Project 3gmm

Manufacturing in a Global View
Project Description
In this project the focus will be put on the establishment of a manufacturing facility as
a part of a global supply chain. It will contain the entire manufacturing establishment
with processes such as capacity, quality assurance, logistics, supplies etc.
Furthermore there will be made investigations to find the best possible solutions. In
order to start the project a pre analysis will be made for the strategies and what kind
of manufacturing systems should be implemented to make the best possible
manufacturing facility. This will in the end give a completely functioning facility.
Product Description
The products FB 7100 and ES 7100 will be specified in this section. A common
starting point in a project like this is to specify the product you are working with.
Both products will in this section be investigated down to every detail using methods
such as BOM and product trees. The essential differences between the two machines
will also be found.
Shortly, the function of the FB7100 is to make fresh brew coffee while the ES7100 is
making espresso brew. The mechanical differences between the two coffee machines
can be seen in the following list:
Table 1, Mechanical Differences
FB7100 ES7100
Part no. Part description Part no. Part description
504 Fresh brew 504-1 Espresso brew
501 Mixing unit 501-1 Mixing unit ES
Wittenborg stickers
204 Wittenborg stickers 204-1
ES
Because of the differences a higher price is charged for the ES7100. The Espresso
brew and the Mixing unit ES has been evaluated to have a higher value because of
their specialized espresso functions. The dissimilarities also mean that there has been
made 2 versions of the list of facts, BOM and the product tree. Appendixes:
- Appendix?: A list of facts for both machines.

- Appendix?: Indented BOM for both machines. Here every machine part is
given a specific par number.
- Appendix?: Product tree made in Microsoft VISIO for both machines. Both
the BOM and product tree contributes to a better understanding and overview
of the products which are essential in the further systemization of a
manufacturing plan.
- Appendix?: All parts of the machines have been divided into different
modules. Practical information about every module can be seen here. The
prices for all parts in the machines have been estimated and this will be used
when finding the selling price including all other cost.
- Appendix?: In addition a forecast has been made so that the estimated sales
figures can be seen 5 years in advance. This gives an essential parameter for
the production planning. In this document a short analysis is made to find the
important trends in the forecast.
Group 2 Author: Shoaib Nashir Page 1 of 44

- Appendix?: A Pareto analysis have been made to find ABC items. In the ABC
analysis five A-items have been selected due to the high usage value. The
Pareto analysis will come in hand when the layout and handling of goods in
the factory have to be specified. It gives knowledge about the priority of all
items needed to make the FB7100 and ES7100.
Approximately 95% of the modules in the two machines are similar. However, during
the project it will be important to differ between the two machines and the modules
within. This also means the different appendixes from above will be taken into count
and used as reference throughout the report.
Make or buy decisions

The machines have been split up in modules through the extensive product analysis.
In the production it is necessary to know whether or not to buy or make the modules?
– From this question follows an analysis of three modules where the rest will be
estimated. Aspects such as quality and cost will come into perspective, but the final
choice of which modules to make or buy will be done later on within the different
manufacturing systems. This is because the choice also is influenced by the specific
tactical decisions made in the manufacturing system.
The following three modules are chosen for analysis:
Table 2, Make or Buy Decision
Modules Box Waste bucket Top canister

Part No. 201 402 404
Height x Width x
Depth 87 x 45 x 5 37 x 24,5 x 15 32 x 7,5 x 24
(cm)
Weight (kg) 6 3 1
Package Dimensions Wrapped pallet Wrapped pallet (120 Wrapped pallet (120
(cm) (120 x 80 x 100) x 80 x 100) x 80 x 100)
Modules per pallet 50 70 166
Price (euro) 30 2 4
Market Analysis and Segmentation

In this section the market for the vending machine will be analyzed.
The market for the vending machines can be divided into two; namely B2C or B2B.
When we talk about Business to Business we think about the vending machines will
be bought by big or small organizations where there will be more than 10 users. It can
also be retailers and business which will buy a large amount of vending machines for
further selling purposes. Business to Consumers here we assume that anyone who are
the end users can order a single machine by making an order on Wittenborg’s website.
The subsidiary chooses to concentrate on B2B since this segment has the huge
costumers for our kind of vending machines. This is because a normal house will
probably use a small coffee machine or espresso machine instead of big vending
machine.

