RFP, colorful origami turtles for Dr. Wright's Decorating Debris, Inc.: an experiential case study.
The focus of this case is to determine the manufacturing cost of an origami product in order to respond to a request for proposal (RFP). Specifically, the case requires students to utilize concepts of cycle time, line balancing, work measurement, standard times, learning curves, product and process design, capacity, layout and costs. Secondary issues include supply chain management and cost accounting. The case is designed to be integrated into an Operations Management class over the course of several weeks, utilizing between three and five in-class hours and five to seven hours of outside preparation by students.
The case is based upon a real RFP format (1)1. Student teams are presented with an RFP and are expected to submit a completed proposal. This case works best in a very unstructured environment where students are forced to ask questions and use the textbook to find methods for completing the proposal. This case reinforces the concepts listed in the case description above as well as critical thinking, decision making and oral and written communication skills. It assists students in understanding how to apply knowledge to real situations, and can be used to discuss cost accounting, manufacturing management and new product introduction.
One of the authors has utilized this case study in various forms for the past 5 years as an experiential learning activity. The author found that most students had never been inside a manufacturing plant and thus found it very difficult to understand the concepts related to manufacturing. The concepts of cycle time, line balancing, work measurement, standard times, learning curves, product and process design, capacity, layout and costs appear to be fairly simple in most texts until students try to apply them to real products. Furthermore, students had some difficulty seeing the connections among the various topics in a typical operations management class and were likely to view the topics as unrelated. The use of a fictional request for proposal (RFP) based on a standard RFP format is effective in tying together all of the concepts listed above.
Students are first given the case study and asked to develop a game plan for developing the proposal. They are told that they will be given crayons, colored pencils, scissors and black and white printed turtles only after they have a complete plan for collecting relevant data to develop costs as they prepare their eight prototype turtles. The information collected during the creation of the prototypes is then used to prepare the proposal. The instructor can modify the assignment from our suggestions to better fit course content. As we have presented it, the ultimate goal in this case is for the student to prepare a final written proposal.
1. To understand the connections among cycle time, line balancing, work measurement, standard times, learning curves, product and process design, capacity, layout and costs.
2. To learn to ask relevant questions and utilize reference books, including the text, to solve real operations management problems.
3. To practice problem identification and discernment of the core concerns that must be addressed in order to find an acceptable solution.
4. To practice applying academic knowledge to real business problems.
5. To reinforce group, critical thinking, decision making and oral and written communication skills.
6. To give students experience in unstructured decision making situations.
SUGGESTED CASE QUESTION
You and your fellow team-mates were recently hired by the Terrific Turtle Company (TTC) to turn the company around. TTC has recorded 12 months of losses. The old proposal response team, which you replaced after their mass firing last week, consistently placed job bids that ended up being lower than the actual costs. Therefore, upper management is very concerned about your diligence on the request for proposal which was received from Dr. Wright's Decorating Debris Inc. (DWDDI) yesterday. However, while underbidding is not acceptable because it causes losses when the bid is accepted, overbidding to pad the numbers may well result in the loss of contracts. For that reason, management will pay close attention to all requests for proposals and requests for quotes that you respond to. They are particularly interested in seeing that all the information related to the final cost is presented in a professional and logical format.
IMPLEMENTATION AND ANALYSIS ISSUES
The case can be handled in many different ways. Typically, the author who uses this case presents it as an experiential activity. First, the students are given the case and asked to read it before the next class period. At this point, the students have been assigned readings on topics including, but not limited to, operations strategy, competitive priorities or distinctive competencies, product and service design, capacity planning, process selection and facility layout, design of work systems, and learning curves. Typically, between four and six class hours have been spent lecturing about and discussing these topics. Rather than cover the topics in great detail, the author has found that it enhances students' problem solving and decision making skills to encourage them to determine how the information in the text can be utilized to solve the problem (i.e., find all the information needed to complete the proposal). However, this case could be utilized as a capstone towards the end of the semester in an equally effective manner.
