OPERATION MANAGEMENT

Case 3  :-

Read the following carefully and answer the questions at the end:

COMPANY BACKGROUND

The Bronson Insurance Group was originally founded in 1900 in Auxvasse, Missouri, by James Bronson. The Bronson Group owns a variety of companies that underwrite and commercial insurance policies. Annual sales of the Bronson Group are $100 million. In recent years, the company sulfured operating losses. In 1990, the company was heavily invested in computer hardware and software. One of the problems the Bronson Group faced (as well as many insurance companies) was a conflict between established manual procedures and the relatively recent within the past 20 years) introduction of computer equipment. This conflict was illustrated by the fact that much information was captured on computer but paper files were still kept for practical and legal reasons.

FILE CLERKS

The file department employed 20 file clerks who pulled files from stacks, refilled used files, and delivered files to various departments including commercial lines, personal line, and claims. Once a file clerk received a request for a file, it usually tock about two hours for the requester to receive the file. Clerks delivered flies to underwriters on an hourly basis throughout the day. The average file clerk was paid &8,300 per year. One special file clerk was used full time to search for requested files that another file clerk had not been able to find in the expected place. It was estimated that 40 percent of the requested files were these ‘no hit’ flies requiring a search after these ‘no hit’ files were eventually found stacked in the requester” office. The primary “customers” of the file clerks were underwriters and claims attorneys.

UNDERWRITING

Company management and operations analysts were consistently told the greatest problem in the company was the inability of file clerks to supply files in a speedy fashion. The entire company from top to bottom viewed the productivity and effectiveness of the flies department as unacceptable. An underwriter used 20-50 files per day. Because of their distrust of the files department, underwriters tended to hoard often uses files. A count by operations analyse found that each underwriter kept form 100-200 files in his or her office at any one time. An underwriter would request a file by computer and work on other business until the file was received. Benson employed 25 underwriters.

MANAGEMENT INFORMATION SYSTEMS

Upper management was deeply concerned about his problem. The MIS department had suggested using videodisks as possible solutions. A video disk system was found that would be sufficient for the company needs at a cost of about $12 million. It was estimated that the system would take two years to install and make compatible with existing information systems. Another, less attractive alternative was using microfilm. A microfilm system would require underwriters to go to a single keyboard to request paper copies of files. The cost of a microfilm system was $5 million.

Questions

(a) Looking at the facts of the case, which one of the new technologies should the company implement? Give reasons for your recommendation.

(b) An operation analyst suggested that company employees shared a “dump on the clerks” mentality What in your view can be the outcome of such a mentality?

(c) How can you apply what you have learnt lot size reduction, WIP inventory reduction, and JIT to improve the files situation in this case?

Q 4.         Consider the following two mutually exclusive projects.  The net cash flows are given below:

If the desired rate of return is 10% which project should be chosen and why?

Q 5 ) Whirlpool Company has experienced the following demand for ice during the past six months:

Forecast for March sales using six-months moving average Compare the result with three-months moving average and one-month moving average. Which result do you recommend?

Q 6 ) Give two examples (with supporting details) of the impact of technology in product and service design, in the context of service and manufacturing firms.

Q 7).         Would a project management organization be different from an organization for regular manufacturing in what ways?  Examples.

Q 8).       How project evaluation different from project appraisal?  Explain with examples.