Since the company is subsidiary of Wittenborg Company all the marketing and orders
will they get from the mother company. When customer wants to order vending
machine they will call or enter the mother company’s website and puts an order for
FB of FS table top vending machines and the order will be transferred to us by EDI,
and then the products will be shipped by us to the costumers. In order to find out
where to sell our product we will try to look at where the mother company has the
largest costumers. N&W Global Vending has sales and after sales offices in Argentina,
Austria, Brazil, China, Denmark, France, Germany, Italy, Poland, Spain, and the UK,
and operates in more than 80 countries worldwide through a network of carefully
selected dealers1
Competitor analysis
The major part of the customers are located in Europe therefore we will try to analyze
the competitor’s in Europe. We also know that we have some costumers in Asia but
we assume that we will have a small market share on that market since the market is
dominated by the Japanese firms Fuji and Sanyo Electric. The competition in the
European market for vending machines is set to increase 2. Wittenborg’s biggest
competitors are Zanussi Electric3 which have a market share of 10.2% and Sielaff
with a market share of 8.4 %. Wittenborg’s market share 4 is 11.3% on the European
market which makes them the largest European-based company. The Products which
will compete with the subsidiaries products are listed below. There is a short
description of the product and what the products are focusing on.
Costumer product5
1
http://www.nwglobalvending.com/Companyoverview/CompanyProfile/tabid/55/De
fault.aspx
2
Euro monitor International
3
4
5
http://www.kaffeemaschine-gastronomie.com/kaffeemaschine-gastronomie--
Hersteller--nw-global-vending.aspx

Model Company Description Product Focusing
On more than 15 years experience in the • Quality
building of automats can fall back presso!mat • Innovation
with the production
Manufacturing in aof its high-grade
Global View steel • Technolog
devices. Under this still young mark we position y
innovative models on the market. Beside Instant
• High Price
coffee automate and Schoko dispensers with
high cup achievement our medium-size
enterprise produces also automats for coffee
specialties and a Milkshake Dispenser with
special cooling technology
servomat steigler brings automatically Italian • Innovative

Caffè culture and flair in offices, Coffee Shops, • Cheap
baker's shops and catering trade. In the • Simple
assortment of over 70 different models in hot
• Design
beverages, cold beverages and Snackbereich.
450 specialized partners alone in Germany • Quality
secure quality and service. International Roester
uses systems of servomat more steigler for years
successfully for its concepts, e.g. Cino - the
usually-sold of its class.
The name "Sielaff" is in the best way imported • Quality

and well-known by its various automat offer in • Design
the Vending branch for many decades. The • Simplicity
Product portfolio was extended in the past years
• Innovative
by hot drinks stand devices and TableTop's of the
mark "Sielissimo". Most modern technology • Technolog
inspires and at the same time a Design highlight, y
which lies fully in the trend. Fully automatic • High Price
charms both standing and desktop devices,
which are available in 3 remarks in each case,
the most seductive coffee creations of the
classical filter coffee over Cappuccino, slat
Macchiato and Espresso up to date. The cool-
option - available in the freestanding devices -
offers additionally cold beverages e.g. vanilla
milk or ice. All the same whether Instant
equipment, Fresh brew execution with
pneumatic Brew system or "whole bean"
Espresso variant - Sielaff offers meeting demand
fitting the equipment for each setting up place.
We make coffee automatically success! Since

1965 the first freezing dried NESCAFÉ was • Cheap
manufactured, Nestlé invests strengthened in • Simple
research and development of automatable • Innovation
products for hot and cold beverages. With
• Fairly
continuous striving for innovation we created it
good
that NESCAFÉ became world-wide the most
Quality
well-known coffee mark. Profit from the
Group 2 confidenceAuthor:
into an incomparably broad palletPage
Shoaib Nashir at 4 of 44
Top products and marks, like NESCAFÉ,
NESQUIK, MAGGI, KITKAT. Our NESCAFÉ
partners and field service advisor advise you
gladly comprehensively and competently with
From the perceptual map we can see the Wittenborg’s products are the high class
products in the Market. Which means the products will be sold by low price, high
quality, short delivery time and good service.
Conclusion
Through the market analysis and market segmentation, we clear to see that the
vending machines have very good evolving opportunities and in the future the market
demand and market share have been conjectured to increase. And the new
manufacturing unit will produce the high class products which will be sold by the
high price, high quality and short delivery time. The customers have focused on the
organizations, which whatever the trading is B2B.
Redesign
In order to be/become a market winner, one’s design of a product is crucial, this will
help you to become recognized and known by your customers and potential
customers.

