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Mt435 Operations Management Unit 6

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Unit Three Written Assignment

MT435 Operations Management

Kaplan University

July 25, 2011

Introduction

Question One Albatross Anchor started as a small family business of four people in the 70s and expanded quickly to a facility on 12 acres an employees of over 130. By 1989, the product line was expanded to include snag hook anchors suitable for saltwater marine crafts. This expansion of products allowed Albatross to compete internationally; however, the technology-deprived and out of date facility has run inefficiently for years causing loss on their bottom line.
1. Cost a) Cost of Production:

Currently Albatross Anchors is experiencing a profit margin 35% less on some of the anchors produced than their competitors, even though the prices they charge are the same. Albatross has manufacturing costs set at $8.00 per pound for the mushroom/bell anchors and $11.00 per pound for the snag hook anchors they manufacture (Albatross Anchor [case study]). These losses in the profit margin have been determined to be caused by inefficiencies in the operations.

b) Economies of Scale: When Albatross decided to begin manufacturing the snag hook anchor in addition to the mushroom/bell anchor in 1989, they invested in the new machinery necessary for the snag hook anchors design and manufacturing process. However, no expansion was made to the building so all machinery for both anchor types share the same plant space. Since each manufacturing process is unique to the designs and requires its own machinery and challenges. A complete change over on the plant floor must be done to switch from producing one anchor to the other, a process that takes 36 hours. This a large amount of downtime for production during which orders are still take, raw materials ordered and received, and employees paid. In other words, numerous costs are being...

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