MNS Electronics Note: This case was developed by Prof. Dattaprasanna Marathe in Case Workshop at IIM Indore. MNS Electronics manufactures LCD television sets with all modern features .The speciality was 32 “ variety which has advanced remote control device .In this device one need not press the channel no. but press only channel name. This remote was found to be useful by customers of all age groups & became very popular as it can be used for any cable network .The company had decided to launch this variety aggressively and there was large acceptance by customers. This turned into huge demand for this variety. The company had concentrated only on this product variety. The process of manufacturing was assembly process of imported circuits. The meeting was attended by Avishek-Marketing Manager, Pooja-Finance Manager, Mugdha-HR Executive & Amol-Operations Manager. It was chaired by Sumit- General Manager. Avishek –There have been severe & persisting complaints of late or no delivery of our prime product,32” variety LCD Television set. Amol – The demand forecast is highly fluctuating. The product is new & hence it will take time to stabilize the assembly batch cycle .The worker strength is not adequate. Mugdha– Why don’t you hire more people? It will smoothen the fluctuations. Amol– We are operating under limited budget . We are not allowed to hire any new worker. Pooja – It is expensive to hire & train a worker. One may allow overtime for some of the workers. Mugdha– What about making changes in work force level every month? Sumit– There seems to be lots of ideas to overcome the demand shortage problem. Let us hear from Amol. What options you have thought over? Amol– One can change workforce every month as Mugdha has pointed out. Since hiring & training is expensive one can make use of all existing 50 workers, make use of stocks & provide overtime if required to adjust to fluctuating demand schedules. We can vary the work force only if it is cost effective. But to evaluate all such options one will need cost data from different departments. Sumit– I feel we can try this way. I request all of you to provide all data what Amol needs. Amol , you prepare a comparative statement of all possible options with associated costs. Can you do it in a week’s time? Amol– Yes but if all data is made available to me in next 2 days. The meeting ended with a promise to deliver within next 2 days whatever Amol wanted. The data made available was on basis of company working for 8 hours /day & 25 days/month. (1) Demand forecast for next 12 months in units of television sets month 1 Demand month 7 Demand (2) 4400 11200 2 3 4 4400 6000 8000 6600 13000 10 11 12 7600 6000 5720 8 10800 9 11920 5 6 Cost of hiring & training a new worker 18000/ worker Cost of firing or disengagement 12000/worker Cost of wages normal time 25000/worker/month Cost of wages overtime 40000/worker/month (3) Production time Inventory carrying cost Opening workforce for month 1 Opening stock for month 1 2 hour/unit 80/unit/month 50 workers 240 units Amol thought over the demand forecast & designed following production plans assuming no closing stock at end of month 12.The plans can be amended if closing stock is specified. PLAN A : Hire & fire policy Make use of adequate work force just enough to satisfy the demand of current month. This will ensure there is no closing stock & no worker is paid overtime. PLAN B : Use constant workforce each month based on average demand. This will ensure there is no cost of hiring or disengagement of workers except in month 1.This may result in inventory or workers may have to be paid overtime as & when required. PLAN C : Use constant workforce each week so as to ensure there is no cost of hiring or disengagement except in month 1.There will not be any overtime as well. Questions for discussion: 1 Evaluate all three plans designed by Amol & prepare a comparative statement of costs. 2 Select the best plan based on costs as well as operational problems in execution of each. 3 As a student of Management consider different kinds of cost comparisons or cost tradeoffs : a) Holding inventory against layoff and rehiring, b) Idle worker against layoff & rehiring, c) Working on OT against layoff and rehiring and d) Working on OT against holding inventory.
