TUGAS MANAJEMEN OPERASI EM 21
CASE STUDY
U.S. Stroller : Lean
Dibuat Oleh:
Audina Attahaya
Dwi Permana Abdulrachman
Helen Intan Sapitri
Muhammad Hanif Adriansyah
Pangeran Alex Sebastian
Kelas: Eksekutif Muda 21
PPM School of Management
Jakarta
2019
Synopsis
U.S. Stroller is a manufacturer and distributor of a line of baby strollers.
The company makes three types of strollers in a typical batch production
system. Recently, profits are down and competition is entering the market that
the company dominates. Proposals have been made to go to a JIT production
system or to a Cell approach for production. The purpose of this case is to show
how a batch system can be dramatically improved by JIT or Cellular concepts.
The case clearly describes the changes that must be made in the production
system to achieve the benefits desired. This amounts to a complete change in
layout of the production floor and a substantial overhaul of the MRP system.
The case nicely ties together some of the material from the text on JIT, GT,
EOQ and MRP.
Company background
U.S Stroller is a leader in the production and sales of baby strollers in the
United States. It is well known for its innovative design and its good
distribution system. There 2,000 different sites in the U.S to distribute company
products and has been a market leader for over 50 years. At the present time it
conquers 40 percent of the market. U.S Stroller started its business in 1934 with
the introduction of the regular model which sells at $ 49 retail.
In 1955, the company introduced a deluxe model which sells at $ 99 retail and
in 1974 it introduced its shopping centre stroller which sells at $ 149. The
company is currently selling 106,000 units per year of the three types of
strollers with the sales approximated at $ 4.5 million per year. The gross profit
is 25% of sales and the net profit for the fiscal year is 2% of sales. Its inventory
turnover is at 2.4 times per year and the company has earned a 3% on net assets
on an after tax basis and also 8% on owner’s equity.
Problem Statement
Clem Hawkins, Director of Manufacturing of U.S Stroller is tasked by his sister,
Judy Hawkins, President of the company to take closer look at the plant and
check on and check on how to go about to implement JIT.
Question and Answer :
1. How would you describe the current situation facing U.S. Stroller?
U.S. Stroller must do something quickly. Profits have eroded. They are not
losing money yet, but financial results are poor based on percent of sales and
return on equity. Also, Japanese competition is coming. Even though U.S.
Stroller still commands the dominant share of the market, they are vulnerable on
both quality and cost grounds. The Japanese are following a typical Japanese
strategy by entering the market with a high quality stroller on the low end of the
market. The Japanese can be expected to come after U.S. Stroller directly after
gaining a foothold in the market. U.S. Stroller cannot delay making
improvements, until after they have lost market share. They must improve now
in order to pre-empt the competition and to improve profits in the face of
probable price erosion. There should be a sense of urgency in making drastic
improvements in order to protect their market share. Some changes should be
made, assuming U.S. Stroller wants to survive in the long-run.
2. What are the pros and cons of the options presented in the case ?
JIT Pros:
A. Setup is not necessary. Master schedule is frozen to 2 weeks.
B. Finished goods inventory from 80 days to 15~30 days inventory cost
$765,000 to $210,000 (765 x 22/80), savings $555,000.
C. WIP inventory from 4 weeks to 2 weeks inventory cost $322,000 to
$161,000, savings $161,000.
D. Raw materials from 12 weeks to 2 weeks inventory cost $337,000 to
$56,000, savings $281,000.
E. Reduced inventory: $997,000 (three quarter of current $1,424,000) cost
savings = .25 * 997,000 = $249,000.
F. Lead time 2 weeks ⇒ shorter response time ⇒ better customer service
dedicated assembly line ⇒ better quality.
Cons:
A. Purchases of 2 assembly lines ($200,000) -> lose production during
changeover
B. More training and management required, cooperation with supplies is
needed lose flexibility.
Cell Production
Pros:
A. Same savings in inventory cost
B. Throughput might be even faster ⇒ less lead time ⇒ better service or
further savings quality will be better.
Cons:
A. Additional equipments ($150,000)
B. More training required.
3. What will be the impact of these options on the MRP system currently in
use ?
a. MRP system cannot control the shop floor (Not Perfectly Agreed).
b. Pull System doesn’t make MRP system necessary.
c. MRP is needed only for major events such as changes in demand
or product design.
4. What options do you recommend and why ?
We recommend option 1 and then if demand and product changes
relatively stable, move to option 2. After implementing option 1, they will
have time to evaluate whether a further move to option 2 is also desirable
