EnCom Energy Solutions - Case Study Example

EnCom Energy Solutions 1.0 Introduction:1.0 Introduction The purpose of this case study is to create a theoretical framework within which a set of operational concerns that are facing an organization can be tackled using mathematical programming and optimization techniques. This report will be in the form of a case study which will highlight a certain set of issues that a large scale organization is facing with its supply chain operations; problems which deal with logistics, transportations, personnel scheduling and allocation of resources within the organizations manufacturing facilities. The problems have been solved using Linear Programming (LP) which has been used to minimize the costs and maximize the benefits that are associated with each operation. 1.1 Supply Chain & Operations Management:1.1 Supply Chain & Operations Management According to Young (2009), Operations Management is “essentially the process of making things”. The term Operations Management is frequently called “productions and operations management”, a phrase which stems from the fact that this field of study has its roots in the “factory” and the “production” that takes place there. According to Young, what Operations management deals with is the age old dilemma: How to increase productivity while balancing quality and costs. In the same manner, this case study has also dealt with the most basics of all operational issues; that of minimizing the increasing logistics cost of the firm while maintaining production schedules ensuring a high standard of quality of the end products. The term Supply Chain management, here is used as an umbrella term; one that covers the entire process through the logistics spanning the procurement of raw material, production scheduling, transportation to warehouses and eventually to the customers. The case study has followed a large scale firm which has been long in the business and is well known for its consultancy services. According to Meijboom (1999), production that was traditionally carried out at a single location has now been transformed into complex manufacturing networks with facilities that are separated by hundreds of miles. The same problem is faced by EnCom which has manufacturing facilities in a number of cities and the objective that is required is to solve the supply chain issues that have resulted in high costs for the firm. 2.0 The Case Study of EnCom Energy Solutions:2.0 The Case Study of EnCom Energy Solutions EnCom Energy Solutions is a large and well reputed firm which provides energy solutions to firms all over the United States. The Company is based in Cleveland, Ohio and has been in operation for the last 17 years. The main business operations of the organization are centered on providing consultancy services in the areas of energy and utility systems and their management. The firm also manufactures and designs specially built power generation units for their clients and has state of the art manufacturing facilities different cities in the United States. The firm comprises of a team of electrical engineers, mechanical engineers, technicians and accredited Energy auditors along with managerial and production staff and has its business activities spread across various states. The EnCom consultants are involved in different activities, ranging from designing of special power solutions for clients as well as providing energy efficiency education through appropriate training modules that are held for the employees of the client organizations. The consultancy services are aimed at planning and developing specifically tailored energy conservation mechanisms, energy management solutions and carrying out energy audits for client organizations. Apart from that the other consulting services the firm offers involve help with the implementation of energy conservation measures that have been recommended by the consultants. The firm helps implementation and control exercises by providing training to the client’s employees, revolving around equipping them with technical know-how and imparting upon them the knowledge that equips them in the practices involved in the energy management systems. The consultation services aside, the manufacturing side of the firm’s business involves the manufacturing of energy generation units, a manufacturing business that is spread over a number of cities. The firm has manufacturing facilities in Denver and Atlanta, where specially designed components are manufactured for the company’s generator manufacturing plants. These special units are then transported to the 4 different warehouses that the firm operates from where they are transported to the 5 factories that EnCom has which are located in Cleveland, Bedford, York, Miami and Detroit ,according to the demands generated by each unit. Recently, the firm has expanded and the new plans include commercial retailing of smaller power generators that can be used for household as well as for smaller scale commercial use. For this purpose, the organization has set up three separate departments at the manufacturing facilities in Cleveland, Bedford and in York, from where the company plans to transports these generators to the retail outlets in Boston, Chicago, St. Louis and Lexington. This case study is aimed at providing strategic solutions to some of the logistics as well as allocation, transshipment and personnel problems that the organization is facing at the moment. The recently carried out expansion has also resulted in staffing problems where a large number of assembly line workers at a a particular plant have resigned; a problem which may pose as a considerable risk for the newly constructed manufacturing facilities that have been specially set up for production of smaller scale generators. Due to the fact that the company is facing these problems, the cost factor has been continuously up on the rise and the level of effectiveness has been on the low side. The management has associated these issues with the recent changes that the organization has gone through and have decided that it is high time that all o these issues are tackled. For that purpose the organization’s leaders have called for a strategic evaluation of the current situation of the organizations supply chain and for solutions to the problems that have been troubling EnCom in the recent times. 