is the planned production level in terms of monthly output?

Answer:

Planned Production per line per shift= 700 units

Number of shifts in a day = 2,
Number of working days in a week = 6,
Number of assembly lines = 4,
Number of weeks in a year = 52/12

Therefore, planned production level in terms of monthly output = 700*2*6*4*52/12

= 1,45,600 units/month.

(B). What is the financial impact of achieving the target cycle time?
Answer:
Actual: -
8 working hours shift = 28800 seconds,
Number of shifts in a day = 2,
Number of working days in a week = 6,
Number of assembly lines = 4,
Number of Netbooks produced per assembly line per shift per day = (28800/50)
= 576 Netbooks /line/shift/day
 Number of Netbooks produced in total in a day = 576*2*4
= 4608 Netbooks/day

Number of Netbooks in a month = 4608 * 6 * (52/12) = 1,19,808 Netbooks/Month

Targeted: -
Cycle time planned = 8*60*60/700 = 41.14 Seconds / Netbook
Therefore: -
8 working hours shift = 28800 seconds,
Number of shifts in a day = 2,
Number of working days in a week = 6,
Number of assembly lines = 4,
Number of Netbooks produced per assembly line per shift per day = (28800/41.1)
= 700 Netbooks /line/shift/day

Number of Netbooks produced in total in a day = 700*2*4

= 5600 Netbooks/day
Number of Netbooks in a month = 5600 * 6 * (52/12) = 1,45,600 Netbooks/Month

Difference Between Targeted and actual= 1,45,600 -1,19,808 = 25,792 Netbooks/Month

Gross profit per netbook= $ 19.20

Therefore, financial impact of achieving the target cycle time = 19.20 * 25,792 = $ 4.95,206/Month

(C). How important is reducing direct labor as a means to improve financial

performance? (assume each assembly line worker costs $500 per month).
Answer:

Actual: -
Number of Netbooks produced per assembly line per shift per day = (28800/50)
= 576 Netbooks /line/shift/day
Assembly line worker costs $500 per month
Direct labor cost
Total deployment: - 12
Per person production per day per shift per line: - 576/12 = 48
Cost per month for direct labor = 500 * No of labor * No of shifts * No of line
= 500 * 12 * 2* 4 = $48000/month

Total deployment: - 10
Per person production per day per shift per line: - 576/10 = 57.6
Cost per month for direct labor = 500 * No of labor * No of shifts * No of line
= 500 * 10 * 2* 4 = $40000/month
Now,
Labor cost per unit = $ 4.80
Total labor cost with 12 labors (Direct labor + Indirect labor) = 4.8 * 119808(units/month)
= $575078.4/month
Total labor cost with 10 labors = 575078.4 – 8000 = $567078.4/month

Per unit cost difference = 567078.4/119808 = $4.73 / unit.

Thus $0.066/unit can be saved if we achieve direct labor cost from actual 12/line to planned 10/line.