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McLeod Motors LTD

Operations Management
McLeod Motors LTD is a successful company with numerous customers in the original equipment manufacturer (OEM) market. These customers use motors as components in large products and in the replacement market. They have made over 40 models of electronic motors.
Report made by

Osama Mir
16/1/2012

SUMMARY
McLeod Motors LTD is a successful company with numerous customers in the original equipment manufacturer (OEM) market. These customers use motors as components in large products and in the replacement market. They have made over 40 models of electronic motors. During the previous year McLeod engineers have recommended that the company minimize the different number of end shields and replace these different end shields with a new end shield called BN-88-55. The new end shield replaces 15 end shields in one motor product line of motors. Sue Reynolds, plant manager at McLeod Motors LTD factory realized that this new product would result in lower manufacturing costs, make higher sale and lower inventories; however, the results that the vice president expected to see at the end of the period did not occur. McLeod Motors LTD has too much inventory and the warehouse does not have enough space for all their inventories such as: Raw Materials, Work in process, finish goods and supplies. Sue Reynolds needs to investigate the reasons why the warehouse does not have enough space and what Macleod has to do in order to decrease their inventory and lower the cost of keeping the inventory in the warehouse. Sue Reynolds has to consider what action to take and what should tell John Ingram.

PROBLEM STATEMENT
McLeod Motors has experienced sales boom and this affects all areas of company. All the machines busy to make orders ready and send it to the customer in the right time. Warehouse space was scarce and the machines were usually all occupied. The company replaces 15 end shields in the new BN-88-55 but they still do not have enough space in the warehouse. The construction of the new BN-88-55 shield consumes too much time of the daily operations.

BN-88-55
BN-88-55 is a motor component designed by the engineers of McLeod Motor to reduce the number of different end shields. BN-88-55 was machined from aluminum die. It has the ability to accommodate with the shaft. Its inner surface has various ribs to add strength. Major benefits of it are that it allows better production runs, lower inventory and reduces cost. BN-88-55 is bowl shaped motor component which has a diameter of 16.6 cm and is 4.8 cm deep. It costs McLeod motors 5.28 $ on the casting of each BN-88-55. It takes 3.1 minutes of direct labor time to process which costs 0.77 $.The added overhead allocation cost is 2.31 $. Hence the total cost on each BN-88-55 is 8.36 $ and McLeod motors sold them for 10 $ to replacement market customers.

For better understanding there is a Case study below.

Reference Case Study is available here.