The FB7100 the left hand and the ES7100 on the right hand; both shows that the
design is simpel and has a wide spread customer base, such as the door with the coffee
cup.
As the market segment is the middle class companies, the design fits the market very
well as it is now.
From a production point of view the design of the vending machines is very
functional, and it is not necessary to change the design.
The decision of maturing the design of the product is solely up to Wittenborg.
Location Decision
Choosing a location for production is one of the crucial decisions any company has to
make. Wittenborg has decided to build its subsidiary in Denmark, where the mother
company is located. It is therefore important to find out the right location to build the
manufacturing facility in. Thus in terms of selecting the best solution for a factory, all
scenarios need to be considered; where the company is going to sell its vending
machines, the economy, and where it is beneficial for the company to manufacture the
vending machines.
In order to find the right placement of the factory, the advantages and disadvantages
of each of the regions in Denmark has to be considered in order to make a reasoned
decision. The scheme below shows the pro’s and con’s for each of the regions.
Regions Pro Con

Zealand Placing the manufacturing A huge problem with Zealand is that
facility in Zealand will give big there is a bridge connecting the
competitive advantages, since Island with the rest of Denmark.
there are many other companies. Every time a truck has to pass the
bridge a fee has to be paid, and in the

end it is a huge expense.

Funen A major strength to build the One of the disadvantages with
factory in Funen is that the choosing to build the manufacturing
mother company is located in in Fyn is that the company will get
Odense. Therefore it is problems with expansion, since the
beneficial in terms of organizing expansion possibilities are medium.
the subsidiary and helping with The labour availability is also
major problems. medium and this can give problems.
Jutland There are several pros on A small weakness can be that all the
building the manufacturing factories are building their facility in
facility in Jutland especially in this place and this is the only way
triangle region; this is due to where the rest of Denmark is
infrastructure, which is very connected with Germany so there
good in this region. This region might be rush on the highways.
is situated in a place which is
close to the Funen and close to
the border of Germany.
Assuming that many of the
products are sold in European
countries, a placement in the
triangle area will be beneficial
because of the closeness to the
customers.
The table below shows some facts of building an industrial factory in the regions.
harbou Building Price DKK/ SQM/ Expansion labour labour
Copenhagen r Ann posibility availibilty Cost
Copenhagen x 475-525 Low Low very high
Odense x 325-375 Medium Medium high
Traingle
Region x 350-400 High High high
Århus x 350-425 Medium Medium high
Ålborg x 300-375 Medium Medium high
Figure XX
Figure XX2
Figure XX2 is a weighted- score method. This procedure shows the criteria which is
used to evaluate the various locations. The scale of the score is subjective. In this

example there is used 0 to 100, where 0 represents the worst possible score and 100
the best.
Conclusion
After investigating the different regions, it is easy to choose in which region
Wittenborg has to build its subsidiary in. Looking at the figure XX, this shows that the
labour availability is low. The building prices and labour prices are fairly higher than
the other cities in Denmark. The fee of bridge will increase the expenses and the
distance to rest of Europe are too big therefore Zealand is discarded. Funen has not
been chosen because labour availability is low due to the population in the island and
expansion possibilities are medium which can create some problem for the
manufacturing facility. Jutland is then left; this region is chosen due to its location in
Denmark, which is very close to Germany thereby access to the European market.
Furthermore there is a good connection to the rest of Denmark if the factory is placed
in the triangle region.
The Triangle Region have a very central location with direct access to road, rail, sea
and air, with the E45 providing direct access to Germany and the rest of Europe, the
E20 linking to Copenhagen and Sweden, and the airport of Billund and nearby ports
offering flight and sea link opportunities, respectively.6
Strategy
In this section there will be looked into the definition of Wittenborg’s strategies, since
the company which we are working with, in the project is a subset of Wittenborg. The
subset company will adopt the strategies of Wittenborg.
Corporate Strategy
Corporate strategy is the pattern of decisions in a company that determines and
reveals its objectives, purposes, or goals, produces the principal policies and plans for
achieving those goals, and defines the range of business the company is to follow.
Wittenborg has one simple objective; achieving world class status both in terms of
competitiveness and consumer satisfaction. Taste and quality is their ultimate
objective through technological excellence.
The investment in research and development, 4% of the yearly turnover, is the key
issue. More than 100 people work in 4 countries in R&D centers’ to meet demands of
local markets. R&D is assured to maximize the sharing of knowledge and project
synergy. 7
As we can see from Figure XX, shown below, Wittenborg has the benefits of vertical
integration, being both the manufacturer and having the operator’s function as well.
Having sales and after sales offices in: Argentine, Austria, Brazil, China, Denmark,
France, Germany, Italy, Poland, Spain and the UK and by operating in more than 80
countries, gives them their competitive advantage; through economies of scale to meet
local market demands and develop innovative solutions for specific market
requirements. By using known product suppliers as BKI and Merrild in Denmark, the
machines will be sold branded and associated with quality. The free information flow
6
http://www.investindk.dk/db/filarkiv/636/Fact_PropertyOUT_Aug2006.pdf
7
www.gmid.com

