Mexicana Wire Works Ron Garcia felt good about his first week as a management tr
ID: 457768 • Letter: M
Question
Mexicana Wire Works
Ron Garcia felt good about his first week as a management
trainee at Mexicana Wire Winding, Inc. He had not yet developed
any technical knowledge about the manufacturing
process, but he had toured the entire facility, located in the suburbs
of Mexico City, and had met many people in various areas
of the operation.
Mexicana, a subsidiary of Westover Wire Works, a Texas
firm, is a medium-sized producer of wire windings used in making
electrical transformers. Carlos Alverez, the production control
manager, described the windings to Garcia as being of
standardized design. Garcia’s tour of the plant, laid out by
process type (see Figure 7.20), followed the manufacturing sequence
for the windings: drawing, extrusion, winding, inspection,
and packaging. After inspection, good product is packaged
and sent to finished product storage; defective product is stored
separately until it can be reworked.
On March 8, Vivian Espania, Mexicana’s general manager,
stopped by Garcia’s office and asked him to attend a staff meeting
at 1:00 P.M.
“Let’s get started with the business at hand,” Vivian said,
opening the meeting. “You all have met Ron Garcia, our new
management trainee. Ron studied operations management in his
MBA program in southern California, so I think he is competent
to help us with a problem we have been discussing for a long
time without resolution. I’m sure that each of you on my staff
will give Ron your full cooperation.”
Vivian turned to José Arroyo, production control manager.
“José, why don’t you describe the problem we are facing?”
“Well,” José said, “business is very good right now. We are
booking more orders than we can fill. We will have some new
equipment on line within the next several months, which will
take care of our capacity problems, but that won’t help us in
April. I have located some retired employees who used to work
in the drawing department, and I am planning to bring them in
as temporary employees in April to increase capacity there.
Because we are planning to refinance some of our long-term
debt, Vivian wants our profits to look as good as possible in
April. I’m having a hard time figuring out which orders to run
and which to back order so that I can make the bottom line look
as good as possible. Can you help me with this?”
Garcia was surprised and apprehensive to receive such an
important, high-profile assignment so early in his career.
Mexicana Wire Winding, Inc.
Questions
1. Which product is the most profitable? Why doesn’t Mexicana just produce that product and forget about the others?
2. What are some of the inputs that Mexicana uses to produce its products?
3. Does Mexicana have enough resources to satisfy all of its demand? If not, then how many units of each product should be produced?
4. What are some ways that production capacity can be increased?
5. What would you do if you were Ron Garcia?
Explanation / Answer
1. Which product is the most profitable? Why doesn’t Mexicana just produce that product and forget about the others?
The most profitable Unit is W0005C.
W75C
W33C
W5X
W7X
Selling Price
$100
$80
$130
$175
Material
$33
$25
$35
$75
Labour
$10
$8
$11
$11
Overhead
$23
$18
$25
$64
Total Cost
$66
$50
$70
$150
Number of units
1,400.00
250.00
1,510.00
1,116.00
Profit
$34
$30
$60
$25
$47,600.00
$7,500.00
$90,600.00
$27,900.00
The orgs profits is not only because of one product production, but the overall cost is less due to overall setup being sharing the cost and utilization. Focus only on one product will increase the overheads costs does reducing the profitability
2. What are some of the inputs that Mexicana uses to produce its products?
Inputs that Mexicana uses to produce its products are Labor, Capital, Raw material & Packaging materials
3. Does Mexicana have enough resources to satisfy all of its demand? If not, then how many units of each product should be produced?
Number of units
1,400.00
250.00
1,510.00
1,116.00
Profit
$34
$30
$60
$25
$173,600.00
Constraints
Drawing time
1
2
1
$3,016.00
<=
4000
Extrusion time
1
1
4
1
$8,806.00
<=
4200
Winding time
1
3
$2,150.00
<=
2000
Packaging time
1
3
2
$8,162.00
<=
2300
W0075C orders
1
$1,400.00
<=
1400
W0033C orders
1
$250.00
<=
250
W0005X orders
1
$1,510.00
<=
1510
W0007X orders
1
$1,116.00
<=
1116
April W0075C
1
$1,400.00
>=
150
April W0007X
1
$1,116.00
>=
600
Yes, Mexicana have enough resources to satisfy all of its demands.
4. What are some ways that production capacity can be increased?
The production capacity can be increased by
· Reducing the no. of rejected unit’s especially winding department.
· Increasing the machine utilization from current 63%
· Modify the Rework Department with a bigger area to increase it’s a capacity, increasing the overall production capacity of the factory.
5. What would you do if you were Ron Garcia?
As Ron Garcia I would recommend changes in the layout of the plant,
W75C
W33C
W5X
W7X
Selling Price
$100
$80
$130
$175
Material
$33
$25
$35
$75
Labour
$10
$8
$11
$11
Overhead
$23
$18
$25
$64
Total Cost
$66
$50
$70
$150
Number of units
1,400.00
250.00
1,510.00
1,116.00
Profit
$34
$30
$60
$25
$47,600.00
$7,500.00
$90,600.00
$27,900.00