During the first class period after the students have read the case, the instructor gives the students one fifty-minute class period to meet with their teams and suggest action steps needed to respond to the RFP. The author informs the students that they will be issued crayons, colored pencils, scissors and black and white copies of the printed turtles upon submission and approval of a complete plan for collecting relevant data needed to develop costs as they prepare their eight prototype turtles. This step is really for the students' protection. If they do not understand what information they must collect, for example, to apply learning curve concepts or conduct a stopwatch time study, they are likely to end up with the wrong information and therefore waste their time. It is the author's experience that students struggle for twenty to thirty minutes before they realize that they will need to systematically review the information in the text and decide what material is relevant.
During the next class period, the instructor uses two problems to exhibit some of the relevant issues. The first is a problem where tasks from a precedence diagram are assigned to workstations to minimize idle time. Any line balancing problems from an Operations Management text are probably suitable (2). Students are reminded that they cannot begin to assign tasks to workstations until they know "the" amount of time it takes for each task (e.g., usually the standard time). Additionally the problem in Figure 1 can be utilized to show students that, assuming the factory also has other uses for its employees, factory A actually pays for less manufacturing time per unit than factor B. A has 5 workstations with a cycle time of 30 seconds and B has cycle time of 40 seconds. This necessitates total manufacturing times of 150 seconds and 160 seconds, respectively.
Upon submission of a plan for data collection, the students are given the appropriate materials to make their prototypes. Students typically pursue one of two plans for the data. In either case, they decide on all the tasks needed to complete a turtle (e.g., color blue eyes, color green toes, dark green on shell, etc.), such as those shown in Table 1. Then they time separately each of the tasks eight times using wristwatches. This results in data similar to that shown in Table 2. Often they must be encouraged to use the same person for all eight trials on any particular task; if this is not done, the learning curve cannot be calculated. Additionally using different people on different trials leads to increased variation in the times.
Students can either use the eight times per task, such as the example shown in Table 2, to calculate the learning curve percentage or the observed time, normal time and standard time (3). They quickly realize that it is difficult to calculate the learning curve because they have only eight trials which results in only 3 doublings of the units, for example, as shown in Table 3. Recall that the learning curve theory is based on an assumption that at each doubling of units produced there is a predictable percentage change in the time required to manufacture a unit. The difficulty in using this theory is that a learning curve percentage is hard to determine because the percentage change is typically different for each doubling (see Smunt and Watts4 for information on how this can be handled). If, however, the students choose to use this approach, they will have to determine "the time" that best represents the time needed to complete each task. For example, the students may decide to use the time to complete the 100th, or nth, unit.
Most teams of four students can completely make their eight prototypes within a one-hour class period. However, this could also be assigned as an out-of-class step. Additionally, if the instructor prefers, the data for the eight times (or more) for each task could be given to the student. Table 2, without observed time, normal time and standard time could serve as that data. There are advantages and disadvantages to this approach. The advantages include saved time as well as not requiring students to color, cut and fold. However, the disadvantages are that the students may fail to see that it is usually advantageous to have many small tasks versus a few large tasks. The result of many small tasks is that, depending on the precedence, they can usually be arranged to minimize idle time. When only a few tasks are created, there is usually more idle time. Also, initially, most students decide that the precedence of the tasks is strictly linear, as shown in the example in Figure 2. Upon discussion with the individual student teams, they can be shown that more tasks with less strict linear precedence will usually allow more options for work station arrangement and less overall idle time. Figure 3 shows a precedence diagram with less strict linear precedence. Once the students have collected the data for the eight (or more) repetitions of each task, it is a rather simple task to calculate observed time, normal time and finally, standard time. Then the student teams must calculate the costs for the 40,000 units as well as the cost for any one of those 40,000 units. This is relatively straightforward if students are given some basic costs. We provide those costs to student teams in a handout as shown in Figure 4. Each team is given slightly different costs and the number of regular and overtime hours available is varied for each team. These are shown in Table 4. Occasionally, a student team will need to exceed the 4-week period to manufacture enough units within the given regular time and over time labor hours available. This is negotiated with the instructor on a case by case basis.