between R&D and the manufacturing facilities enables the design team to obtain an
overview of real demand and the trends in local markets.
Wittenborg’s corporate strategy
Sales offices all

Wittenborg –
over the world –
manufacturing of
supply of
vending machines
machines for a fee
Product supplier –
End customer
BKI/ Merrild
R&D Department – R&D Department –

Innovative solutions Innovative solutions
Figure X illustrates the corporate strategy of Wittenborg

Products
Information
R&D has so far come up with new features as software to the machines and different
paying methods. A management system is also available; it keeps statistical data in
order while also making sure of appropriate stock levels in the machines.
Wittenborg is aiming to achieve the benefits of diversification through product
development and entrance in new markets.
Business Strategy
This new manufacturing unit is going to produce Model ES 7100 and FB 7100
without any redesign. These two models will go to the market and place fairly high
quality products. Based on the mother company, N&W mission statement aims to
satisfy the company stakeholders and inspire new industry standards for quality and
service. The subsidiary has to produce reliability and stability for continuous
operation, delivery the finished goods and spare parts in short time and high
assurance. But at the same time there is another competitive parameter which is
environment. From design to manufacture, through to the low energy consumption,
the utilization of the products and the recycling of goods, the company has to adopt an
environmentally focused strategy with an emphasis on continuous improvement in
order to achieve the highest standards.
Functional Strategy
Functional strategy provides support for overall business strategy. functional strategy
emphasize the actions that will be taken to achieve the goals in the business strategy.
This chapter provides the areas which develop the functional strategy to support the
business strategy.

Manufacturing strategy
In this chapter there will be looked in to which subjects we are going to choose for
ours market qualifiers and order winners. There is also going to be a primarily
decision on which manufacturing strategy we are going to work with.
To decide which production strategy should be chosen for the new production unit,
the Product/Volume – Layout/Flow matrix is used.
Figur 1 - The Product/Volume - Layout/Flow matrix

The production unit is going to produce two different end products in a high volume,
this is placing it in the area with Operator/Equipment-Paced line flow. The JIT and
FMS are also going to be looked into in the system decisions.
Competitive analysis
In order to determine the company’s order winner and market qualifiers, there will be
looked in to the market for the vending machines. The biggest competitors will be
examined in order to find the company’s competitive advantages. The five biggest
competitors all over the world are Grindmaster8 from USA, Scanomat9 from
Denmark, Zanussi Electric10 from Sweden, Sielaff11 from German, and Fuji Electric12
from Japan.
8
http://www.grindmaster.com/about_us.aspx
9
http://www.scanomat.com/default.asp?Action=Menu&Item=32
10
http://www.zanussi.com/node2.aspx
11
http://www.sielaff.de/en/unternehmen/index.php
12
http://www.fujielectric.co.jp/eng/

Competitors’ names Market Qualifier Order Winner

Grindmaster good quality, performance Innovate in design and
(new features with technology
breakthrough technology -
Also in connection with
their order winner below),
flexibility (many products,
customization)
Scanomat Excellent quality (markets Innovate in professional
some of the best design, modern technology
professional coffee and best service
brewers in the world),
performance ( knowledge
and experience from
customers benefit, new
technology), flexibility
(package is based on
modern technology,
superior range of
products )
Zanussi Electric Good quality, good Lower price than other
performance, less competitors
flexibility (few products,
few customization)
Sielaff Excellent quality, good The excellent quality and
performance, less appropriate price
flexibility ( only three
models of coffee vending
machines)
Fuji Electric Good quality, performance Good customization, the
( modern design and new product can be made as
technology), flexibility order.
(big rang of products and
more customization)
Mother Company Market Qualifier Order Winner