3.0 Operational Techniques recommended for critical issues:3.0 Operational Techniques recommended for critical issues 3.1 Transshipment Problem:3.1 Transshipment Problem EnCom energy solutions has state of the art manufacturing facilities in two cities where the consultants and resident engineers collaborate in the designing of components that are used for the manufacture of power generators for large scale units as well as for smaller scale commercial and home use generators. These components are manufactured with local and imported material at one of the two facilities in Denver and Atlanta, from where they are transported to four warehouses that the firm owns at strategic locations around the USA. From here, the units are shipped to their desired locations; that is to one of the manufacturing facility that the firm has in Bedford, Cleveland, York Miami and Detroit. The management has recently raised the issue that the cost incurred during this transportation has been steadily on the rise and is fast becoming a major concern for the organization in the terms of rising costs. To solve this issue, the following model has been presented. This Transshipment model deals with the 2 component manufacturing plants located in the cities of Denver and Atlanta, and the four company warehouses named numerically and the 5 clients (the company’s own 5 manufacturing plants) for whom these components have been specifically designed and manufactured. Here the cost of transporting the units from the plant to the warehouse and from there to the clients has been minimized and for this purpose, a linear programming model has been created. The variables in this model are the generating units that are shipped from the factories to the warehouses, from the factories to the customers and the warehouse to the customers. All the constraints are defined through assuming non-negative options and are as follows: Factory to warehouse >= 0 Factory to customer >= 0 Warehouse to consumer >= 0, The remaining constraints are: Total units from Factory = Demand Total units sent to warehouse = 0 Employee per schedule = an integer Another constraint that has been used is the requirement that enough employees are present each day so that the day’s production schedule is met successfully, hence: Employees per schedule = required per day The objective function is to minimize the payroll. Table 2 Problem                     Sch. Days off Employees   Sun Mon Tue Wed Thu Fri Sat A Sunday, Monday #3 0 0 1 1 1 1 1 B Monday, Tuesday 5 1 0 0 1 1 1 1 C Tuesday, Wed. 6 1 1 0 0 1 1 1 D Wed., Thursday 4 1 1 1 0 0 1 1 E Thursday, Friday 6 1 1 1 1 0 0 1 F Friday, Saturday 1 1 1 1 1 1 0 0 G Saturday, Sunday 0   0 1 1 1 1 1 0 Schedule Totals: 25 #22 17 14 15 15 18 24 Total Demand: #22 17 13 14 15 18 24 Pay/Employee/Day: $40 Payroll/Week: #$5,000 The model suggests that to meet the daily demand for production, the total number of assembly line workers that should be hired is 25 out of this; the numbers are broken down for each of the seven possible schedules so as to minimize the company’s pay roll costs. One of the major Key Performance Indicators in this situation would be the Job satisfaction that the assembly line workers have about their new jobs. It is recommended that the management makes an assessment in this regards so that the results of the model and its application can be justified. Job absenteeism will be another major factor which will act as a KPI. The levels of job absenteeism will determine whether the model has been effective or not. Productivity and its measurement will also act as a helpful key performance indicator in this regard. 3.3 Transportation Problems:3.3 Transportation Problems Another major issue that has been troubling the firm in this regard has been the high transportation cost that has been incurred in the plants initial few months during the transportation of the power generation units from the three manufacturing plants and to the four distribution centers that the firm has contracts with. The firm has a set production capacity and has pre-planned demand schedules that have been set on three month duration and have been pre-decided on the basis of the forecasted demand schedules. This particular problem that has recently arisen has lead to an alarming increase in the costs associated with the transportation of the power generators manufactured by EnCom for home and small scale commercial use. Following are the tables which give an overview of the production capacity that the manufacturing plants have as well as the demand schedule for a particular type of power generation unit which has been designed by EnCom engineers. Table 3 Plant 3-Month Production Capacity (units) Cleveland 5000 Bedford 6000 York 2500 Total: 13,500 Table 4 Distribution Center 3-Month Demand Schedule (units) Boston 6000 Chicago 4000 St. Louis 2000 Lexington 1500 Total: 13,500 The management is concerned with finding out the amount of production that should be shipped from each plant to the four distribution centers in Boston, Chicago, St. Louis and Lexington. The objective here is to determine particular routes that should be used and the number of units that should be shipped through each route in a manner that incurs the lowest possible cost. The following table shows an overview of the transportation cost that is incurred in Dollars per unit for each generating unit. Table 5 Origin Destination Cleveland Bedford York Boston Chicago St. Louis Lexington 3 2 7 6 7 5 2 3 2 5 4 5 A Linear Programming (LP) model is used to solve this transportation problem. The Decision Variable is presented as: X ij = Number of units shipped from origin i to destination j, where I= 1,2,3,……., m, and j = 1,2,3,….n. Here the demand and supply constraints are as follows: Bedford supply Read More