Berry Company produces two different metal components used in medical equipment (Component X and Component Y). The company has three processes: molding, grinding, and finishing. In molding, molds are created, and molten metal is poured into the shell. Grinding removes the gates that allowed the molten metal to flow into the mold’s cavities. In finishing, rough edges caused by the grinders are removed by small, handheld pneumatic tools. In molding, the setup time is one hour. The other two processes have no setup time required. The demand for Component X is 300 units per day, and the demand for Component Y is 500 units per day. The minutes required per unit for each product are as follows:
The company operates one eight-hour shift. The molding process employs 12 workers (who each work eight hours). Two hours of their time, however, are used for setups (assuming both products are produced). The grinding process has sufficient equipment and workers to provide 200 grinding hours per shift. The finishing department is labor intensive and employs 35 workers, who each work eight hours per day. The only significant unit-level variable costs are materials and power. For Component X, the variable cost per unit is $40, and for Component Y, it is $50.
Selling prices for X and Y are $90 and $110, respectively. Berry’s policy is to use two setups per day: an initial setup to produce all that is scheduled for Component X and a second setup (changeover) to produce all that is scheduled for Component Y. The amount scheduled does not necessarily correspond to each product’s daily demand.
1. Calculate the time (in minutes) needed each day to meet the daily market demand for Component X and Component Y. What is the major internal constraint facing Berry Company?
2. Describe how Berry should exploit its major binding constraint. Specifically, identify the product mix that will maximize daily throughput.
3. Assume that manufacturing engineering has found a way to reduce the molding setup time from one hour to 10 minutes. Explain how this affects the product mix and dailythroughput.