N&W Good quality, performance High performance.
( More function within one
vending machine, easy to
use designing), flexibility
(big rang of products and
customization)
For the factory the market qualifier and order winner scheme is shown below
Subset Company Market Qualifier Order Winner

To N&W Delivery (to have a high Quality (to exceed

reliability when it comes customer expectations and

to deliver on time), make the best value for
Performance (is at market money product)
standard), Cost (in
accordance with the order
winner, the cost has to
contribute to “best value
for money”)
Since the mother company has performance as their order winner it would be
appropriate if the subset would adopt this. However the subset is only making two
types of vending machines. That is why a new order winner has to be chosen. When
looking at the forecast flexibility is not a requirement due to the rather low fluctuation
in demand. Since innovativeness is taken care of by the mother company itself there
are three possible order winners left; cost, quality and delivery. Delivery is not chosen
because it is an intangible factor, it depends on the distribution and where the
customer is located, but the company will still put much focus on it. The company
will make the orders ready for the costumers in five days, that means when the
company gets an order from the costumers the order will be completed and ready for
shipment within 5 days. When looking at the competitors, quality appears to be a
common focus point for all the companies. But when the choice comes between
choosing cost or quality as the order winner quality is chosen, because it is the factor
lies closest to the mother company’s business strategy.
Perfor- Flexibilit Innova-
Delivery Cost Quality
mance y tiveness
Market
Market Market Order Market
qualifier /
qualifier qualifier winner qualifier
order winner
Figur 2 - Competivtive analysis
Manufacturing capability
With the placement of the unit in Denmark, the unit is able to get levers in the areas
seen here below

This large area of capability opportunities gives wider opportunities when selecting
the final manufacturing system in the next chapter.
Conclusion
The manufacturing systems which are going to be looked further in to in the next
chapter should be either
• Operator/equipment-paced line flow or with dedicated lines, these lines can
have JIT and FMS philosophies within them.
• The main focus for the final product placement on the market is the quality of
the product; this should be constantly taken in to consideration when
designing production lines.
• With placement in Denmark the opportunities about the manufacturing
capability are rather widely defined as the manufacturing levers above are
showing.
Production strategy
In this section the production strategy will be described in detail which the subsidiary
can choose. The output from this section will be recommending the appropriate
production strategy to produce the vending machines in, to meet the customers’
demands.
A production strategy tells us how and in what level the
company has to produce the vending machines in order to meet
the actual demand. Here we will look at two production
strategies which will be described in detail. The two
production strategies are Level and Hybrid.

Leveled Strategy
Choosing Leveled strategy means that the factory will produce its unit at a leveled
plan. This means the some of the time the factory will keep stock and some of the
time there will be no stock, since kept stock will be used in the high seasons. Figure
XX Leveled shows how a leveled strategy looks for a production of one year. Some
of advantages and disadvantages of using leveled strategy are:
• High inventory
• Smooth production run
• No need for excessive capacity
• No hire/fire
• Stable workforce
Do to the high fluctuation in the demand shown by the forecast; the level strategy over
the five year period wouldn’t be profitable.
The following calculations are done with a holding cost of 5 % of the production cost
for holding an item in stock for one period. And a 10 % cost increase for chancing the
production rate over a period, the increase is added to the amount which the chance is,
for example if the production rate is going from 10000 to 20000 the calculation would
be 20000-10000 = 10000, 10000 * 10 % = 1000, these 1000 would be the cost of
chance production rate from 10000 to 20000. The 10 % is the cost for hiring / firing
staff, training and so on.
Level production13 throughout the five year period.
Item Total cost Production rate

