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.