[FIGURES 2-3 OMITTED]
Lastly, students often request an example proposal for use in writing their proposal. The author has not yet conceded to this request. This exercise provides much needed practice for students in creating written reports and working in an unstructured environment. The disadvantage of this refusal is that many different formats are received from the student teams. However, with a simple spreadsheet, the number of workstations and cycle time, costs from the input sheet and packaging, printing and shipping costs can easily be input and final costs compared with students'.
The example tables and figures shown throughout this instructor's note are from Team 1, with the exception of Figures 1 and 2. Team 1 had ten tasks, as shown in Table 1, with the times for each of the eight trials shown in Table 2. The precedence diagram for this team is shown in Figure 3. The workstation diagram for Team 1 is as shown in Table 5. Example calculations are shown in Table 6.
SOURCE OF ORIGAMI ORIGINALS
This case utilizes origami turtles from "Paper Folding with Origami Techniques: Reproducible Craft Patterns, Grades 3-6" part of the Create-a-Craft series published by Frank Schaffer Publications5. The pattern for the turtles and folding directions are shown as drawings 12344 and 12345 at the end of the case study. Other origami products could be substituted with minor modifications to the case.
ADDITIONAL DISCUSSION TOPICS
After all the student teams have turned in their completed proposals, the instructor can use the cost comparisons from each team to exhibit a number of points. Typically, teams with more tasks and less restrictive precedence diagrams have less idle time. This concept can be reinforced through a comparison of the team's total hours to produce 40,000 units. Often students encounter capacity problems. These problems can also be discussion topics.
Students can also be "pre-qualified" and allowed to participate in an on-line reverse auction. Often if the class is large or the student teams' costs are very different, the teams can be divided into two groups for the auction. However, a short lesson and readings6 related to reverse auctions should also be included as this procurement practice is currently controversial7.
The concepts of product and process design/redesign are also topics which can be readily related to this project. Students can be encouraged to discuss what role innovation played during the "production" of the eight prototypes. Some groups will say that they did not innovate at all while others will decide to print two turtles per page, fold the turtles in half to cut them more quickly, unwrap crayons and use them sideways to color the turtle legs more quickly, etc. Students can be asked to relate these innovations to those which might occur as the production processes in an organization are designed or redesigned.
Within the proposal, students are asked to submit an inspection plan for the turtles. Students can be asked to discuss the advantages and disadvantages of inspection of final product versus built-in monitoring throughout the manufacturing process. The turtles also give a concrete item for students to discuss what would be inspected and how quality could be identified. The author does not ask students to include inspection costs or cost of defectives in their proposal. However, depending on what has already been covered during the course of the semester, this could be added as a section in the RFP.
After the projects are completed, students can be encouraged to brainstorm a list of questions they would ask if they were involved in new product introduction. Such brainstorming is a particularly useful exercise if each student is asked to list questions related to his or her major. It also helps exhibit that every business major (e.g., management, marketing, finance, accounting) should be interested in and concerned about cost estimates. For example, the marketing majors can see that the cost estimates will affect the pricing and thus their ability to sell the product and make a profit.
This case can be expanded to include additional cost accounting topics. For example, if the instructor supplies selling price and fixed cost data, teams can also compute contribution margin per unit and breakeven points in units. Then, during discussion, students can compare different student supplier teams to determine which would be most cost effective at different volume levels. To do this effectively, each student team would need to have different fixed costs.
However, the authors have chosen to only include variable cost data in the case. As given, the case is quite challenging for students. The addition of accounting elements to the case would likely increase the challenge factor for most students. Also, the primary learning objectives of the case relate to manufacturing objectives and not accounting ones. Eschewing fixed costs does not necessarily detract from the realism of the case. Firms, when bidding on a one-time job (as might be the case with this RFP), may very well bid by concentrating on the variable product costs with the recognition that the firm's regular product line adequately covers fixed costs.