FB worst case 14938 18000
FB forecast 21038 19700
FB best case 33757 22000
ES worst case 5848 6700
ES forecast 7321 7250
ES best case 10699 8000
The rate of production is set at the lowest round amount so that the production would
run without backorders or lost sale.
Hybrid strategy
In this strategy the factory will have a leveled production to some extend and when it
knows from the forecasts that the demand is going to increase then the production will
be increased by hiring workers or having more shifts. This is done to prevent back
orders and to meet the real demands. When choosing this strategy the company must
be aware of location where the manufacturing is located in terms of labour
13
See appendix Level production for complete calculations

availability, since this strategy contains that you have to hire or fire workers
sometime. Figure XX strategy illustrates how the Hybrid strategy meets the demand.
The major advantage of implementing this strategy is to minimize the cost. The
calculation14 of the rate of production where hybrid strategy is used to meet the
demand is:
Total Production Production Production Production Production
Item
cost rate year 1 rate year 2 rate year 3 rate year 4 rate year 5
FB worst
5768 12500 18800 22500 18000 16000
case
FB
6188 12500 19700 2500 21300 20000
forecast
FB best
6807 12500 20700 27500 24500 24000
case
ES worst
1903 5200 6000 8000 7300 5700
case
ES
1966 5200 6300 8900 8700 6900
forecast
ES best
2249 5200 6600 9900 10000 8300
case
With a level production over a period of one year the company would have the lowest
overall cost. That the period of same rate is running for a year would also make it
easier to administrate for the company.
The cost when doing it with a chancing rate of production would be between 1/3 and
½ of the cost of running a level production.
Conclusion:
The hybrid production strategy of having the factory running for a year at the time on
a level production rate would give the company the lowest cost when taking holding
cost and production rate chance cost in to consideration.
Using Level production strategy for FB vending machine will lead us to high stock
which again will cost us money. These products have a high price by having these in
stock will cost the company too much money. Therefore using hybrid production
strategy will be beneficial, there are some tradeoffs with hiring and firing workers.
Looking at the location decision we can see that it is not a problem to hire new people
and therefore it will be a good idea to use Hybrid system rather than level which
means having items in stock.
This preliminary calculation shows that when designing the manufacturing system the
capacity should be according the amount found out in this chapter.
Make or buy decisions
In the project the focus will be on four modules. The four modules have been chosen
on the background that there is a possibility that they can be made from scratch in the
factory. Whether or not they will be made also depends on other factors chosen later
on, but in order to get a part the background of that forthcoming decision an
investigation hereby is made. This will consist of the following:
14
See appendix Hybrid production for complete calculations.

1. Supplier-price: The fixed price of buying the four modules from a supplier.
2. Making-price: The price of making the four modules in the factory.
These two factors will be compared in the end to find the best solution economically.
If any other factors are relevant these will also be taken into account in a final scheme.
The analysis will use the four modules as examples and the rest of the modules are
then estimated in the make or buy decisions.
The four chosen modules:
Top Waste
Modules Box Drip tray
canister bucket
Part No. 201 403 404 402
Material Sheet metal Plastic Plastic Plastic
Height x Width x
32 x 7,5 x 37 x 24,5 x
Depth 87 x 45 x 5 32 x 36 x 2
24 15
(cm)
Weight (kg) 6 0.5 1 3
Number of
1 1 3 1
modules/machine
Wrapped Wrapped Wrapped Wrapped
Package
pallet (120 pallet (120 pallet (120 pallet (120
Dimensions (cm)
x 80 x 100) x 80 x 100) x 80 x 100) x 80 x 100)
Modules per
50 416 166 70
pallet
ABC analysis B C C C

Electrical parts is not beneficial to make because it either requires a large investment
or a lot of labour. The production system would require a complicated assembly. It has
been estimated that neither of the two alternatives would be beneficial for a subset
like this. Instead outsourcing is used for these modules.
Method
It has been chosen not to contact any real supplier to get a supplier-price on the
modules. This is because it is a theoretical project where the product not is going to be
made afterwards15. Therefore the supplier-price will be calculated using several price
aspects. The following factors will be found and used for the evaluation.
a. Direct material cost/module

