Case Study Microlite S.A.: The Pan-Orient Decision

Case Study Microlite S.A.: The Pan-Orient Decision

Abstract

Microlite S.A. which is located in Brazil was the largest producer of batteries in South America with a mighty 55% share of the Brazilian battery market. Top Management had decided to shut down all but one out of three of the dry cell battery factories in Guarulhos. This opened up the chance for Luiz Pinto, manager of Microlite's battery factory in JaboatÐ"Јo, to take over this market share and do further investments in his company.

This report is going to describe three basic different proceedings on how he can increase his production. Take over the old machines from the factories in Guarulhos, invest in new machines from Pan-Orient or come up with new ideas how the current processes can be improved to cover the shortfall.

Possible Solutions

The closing of the plants in Guarulhos caused the JaboatÐ"Јo plant to increase the production of one-eighth of its production to absorb this shortcoming. Luiz Pinto can basically choose from several solutions to reach a required capacity of 540 units/min:

1) Take over old machines from the factories in Guarulhos

The machines from Guarulhos were stated to be more reliable than the current machines in JaboatÐ"Јo. A partly or a complete takeover of these machines would allow to adapt to the needed capacity. Unused machines could be sold.

2) Acquire a new assembly line from Pan-Orient

This would be the opportunity to replace the old batch assembly machines with an automated assembly line for AA-size batteries. This investment of 2M$ would allow to reach and even excess the needed capacity, drastically reduce downtime and the number of operators.

3) Diverse improvements in the production line

Through various improvements (e.g. improved supply mechanisms) we could try to reduce the huge downtimes in the current production. Those 10-40% are mainly due to intermittent short stops to fix jams or adjust settings. If it would be possible to reduce this downtimes in critical points to a minimum, the demanded capacity could be reached with the current equipment.

Approach

These three approaches have all their advantages and disadvantages and allow a great number of combinations. Our idea is to implement a three-step solution.

The first phase of our solution is concerned with improving the current situation and overcoming the shortfall in a fast and inexpensive way. According to exhibit "current situation" we can identify two bottlenecks in our current production process, "Add Paste to Cup" and "Inspect Carbon Rods". Those are below the necessary capacity of 540 units/min. To overcome this, we suggest adding one additional machine ("Add Paste to Cup") from the factory in Guarulhos to reach a overall capacity of 540 units/min and engage two more persons, one to operate the additional machine and one in the "Inspect Carbon Rods"-operation (exhibit alternative II).

The second phase, after the installation of the machines from Guarulhos, has the goal to improve the current production to an extend that:

- Average Downtime shall be reduced by 30%

- The quality of the batteries shall be increased with the long-term objective of eliminating the final electrical output test

To reach this goal, first all the processes in the plant need to be scrutinized. Second, problems need to be identified, analyzed and solved in the manner of Kaizen. The third objective is, to implement quality control on the running belt. With these measurements we're converting the factory step by step from a batch process to a JIT production.

The third phase will just be implemented if we're not able to increase the quality of the batteries in the way that the electrical output test can be eliminated. We would then invest in the new automated assembly line from PAN-Orient, Inc. and sell all the not required machines from the plant in JaboatÐ"Јo. With this machine the plant has even the possibility to excess the required capacity of 540 units/min by 21 (exhibit "alternative 1") and reduce the needed number of operators by 32.

Financial Analysis (see exhibit)

Phase I

The transporting and installing of one additional machine from Guarulhos and the sale of the remaining equipment will result in a one-time revenue:

138'889$.