AIC Netbooks.docx

AIC Netbooks: Optimizing Product Assembly Dated : 17/08/2013

Submitted By: Group - 1 A V Rahul Ajay Minocha AparnaGopakumar Gaurav Sahu Mayank Gupta Rakhi Sharma

About the Company: AIC systems was founded in 1992 as a producer of printed circuit boards, focusing on motherboards and graphics cards for personal computer industry. It supplied to branded manufacturers of desktops and laptops like dell, HP, and Compaq. Its major competitors were Elitegroup Computer Systems, ASUS, and MSI. It stayed in the competition because of its low cost. By early 2000s, AIC started innovating and designing in-house which made it an ODM (Original Design Manufacturer). It protected its low cost tag by opening its Kaizhi plant outside Shenzhen in early 2001. In 2007, AIC systems formulated a new strategy to enter into the market of consumer electronics particularly focusing on mobile technology. Mobile technology took forms of ultra-portable laptops called netbooks, traditional laptops and smartphones. Development of QuiN Netbook: Short for “Quick Net”, AIC systems started with the development in March 2008. Initial considerations were: 

 

Choice of processor o They waited for the latest intel processor atom’s launch to prepare the motherboard Avoid developing a “me-too” product Bring netbook into the market by third quarter of 2008

The engineering team developed a motherboard “Koda” to integrate it with the Atom processor within the timeline. Netbook Assembly Line: Number of assembly lines = 4 Number of stations per line = 10 Duration of one shift = 9 hrs ( minus one hour for breaks and lunch) Net working time per shift = 8hrs Number of shifts = 2 Number of days = 6 days/ week 1 supervisor per line 2 floater workers per line – floater worker is cross trained across stations and helps workers at each station to improve efficiency  One floater for stations 2 to 6  Another floater for stations 7 to 10 Each worker puts out screws required by next station on the conveyor belt

Challenges in assembly line: 

Demand spikes o Forced to run into 10 – 12 hour shifts – which the management felt was not sustainable Issues with getting a new assembly line fully operational Additional adhesive required for webcam cable Although useful, kaizen meetings led to supervisors fire-fighting to look for quick fixes to maintain output levels Future demand of 130,000 units per month expected

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By November 2008, manufacturing rate had stabilized to one netbook per 50 seconds per line Problem: Find out a way to optimize the current assembly line in order to meet the demand of 130,000 units Analysis: Required capacity: 130,000 units/month = 32,500 units/week = 5,417 units/ day = 339 units/ hour = 42.5 seconds per unit per line Station 1

2

3

4

5

6

Operation #

Planned Time (sec)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

10 12 12 6

Actual Time(sec)

Actual Time per station

7

8

9

10

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20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Bottleneck stations are station 2, 6, 7 and 9 The planned time per station per unit is 40 seconds but average actual time per station per unit is 44.5 seconds. o One option can be to increase shift time although management may not be very appreciative of this option o Another option can be to introduce a third shift which would require hiring of more workers o Another option can be to introduce one more assembly line to ramp up production

Option 1 (Current Method )– Increase shift time by 2 hours to 10 working hours Current rate of production is 50 seconds per unit per line Number of units in 1 hour = 3600/50 * 4 = 288 Number of units per shift = 288 * 10 = 2,880 Number of Units per day = 2,888* 2 = 5,760 Number of Units per week = 5,776 * 6 = 34,560 Number of Units per month = 1,38,240 Although we are able to meet our target, the management feels that this model is not very sustainable. We can think of providing additional incentives to workers for the overtime.

Option 2 – Introduce a third shift of 8 hours With the current rate of production of 50 seconds per unit per line, our monthly production is Number of units in 1 hour = 3600/50 * 4 = 288 Number of units per shift = 288 * 8 = 2,304 Number of Units per day = 2,304 * 3 = 6,912 Number of Units per week = 6,912 * 6 = 41,472 Number of Units per month = 1,65,888

/* If one more shift of same size is added, then production increases by 50% or 55,296 units. Total units per day will be 165,888 units and the entire assembly line can work on 78% efficiency to produce 130,000 units. Total working hours per day are 24. But because of breaks, each shift in actual if of 9 hours. Hence we can add 8 hour shift with 7 working hours. We know that 110,592 units per month are produced with 16 working hours per day. Hence 6,912 units per month are produced with 1 working hour per day. This means, we only need 3 additional work hours per day to meet the excess demand to reach 130,000. Thus, although this option with a third shift will meet the demand with some buffer time available, for just additional 3 working hours, option 1 is better. */

New Analysis : We are able to produce well above the targeted 1,30,000. Hence, Floaters may not be required which was one of the area of concern studied by an internal task force. Chen who was assigned to analyse the permanent need of floaters can save labour cost(which is rising at a rapid pace in the Shenzhen area) of floaters. Also, even the labour cost of main assembly line workers can be reduced by decreasing the shift hour to 7 working hours per shift as compared to 8 hours earlier. Number of units in 1 hour = 3600/50 * 4 = 288 Number of units per shift = 288 * 7 = 2,016 Number of Units per day = 2,016 * 3 = 6,048 Number of Units per week = 6,048 * 6 = 36,288

Number of Units per month = 1,45,152 Thus, even with the three 7 working hour shifts, we are able to produce well above the expected demand of 1,30,000 Netbooks per month.

Option 3 – Introduce another assembly line: /* We are currently producing 110,592 units per month with 4 assembly lines. Hence, units per month per line = 27,648 If we introduce one more assembly line, total production per month = 110,592 + 27,648 = 138,642 This will cater to the demand although additional cost required to set-up the assembly line would be huge. */ 5 assembly lines with two shifts of 9 hours (8 working hours ) – Number of units in 1 hour = 3600/50 * 5 = 360 Number of units per shift = 360 * 8 = 2,880 Number of Units per day = 2,016 * 2 = 5,760 Number of Units per week = 5,760* 6 = 34,560 Number of Units per month = 1,38,240 Thus, introducing a new assembly line yields the same output as delivered by current approach. This is not a preferred option because investing in a new assembly line would not increase my capacity(given the shifts are not extended beyond regular hours)

Option 2 is the best choice, as it increases my capacity and makes full utilization of the four assembly lines. There would be cost associated with training new workers for the third shift but the total labour cost once the new workers get trained would almost be the same as in the case of introduction of a new assembly line P.S. I will prove the point highlighted in GREEN (NEED SOME TIME  )