Reference no: EM13177275

Mick and Donald run a fast food outlet on Queen Street. For most of the day, Mick and Donald are able to keep up with demand and serve customers quickly. However, from 10 am to 2 pm the shop becomes very busy with employees from close by businesses going out for their quick lunch. Most of the shop's customers want one of Mick's famous 'hamburgers with the lot'. Queues build, tummies rumble and customers grumble. Mick decided to solve this problem by setting up a burger production line from 10 am to 2 pm each day.

His wife, Minnie, would take over the sales counter. He would cut, toast and butter the bread rolls (he can complete 20 per hour). Donald would cook the meat patties, eggs, bacon and onions (he can complete 40 serves per hour). Donald's wife, Daisy, would chop the lettuce and tomato and place it in a toasted bread roll along with the meat patty, egg, bacon, onion, and of course sauce (she can complete 25 hamburgers per hour). The new system was put in place and the next day an average of 30 customers per hour ordered 'a hamburger with the lot' between 10 am and 2 pm.

Required:

a. Explain the theory of constraints and its implications for managing costs and improving customer value.

b. Draw a diagram to identify the number of customers per hour who received their orders.

c. How many customers were unfed by 2 pm?

d. Identify the bottlenecks in Mick's production process and suggest how they might be overcome to meet the customers' requirements.

Classic Homes manufactures modular kitchens and bathrooms and the managing director, Amy Jones, is concerned that the total number of suppliers has increased from 20 to 60 over the past three years. He is sure that this is insufficient and has asked you as the new management accountant to investigate this. You have decided to undertake an activity-based analysis of supplier costs and supplier performance, and will focus initially on the four suppliers of wall and floor tiles.

Activity	Cost per unit of activity driver
Order material	$200 per order
Receive order	$1500 per delivery
Inspect order	$250 per delivery
Return material to supplier	$210 per return
Downtime due to late delivery	$260 per hour
Rework due to low quality tiles	$50 per hour
Pay supplier	$190 per invoice
Dispute invoiced amount	$480 per dispute

Over the past year, the four suppliers of tiles consumed the following number of activities:

Activity	Ardex	Slatecrete	Bath Depot	Bath & Tiles
Order material	20	50	30	10
Receive order	20	80	10	20
Inspect order	5	25	5	0
Return material to supplier	3	8	0	0
Downtime due to late delivery	20	60	10	10
Rework due to low quality tiles	11	10	0	0
Pay supplier	12	48	12	10
Dispute invoiced amount	2	0	13	2
Supplier manager time	10%	15%	10%	5%
Cost of material purchased	$60000	$120000	$70000	$30000

The Supplier Manager employed to manage suppliers is paid a salary of $90,000.

Required:

1. Calculate the total cost of ownership and the supplier performance index for each of the four suppliers.

2. Discuss the relative performance of each supplier.

3. Suggest four non-financial performance measure that could be used to assess the performance of the tile suppliers

4. Describe the benefits of supply chain management for an organisation and the ultimate customers.