Question # 1 What business is LCI in? What are the key success factors? How operations can contribute? LCI BUSINESS: LCI was founded in 1994 by Mr. Sheikh Ubaidullah, a Former Chairman of Pakistan Cycle Cooperative Society Limited. LCI is located at Ferozpur Road, eighteen miles south of Lahore Pakistan. LCI marketed its bicycles under the brand name of Leader bicycles. LCI was in bad shape and financially bankrupt , all shops run by one supervisors , its production was practically zero when Managing director at Descon Mr.
Razaq Dawood acquired LCI in June 1999. He hired new 6 engineers since 1999 in following departments like production planning, production scheduling, inventory control and quality control to set up all the necessary systems and procedures in order to turn LCI around. In May 2002 Five bicycles –manufacturing companies (competitors) existed in market, combined capacity of these companies producing bicycles were 580,000bicyles per annum, and all were running at or near capacity, the competition was very tough.
Up to May 2002. LCI was producing 60,000 bicycles/annum, in May 2002, LCI started producing manufacturing its new product named BMX cycles, for betterment in this new product, after a year-long negotiation with Hercules of England, Decscon acquired from them the manufacturing and technology right, in Pakistan, for the very popular BMX cycle, Hercules also agreed to send engineers to Lahore for ten-week periods in order to help in set up the plant, tooling and train the staff.
KEY SUCCESS FACTORS: * Senior Management of LCI wanted to introduce the BMX Cycle in market before competitors, and Mr. Mansoor Waraich, Senior Planning Engineer, had a lot of pressure by the top management of LCI to complete this huge production of BMX Cycles. That massive production was carefully planned and all the processes where closely monitored and upgraded. * Mr.
Razaq Dawood, Managing Director, of Descon, took over the LCI in very bad shape , and he set up all necessary systems and procedures like production planning, production scheduling, inventory control and quality control in order to turn LCI around , it is also a factor of the success of LCI * Another key success factor was that Descon called Hercules of England engineers to train LCI’s staff. LCI’s staff can also go to England for the same training for a specific period. OPERATIONS CONTRIBUTION:
LCI is a Production Company so operations plays very important role. Outsourcing and subcontracting of different raw materials is done for the better result of operations. All the plants structure was designed in a way so that they can minimize the wastage and can maximize the production. Manpower was also assigned according to their expertise and labor was hired on daily wage system. Question # 2 What is your Analysis of the BMX production process? How would you characterize this process? ANALYSIS OF BMX PRODUCTION PROCESS:
BMX production process is almost in sequence, all processes depends on each other, if one process is skipped then they cannot complete other part of cycle, in other wards they cannot ignore only a single process, As LCI wanted to introduce BMX in market before competitors and management wanted to produce huge quantity of BMX cycles so LCI purchased different finished parts for BMX cycles from several suppliers, like, seats , pedals, handle bars, frame pads, and tires were directly purchased and installed , but other side , several parts, like sheet metal, metal coils, steel bars and pipes were manufactured from raw materials acquired locally and abroad. Management hired permanent and daily paid labor in all shops to complete tasks efficiently and in timely, this planning was proved very helpful to complete huge production. First process is cutting shop:
This shop having 3 machines for cutting metal pipes into different lengths to use prepare bottom bracket shell, frames and handle bar, this shop run under one supervisor and 4 full time employees Second process is Bottom bracket shell shop: This Shop contained three 600 tons processes and 6 presses ranging from 60 to 100 tons, heavy parts of bicycle like BB shell were manufactured in this shop , this shop run under supervision of one supervisor and 4 full time employees. Handle Shop: BMX bicycle handles were manufactured at this shop completely, a specific machine automatically bent the placed pipe in a few seconds into appropriate configuration and cut the handle bars to length and knurled. These Knurled to help retain the handle bar grip. BMX enameling and Phosphating Shop:
All parts of bicycle were enameling and phasphating, phaspating treatment enabled the steel surface to retain the enameled paint for a long time and provide a durable finish, all partes were placed on jigs and hang on a conveyer, this conveyer passed through a drying oven at a speed allowing each part to be baked at 1500C for approximately 50 minutes. Rim Shop; Bicycle Rims contained at this shop, One mm thick and 83 mm wide metal coils required to prepare rim and these rims imported from barazil or Japan, then front end coil was welded with back end coils and finally, the rims was bent into a required radius and cut after buffing and polishing. Press Shop:
A specific machine at press shop for grinding and buffing the parts of rims and two ends of strips had been welded together Saddle, Brake and Hub Shop: Hubs and saddle for BMX cycle were assembled at this shop, loop clips of were manufactured at LCI , other parts like saddle frames and saddle covers were procured by vender and assembled manually at other end of same shop. Machine Shop: Four production lathes like a grinding machine, a milling machine and four drilling machines are contained at this shop, some parts of BMX cycle check-nut, lock-nut and wheel valve produced in machine shop, this machine was operating 50% of its capacity Electroplating Shop:
Some parts of BMX like Hub flanges, steel rims , lamp brackets, pners and chain wheels electroplate at this shop, this machine have limited equipment capacity so double shift running six days per week for electroplating. BMX Welding line: This shop have 5 welding stations and a mitering machine , different parts of cycle welded and metering machine give a smooth curve at the ends of tubes (pipes) once this machine was set then all tubes automatically mitered the tube. Final Assembly Area: This area have 6 work stations, fitting machine and an assembly track conveyor, all manufactured parts of BMX cycle assemble on these 6 stations, finally all the assemblies and accessory packets were packed in a cardboard carton for delivery.
Characteristics, All shops worked very efficiently and all work stations busy to prepare assigned parts on same time so it’s very helpful to produce huge production, management took decisions for daily paid and monthly paid employees, and paid them attractive salary. Question # 3 Given the investment in BMX cycle manufacturing line, what is the payback period? Each bicycle Price = 2400 Gross margin = 8. 3% Profit margin for each bicycle = 2400 x 8. 3% = 199. 2 Production Capacity = 60,000 Profit margin for 60,000 bicycles are = 199. 2 x 60000 = 11952000 Payback on gross margin = 2 Years & 2 Months Question # 4 Assume the enameling plant capacity is 3000 bicycles per month, as senior planning Engineer, what alternatives are available to increase BMX cycle production?
As per upper management’s drive to expand operations, a ten year old enameling unit that was purchased for Rs 3 Million in 1999. In order to increase production LCI in addition to subcontracted enameling should start in house production in parallel by utilizing the unit purchased. It may have to invest on up-gradation of the unit as required to meet the current production standards. Company purchased enameling machine but they did not use it, because outsourcing and subcontracting was present in LCI’s tradition so upper management should change it and it’s better to utilize enameling machine, bring it in use, so BMX production will definitely be increased. Question # 5 What is your recommendation and why? Following are the Recommendations and the reasons LCI should do some forecasting for identifying the real need of their product in the market, * They should give advertisement though email, news paper and web TV add etc, * They should do SWOT analysis of their own company and their competitors. * They should improve their weaknesses, and they should produce bicycle for elders * They should hire some vender for parts of BMX so it is suggested that they should arrange of those machines at their company, it’s also saving the cost and time. * For sustaining the market position more innovation is required, the designs of bicycles should be upgraded and changed to attract the customers towards the product.
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