Synopsis US Stroller Is A Manufacturer

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Synopsis
U.S. Stroller is a manufacturer and distributor of a line of baby strollers. The company makes three types of strollers in a typical batch production system. Recently, profits are down and competition is entering the market that the company dominates. Proposals have been made to go to a JIT production system or to a Cell approach for production. The purpose of this case is to show how a batch system can be dramatically improved by JIT or Cellular concepts. The case clearly describes the changes that must be made in the production system to achieve the benefits desired. This amounts to a complete change in layout of the production floor and a substantial overhaul of the MRP system. The case nicely ties together some of the
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While U.S. Stroller has been supplying the customers from its finished goods warehouses, the shorter lead time will provide advantages for promotions, special orders or other customer changes.
Option 1 will also improve quality through faster correction of problems in the plant. This will not only result in less rework and scrap, but will result in a better product being delivered to the customer. If the cost of quality, for example, is 30% of sales at U.S. Stroller and is reduced to 20% of sales, a savings of $456,000 per year will be realized. Thus, the quality savings could be even greater than the inventory savings. Of course, quality can be improved without JIT, but the two approaches reinforce each other.

Cons
Option 1 will cost $200,000 to implement in new assembly equipment, plus a large amount of time and other costs (including training, lost production time during changeover, management time, etc.). Nevertheless, these costs could be paid off in one or two years depending on what savings are assumed for quality improvement, and inventory reduction.
The effort in implementing Option 1 should not be underestimated. Top management will have to be involved, everyone will have to be retrained, a lot of changes will be needed in procedures and systems by all departments. If this is not done with a careful and dedicated approach, a con could be failure to achieve the promised benefits of this option or failure

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