- How would you measure the productivity at a plant and perform a fair comparison of the performance of Applichem's six plants?
We assume that the 'Number of People at Each Operation at Each Plant' means 'number of people for each product type at each plant'. Therefore the product variety difference among different plants should already be taken into consideration in Exhibit 3.
But the package variety is also an important factor for performing a fair comparison of the performance, since the package variety difference is very big among all the 6 plants. For example, Gary is carrying 80 package sizes while most of the others carrying only 1. Therefore we divide the package labor (in Exhibit 3) by the number of package sizes the plant runs, and calculate the subtotal of direct labor based on it. By this modified calculation, the plant productivity is as shown in table 1.2.
Table 1.1 Direct labor
Mexico | Canada | Venezuela | Frankfort | Gary | Sunchem | |
Original package labor in Exhibit 3 | 10.4 | 5 | 6.2 | 14.6 | 11.3 | 2.7 |
Modified package labor | 10.4 | 5 | 6.2 | 14.6 | 0.14125 | 1.35 |
Table 1.2 Productivity
Mexico | Canda | Venezuela | Frankfort | Gary | Sunchem | average | |
by direct labor | 0.882 | 0.215 | 0.318 | 0.828 | 0.591 | 0.278 | 0.518523 |
by direct labor-modified | 0.882 | 0.215 | 0.315 | 0.828 | 1.116 | 0.304 | 0.610116 |
by indirect labor | 0.691 | 0.167 | 0.373 | 0.945 | 0.405 | 0.241 | 0.47017 |
by total | 0.387 | 0.094 | 0.172 | 0.441 | 0.240 | 0.129 | 0.243886 |
by total-modified | 0.387 | 0.094 | 0.171 | 0.441 | 0.297 | 0.134 | 0.254144 |
- Why do you think the plant have different productivity?
The productivity depends on the product make-up, equipment efficiency, employee loyalty, improvements, operator technology, national labor rules, product quality etc. The following table summarizes the differences in all aspects among the six plants:
Product Make-up release-ease / other / packages | Equipment Efficiency | Employee Loyalty | Improve-ment | Operator Technology | National Labor Rules | Product Quality | |
Mexico | 1-6-1 | 68, dry-78 | - | - | ok | - | - |
Canda | 1-4-1 | 55 | non-union | - | - | - | high |
Venezuela | 1-1-1 | 64 | - | Bad | low | - | - |
Frankfort | 2-12-1 | 71-74, 1961 | - | Good | - | - | - |
Gary | 8-19-80 | 59-64 | excellent | - | - | - | - |
Sunchem | 1-1-2 | 57, redesign-69 | non- union | best | excellent | severe | high |
- A new cost measurement. Set up a linear program using the demand data, transportation and manufacturing costs and capacities to find the optimal production for Applichem's global network for 1982.
Because there is no technology break-through from 1977-1982, we assume that the manufacturing cost is affected by exchange rate and inflation rate only. The exchange rates and inflation rates vary greatly by country. For example, Mexico has the most dramatic change between 1982 and 1981, while Japan has the lowest overall inflation rate change, and Venezuela has no exchange rate change at all. Since all the plants' equipment setup date and manufacturing starting date are before 1975, the plant's performance (manufacturing cost) should be based on the modified cost eliminating the effect of outside influence out of control of plants (exchange rate and inflation rate). For the 1982 manufacturing, if it was performed in 1977-81, the corresponding cost should be:
year | Mexico | Canda | Venezuela | Frankfort | Gary | Sunchem |
1982 (check) | 92.63 | 93.25 | 112.31 | 73.34 | 89.15 | 149.24 |
1981 | 216.7922 | 91.70873 | 103.9096 | 73.29401 | 86.71935 | 156.7062 |
1980 | 198.4 | 82.52094 | 91.30894 | 78.05058 | 78.40809 | 167.4084 |
1979 | 162.1102 | 73.9437 | 76.06035 | 82.23734 | 67.50937 | 120.3686 |
1978 | 137.6809 | 63.54112 | 69.66872 | 74.14891 | 59.82537 | 138.1361 |
1977 | 118.8233 | 63.51462 | 64.82935 | 63.887 | 55.66974 | 114.9789 |
And the ratio with average cost (among 6 plants) is:
Mexico | Canda | Venezuela | Frankfort | Gary | Sunchem | |
1982 | 0.911234 | 0.917333 | 1.104833 | 0.721472 | 0.877 | 1.468127 |
1981 | 1.78398 | 0.75467 | 0.85507 | 0.603135 | 0.713612 | 1.289533 |
1980 | 1.710107 | 0.711288 | 0.787036 | 0.672756 | 0.675838 | 1.442975 |
1979 | 1.670581 | 0.762006 | 0.783818 | 0.847473 | 0.695698 | 1.240424 |
1978 | 1.521333 | 0.70211 | 0.769819 | 0.819323 | 0.661053 | 1.526362 |
1977 | 1.48004 | 0.791126 | 0.807502 | 0.795764 | 0.693412 | 1.432156 |