 The weight of the material has been found. Using the common pricing
for material today it is possible to find this factor
b. Direct labour cost/module
 This factor is going through a realistic estimation based on the
complexity of the module and the processes required to make it.
c. Manufacturing overhead cost/module
 As above this factor is going through a realistic estimation.
d. Transport and distribution cost/module
 Based on where the supplier of either raw material or modules is
located compared to the subset it is possible to find a transportation
cost. Another aspect in this calculation is also the number quantity of
material pr. truck.
e. Selling and administrative cost/module
 Estimated cost
f. Supplier profit/module
 The supplier has a reasonable profit which is estimated.
Important details
Now the different costs will be found. Eventually when the costs are found it is
possible to make a comparison between “Making-price” and “Supplier price”. To do
the analysis more detailed than the following is redundant because the analysis only is
to give a hint and though you would make it more detailed it would not be 100%
correct anyway. The analysis is only made as guidance for the “make or buy
decisions”. The numbers calculated here are not that precise that you can depend
solely on it so other factors may have to go into the decisions as well.
To find the different costs it is necessary to establish suppliers. Considering that this is
a preliminary calculation it is not necessary to look at many suppliers and make a
comprehensive analysis. This could be done afterwards if the result of this comparison
between make or buy shows that it can be beneficial to find a supplier of either raw
material or the modules needed.
15
(and it would mean that it would have to go through a time-consuming
evaluation by the supplier to find a price)

Chosen suppliers
Box Drip tray Top canister Waste bucket
Buy (modules) Ib Andresen Bogense Plast Bogense Plast Bogense Plast
industry A/S16 A/S17 A/S A/S
Make (raw Ib Andresen BASF DK BASF DK BASF DK
material) industry A/S Inventory18 Inventory Inventory
Direct material cost/module
The materials
In order to find the price of the material it is necessary to know what exact material
you are dealing with because of the remarkable differences in price when talking
about types of plastic. The top canister, waste bucket and drip tray are all made of the
same material; plastic. But exactly what goes into this sort of plastic is going to be
found out. It is tedious to find the exact recipe on the plastic used so only the core
element is found. This can be seen in Appendix? The material is PBT.
The latest update of the “street price” of PBT has been found19:
16
The Danish manufacturer Ib Andresen Industri A/S can supply coils of sheet
metal, but they also have the ability to do other more comprehensive jobs to
some extend.
17
The Danish manufacturer Bogense Plast A/S has the ability to do make modules
for other companies. This company is chosen as supplier of the waste bucket, drip
tray and the top canister, all made out of plastics.
18
BASF is one of the worlds leading chemical enterprises. They can supply plastics
in raw material from their inventory in Denmark if it will be chosen to make the
modules from scratch in the subset.
19
http://www.ides.com/resinprice/resinpricingreport.asp
Street Plastic Prices Report (Updated July 3, 2007)
Submit your plastic pricing

Print this | Email this
Prices
listed
are Per
Pound
Less
than 10,
000 lbs.
10,000
-
100,000
lbs.
Greater
than
100,000
lbs
Generic
High
Low
Avg.
High
Low
Avg.
High
Low
Avg.
PBT
$3.16
$3.16
$3.16
$1.80
$1.80
$1.80

Because BASF and the subset are partners the cheapest price is chosen for the
calculation: $1.80/lbs = 19.45 DKK/kg
In consultance with Ib Andresen Industri A/S 20it has been found that the current price
for a coil of sheet metal (not stainless steel) is app. 7 DKK/kg. It of course depends on
how much you will buy but this is apparently a good parameter.
Direct material prices for the four modules:
Module Box Drip tray Top canister Waste bucket

Coil of sheet
Material type PBT PBT PBT
metal
Material price
7 19.45 19.45 19.45
(DKK/kg)
Weight (kg) 6 0.5 1 3
Total direct
material 42 9.73 19.45 58.35
(DKK/module)
Direct labour cost/module
The total process for making each module will be found and on this basis the exact
direct labour cost will be estimated21. There are several alternative methods of making
a product. In this case all alternatives will not be discussed as it has been through an
investigation. The focus will lie on the make or buy arguments.
Box
A coil of sheet metal is placed in the start of an automated line. The coil of sheet metal
will be painted black and to ensure no damage and corrosion to the plate in the
production the metal will be covered with a thin layer of plastic. 22This layer will be
removed when the plates are finished. The following production line will be capable
of producing all plates used for the box in one process.
Total Move to
Quality
Process Punching conveyer- main- Total
check
transport assembly
Process time
11 10 20 10 51
(sec)
Equipment Punching machine Staff Conveyer Robot X
20
http://www.iai.dk/
21
The investment price includes the installation of the current machinery. The
processes and prices have been discussed with an experienced production
engineer Jan Pedersen from the Southern University in Denmark.
22
Information from Ib Andresen Industry A/S

