Reference no: EM1351325

Bottleneck identification and management at Perma-Clear Glass Company.

Perma-clear Glass Company was founded in 1980 by Rob Samson and enjoyed rapid growth as demand for new construction materials exceeded supply. The company became efficient at converting large sheets of glass into various smaller dimensions demanded by residential and commercial builders. In recent years, Perma-Clear diversified its product line to include specialty glass items, such as tempered glass tabletops and shower doors.

More recently, large vertically integrated competitors have captured market share from Perma-Clear because these companies efficiently produce standard products in very large volumes. In response to shrinking profit margins on standard high-volume architectural products, the marketing department at Perma-Clear identified a low volume, high margin niche in the sports/recreational vehicle industry.

Because builders of specialty boats, custom vans, and travel trailers often require small orders of tempered glass cut in unusual shapes, these glass products command a market premium. Managers at Perma-Clear believe they can obtain a significant portion of this market because their competitors are not equipped to make small volume complex glass shapes efficiently. Managers at Perma-Clear are analyzing the potential impact on existing production processes using a computer based factory simulation package. They wonder whether the introduction of a new product line may adversely affect existing manufacturing processes.

Specifically, they are concerned that introducing many small-batch production orders may reduce the plant's total throughput in units and profitability. The production process for the standard architectural product consists of four steps: cutting, shape edging, tempering, and packaging. The cutting process utilizes a computer numerically controlled cutting the glass pieces advance to the shape edging area where workers fasten each piece onto a jig and grind the edges to meet engineering specifications. Following the shape edging process, the piece is tempered. In the tempering process, glass passes through a heated oven for a specified period in the glass. If broken, a sheet of tempered glass should shatter harmlessly into many tiny pieces. Following the tempering process, individual orders are carefully packaged and attached to pallets for shipping. Management has asked the industrial engineering department to compile relevant information about the process. A summary of the report is shown exhibit A.

The report indentified several key characteristics of the production process. Changeover times in the cutting area are rapid because of computer numerically-controlled equipment. Data from the shape edging area present a different story. Long setups in the shape edging area are required as jigs are changed between batches. Tempering setup requires adjusting the temperature controls and loading the racks for processing. the packaging area requires very little set up time and the process is fast and reliable. An engineer noted that a major problem associated with packaging is the time required to bundle orders consisting of many different items. Cutting shape edging tempering Packaging Processing time 3 mins. 6 mins. 4 mins 2 mins (average per unit) Setup time 2 mins 10 mins 3 mins 1 min (average per batch) Managers are unsure how introducing a new product into the mix will affect existing processes. They would like the stimulation model to help management identify the process constraint and to understand how the new marketing strategy will impact day to day operations at Perma clear.

A. Discuss the competitive environment of Perma Clear. What are its competitive strengths?

B. What is the nature of the new proposal?

C. Prepare a sketch of the manufacturing process at Perma Clear including processing time in your sketch.

D. Where is bottleneck located? Explain

E. Using the information presented in Exhibit A, determine the number of products that can be produced in an eight hour shift

F. Can throughput increase if the cutting area is given increased capacity? Explain

G. What do you think will happen to production volume (throughput) as a result of introducing a variety of new small volume products? Why? H. Are there additional factors that management should consider before adding new items to the product line?