(1) The RFP format was adapted from "REQUEST FOR TECHNICAL PROPOSALS AND QUALIFICATIONS NO. 07-0019 SPHERICAL BEARINGS FOR BLUE LINE RAIL CARS" at http://www.ism.ws/MembersOnly/BidSpec/BidSpecDetails.cfm?DetailsID=617. This document is accessible with ISM membership.
(2) Examples of such problems include problems 2 and 3 on page 263 of Operations Management, Seventh Edition by Stevenson or solved problem 3 on page 435 and problems 11, 12, and 13 on page 441 of Operations Management: Strategy and Analysis, Fifth Edition by Krajewski and Ritzman.
(3) See, for example, Operations Management, Seventh Edition by Stevenson pp. 324-329 or Operations Management: Strategy and Analysis, Fifth Edition by Krajewski and Ritzman pp. 178-184 for information on Stopwatch Studies.
(4) Smunt, T. L. and Watts, C. A.(2003) "Improving Operations Planning with Learning Curves: Overcoming the Pitfalls of 'Messy' Shop Floor Data," Journal of Operations Management, Vol. 21, No. 1, pp. 93-107.
(5) Source of drawings 12344 and 12345 is Paper Folding With Origami Techniques, Grades 3-6 by Nakata Atsuko ISBN is 0768201535. This is a Frank Schaffer Create-A-Craft title. Frank Schaffer is now owned by McGraw Hill Publishing.
(6) Inside Supply Management and the Institute for Supply Management (ISM) website (www.ism.ws) are excellent sources of articles about on-line reverse auctions. One particularly appropriate article is "Electronic Reverse Auctions: The Benefits and the Risks," Inside Supply Management, October 2003, pp. 32-36.
(7) Kaufmann, L., and Carter, C. R. (2004). "Deciding on the Mode of Negotiation: To Auction or Not to Auction Electronically," The Journal of Supply Chain Management, Vol. 40, No. 2, pp. 15- 25.
Christine M. Wright, Central Missouri State University
Jo Lynne Koehn, Central Missouri State University
Table 1. Tasks necessary for the manufacture of turtles and their descriptions Task Description A Light green shell B Green shell C Dark green shell D Brown shell, head tail E Brown legs F Toenails, hat eyelids, eyes G Cut ends by legs H Cut Triangle on head I Cut head J Fold Table 2. Eight times per task, in seconds Task T1 T2 T3 T4 T5 T6 T7 T8 A 37 30 28 26 25 23 25 33 B 56 45 54 47 45 38 43 37 C 134 110 114 80 76 75 73 68 D 65 51 52 47 42 45 52 41 E 32 32 32 37 32 26 25 24 F 20 18 20 16 19 13 13 13 G 15 15 17 13 10 12 9 13 H 55 50 33 25 25 25 25 25 I 19 21 17 12 13 12 11 12 J 8 7 10 12 12 10 8 7 Observed Normal Standard Task Time Time Time A 28 34 38 B 46 55 61 C 91 110 123 D 49 59 66 E 30 36 40 F 17 20 22 G 13 16 17 H 33 39 44 I 15 18 20 J 9 11 12 * Performance rating = 20% (1.20) and allowance factor = 12% (1.12) Table 3. Calculating Learning Curve Percentages from task times, in seconds Task T1 T2 T3 T4 A 37 30 28 26 1st doubling of units 81.1% Learning Curve 2nd doubling of units 86.7% Learning Curve Task T5 T6 T7 T8 A 25 23 25 33 3rd doubling of units 126.9% Learning Curve Table 4. Turtle Cost Information for each Team Team 1 Team 2 Team 3 Team 4 Cost per hour per employee $8.00 $9.00 $7.50 $8.50 regular time Cost per hour per employee $12.00 $13.50 $11.25 $12.75 overtime Hours labor available 1200 1300 1100 1250 regular time Hours labor available 600 650 550 625 overtime Direct regular time labor $3.00 $3.15 $3.00 $3.07 hour overhead Direct overtime labor hour $4.00 $4.30 $4.00 $4.14 overhead Team 5 Team 6 Team 7 Cost per hour per employee $9.25 $7.75 $8.75 regular time Cost per hour per employee $13.88 $11.63 $13.13 overtime Hours labor available 1350 1150 1300 regular time Hours labor available 675 575 650 overtime Direct regular time labor $3.15 $3.25 $3.35 hour overhead Direct overtime labor hour $4.30 $4.50 $4.70 overhead Table 5. Workstation Diagram for Team 1, Cycle Time is 76.15 seconds Workstation Number Tasks Assigned Station Time Station Idle 1 A and F 60.25 15.9 2 B 61.26 14.89 3 C 61.32 14.83 4 C 61.32 14.83 5 D 66.30 9.85 6 E and G 57.79 18.36 7 H, I and J 76.15 0 * Because of the length of time required for task C, two workstations are assigned to the task which takes 122.64 seconds. However, because there are two stations, one unit is available, on average, every 61.32 seconds. Table 6. Example Calculations for Team 1 Number of workstations 7 Cycle Time 76.15 seconds Seconds to produce one unit 7 * 76.15 = 533.05 Total seconds per 10,000 units 533.05 * 10,000 = 5,330,500 Total hours per 10,000 units (5,330,500/60)/60 = 1,480.7 Regular time Overtime Hours available per week 1200 600 Labor cost per hour $8.00 $12.00 Overhead cost per hour $3.00 4.00 Totals for 10,000 units 200 * ($8 + $3) = (1,480.7-1,200) * $13, 200.00 ($12 + $4) = $4,491.20 Totals for 40, 000 units 4 * $13,200 = 4 * $4,491.20 = $52,800 $17,964.80 Shipping $484.00 * Paper & Printing $500.00 * Boxes $2,000.00 (#) Total cost per 40,000 units $73,748.80 Per unit cost $1.84 (based on 40, 000 forecast) * determined by students through sources i.e., Office Depot.com or Kinkos.com and UPS.com or Fedex.com etc. (#) given in the case Figure 1 Factories A and B make Origami Turtles. Their workstation information for their turtles is shown below (assume all times are in seconds). Assume that all hourly labor costs, benefit costs, fixed costs, materials costs, etc. are the same for both factories. Will it cost less to make 100 units at factory A or B? Explain why. Factory A Factory B Workstation Time Workstation Time 1 30 1 33 2 27 2 35 3 28 3 40 4 27 4 30 5 28 Figure 4, Input Costs--Team 1 Cost of Each Unit Direct Materials Direct Labor Overhead Applied Direct Labor $8.00 Cost per hour per employee (regular time) $12.00 Cost per hour per workstation for hours beyond 40 hours per week (overtime) (Treat overtime costs as direct labor since the overtime is due to production constraints directly related to the product. This contrasts with overtime that could be incurred as a result of delays or interruptions of an assembly line which would not be directly traceable to the product and, therefore, should be classified as overhead.) 1,200 hours of employee regular time labor per week may be utilized for the production of origami turtles. 600 hours of employee overtime labor per week may be utilized for the production of origami turtles. Direct Materials Printed Paper = You will need to seek costs for this Packaging = $5.00 cost per box (capacity is 100 units per box) Capacity of box: 100 units (turtles) Size of box 12"x12"x12" Weight of box: 16 oz Weight of one unit (turtle): 0.5 ounces Overhead Costs Indirect Labor--Assembly line labor costs of those assisting direct laborers but whose efforts are not linked to specific units of product. Indirect Materials--Crayons, Pencils and Scissors Other Overhead--Heating, Lighting and Supervision Overhead is applied at a rate of $3.00 per regular direct labor hour $4.00 per regular overtime labor hour Shipping Costs You will need to seek costs for this. Fedex.com and UPS.com are excellent sources for this information.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||CASE NOTES|
|Author:||Wright, Christine M.; Koehn, Jo Lynne|
|Publication:||Journal of the International Academy for Case Studies|
|Article Type:||Case study|
|Date:||Nov 1, 2005|
|Previous Article:||Reit valuation: the case of equity office properties.|
|Next Article:||Stepping out of the box at northern box company: parts A & B.|