Management at Rochester Manufacturing Corporation - Case Study Example

Rochester Manufacturing Corporation A Case for an Optimistic Manager that you will move ahead with the FMS now An optimistic view ofthe sales manager shows that the manager is positive about moving with the FMS. The sales manager will view the benefits of moving with the FMS to have more advantages than limitations. In evaluating the FMS, analysts consider the expected value. The expected value entails the future payoffs of a certain project that is to be undertaken. It is viewed that the traditional numerically controlled machines operates in high variety under low volume manner. This implies that the production of the Rochester Manufacturing Corporation is not efficient. The firm believes that 30% of the people use a good estimate of products suitable for the FMS. This provides a good incentive for moving ahead with the FMS now. The 30% is viewed to fit very nicely into a “family”. Moving ahead with the FMS, it is also viewed to reduce the variety. The traditional numerically controlled machine has a high variety. Therefore, moving ahead with the FMS now will be associated with a reduction because of higher utilization in the number of pieces of the machinery. In addition, the resources are scarce and hence proper utilization should be enhanced. By utilizing the resources, the profits will also be utilized. In return, the production will be increased if the variety is utilized (Khanna, 2007). The main objective of any firm is profit maximization and cost minimization. If the FMS will have a lower variety, the costs will be minimized and profits will be maximized. The lower variety is a very big motivation of moving ahead with an FMS now. The firm should be able to go from 15 to perhaps as low as 3. This shows a reduction of 12 in the variety. This variety reduction will create more room for an extra production. The firm will be able to expand its production by perhaps four times. It means that the efficiency of the firm will increase by moving ahead with the FMS now. Moving ahead with the FMS now is also associated with a reduction in the floor space from 20,000 square feet to about 6,000 square feet. This shows a reduction by 6,000 square feet. Any organization strives to have a suitable space to carry out its operations. A suitable space will reduce the congestions within the organization. Congestions are associated with various disadvantages. Also, moving ahead with the FMS now will also be associated with the through put of orders improving with the processing of the family parts in1 or 2 days rather than 7 to 10. This shows a good processing efficiency. If orders are processing very fast, it will attract more customers to the firm. The inflow of the customers into the firm will be high. Hence, attracting more revenue into the firm. The revenue may be applied by the firm in various beneficial ways which will also attract an extra revenue. In addition, moving ahead with the FMS now will also bring about an inventory reduction which is estimated to yield a one-time $750,000 savings and annual labor savings should be in the neighborhood of $300,000. A reduction in inventory since it brings about savings. This means that the firm will be more efficient with a reduced inventory. The labor savings will also be high to about $300,000. This will be associated with the reduced inventory thus the inefficient workers who do not participate efficiently in the production process of the firm. All these savings will be used by the company for other projects. The expenditure on the machinery will be about $3 million. It will handle about 30% of the RMC’s work. The payback period will be less than 5years. This is low for a project as after those 5 years the company will start to enjoy all the benefits of the firm. A Case by a Conservative Manager for Maintaining the Status Quo until the Returns are more obvious A conservative manager is one who is not quick to make immediate changes. He is of the view that the benefits cannot be enjoyed that soon and is afraid of making changes to the old or the current systems. Since he or she is used to the old production machines, he is more comfortable with having them rather than moving to a different production machine. The conservative manager will thus maintain the status quo until the returns are more obvious to him. This can be explained by various cases in the Rochester Manufacturing Corporation. First of all moving ahead with the FMS will only handle about 30% of the RMC’s work. This shows that 70% of the RMC’s work will not be taken care of. The efficiency of production will reduce as a greater percentage of the RMC’s work will not be handled. A conservative manager will thus not be willing to move ahead with an FMS now and he will instead maintain the status quo (Render et al, 2014). Secondly, moving ahead with the FMS now will have more additional and startup costs which will increase the costs of the firm. If the costs are more the profits of the firm tend to be low. This will interfere with the firm’s objective of profit maximization. Thirdly, moving ahead with the FMS now will reduce the storage space from 20,000 square feet to 6,000 square feet. This will bring about congestion to the firm. A firm which is too much congested is prone to accidents. The moving space of the workers will reduce. This will also reduce the efficiency of moving the inputs from one production unit to another. Workers will not be able to consult well if the floor space is small hence the firm will experience more delays. Lastly, the expected returns on the investment of the FMS are estimated to be about 10% to 15%. This is lower than the returns of the traditional numerically controlled machines which are estimated to be more than 15%. Therefore, by considering all these factors, the conservative manager will rather maintain the status quo until the obvious returns are visible. References Khanna. ( 2007). Quantitative Techniques for Managerial Decisions. New Delhi: PHI Learning Pvt. Ltd. Render, B., Stair, R.M., Hanna, M. E & Hale, T., S. (2014). Quantitative Analysis for Management. New York: Pearson Education. Read More