Investment 5.7
3.5 millions 1 mill 1.2 mill
(DKK) mill
Preliminary
capacity
calculation23
Compared to the forecast the potential capacity is too large.
Estimated direct labour cost/module: 1 DKK/module
The result is a low running cost because of the automation. However this requires a
huge investment.
Top Canister
Compared to the other two plastic parts the top canister is very complicated and
requires many small components which will have to be assembled using manpower. It
cannot be made in one line because of the many parts. Each component will be made
in a separate line using injection moulding. In the table below all these moulded parts
have been added together to a total injection moulding.
Move to
Total injection Transport Quality
Process Assembly main- Total
moulding24 to WS check
assembly
Process
180 60 90 10 10 320
time (sec)
Truck Staff and
Equipment 2 x Moulder Staff Robot X
and staff conveyer
Investment 5.25
3 mill 50.000 1 mill 1.2 mill
(DKK) mill
Preliminary
capacity
calculation25
According to the forecast this line will not be able to cope with the demand unless the
production line is expanded. Vending machines need 3 top canisters/machine which
means that the investment will require app. 15 mill. DKK
Estimated direct labour cost/module: 15 DKK/module
Not that low a running cost and also requires a large investment. Quite complex
production containing two or more moulders 26and will possibly have to be divided up
in functional departments.
23
This is calculated using the total amount of production-time/year divided with
the process-time multiplied with a chosen utilization of 90%
24
Several small parts can be made in one moulding
25

Waste bucket and Drip tray

Looking at all four modules the waste bucket and drip tray are possibly the simplest
when it comes to processing. These can be made using one injection moulding.
Move to
27 Quality
Process Injection moulding main- Total
check
assembly
Process
120 10 10 140
time (sec)
Equipment Injection moulder Staff Robot X
Investment 2.7
28 1.5 mill 1.2 mill
(DKK) mill
Preliminary
capacity
calculation29
• The table is pr. waste bucket or drip tray
According to the forecast this capacity is acceptable and can actually meet the highest
demand.
Estimated direct labour cost/module: 0.5 DKK/module
Very low running cost and requires a quite acceptable investment. The few processes
involved are also a pro.
Direct labour cost for the four modules:
Waste bucket and

Box Top canister
drip tray
Estimated direct
labour cost/module 1 15 0.5
(DKK/module)
Investment (mill.
7.2 5.25 2.7
DKK)
Number of
Many processes Many processes Few processes
processes
26
The setup time for a moulding machine can be up to many hours – that is why
you possibly would choose to have an extra machine in the production. (setup
time: workers has to be there 100%, no value adding and so forth)
27
After testing the moulding equipment at the University of Southern Denmark
(technical facility) the processing time pr. Module has been estimated to be 120
sec.
28
The investment price includes the installation of the current machinery. The
processes and prices have been discussed with an experienced production
engineer Jan Pedersen.
29

Manufacturing overhead cost/module
This cost is estimated since it is a very intangible cost. Because the supplier will have
experienced and established production this overhead cost will be less for him
compared to a beginner like the subset.
“Make or buy” Supplier-price Making price

Manufacturing overhead 10 10.5
cost/module
Transport and distribution cost/module (supplier-price only)
As stated earlier on the suppliers are located in Germany we say that it. The transport:
The following cost is based on the number of modules/truck or raw material/truck

according to the list of modules appendix?
Transport cost estimated DKK/module

Module Box Drip tray Top canister Waste bucket
Supplier-price 10 1 4 7
Making-price30 1 0.01 0.01 0.01
Selling and administrative cost/module (supplier-price only)
Supplier-price: This is estimated as the same for every module: 5 DKK/module

Making-price: This is estimated as the same for every module: 2 DKK/module
Supplier profit/module (supplier-price only)
Supplier-price: This is estimated as the same for every module. –A good profit of: 5
DKK/module
Making-price:This is estimated as the same for every module.-A good profit of: 0.5
DKK/module
Final scheme
1. Supplier-price
Cost Box Drip tray Top canister Waste bucket
30
The raw material supplier, supplies the raw material in containers holding tiny
flakes of plastics in the needed colour.

(DKK)/module,
module
Direct material 42 9.73 19.45 58.35
Direct labour 1 0.5 15 0.5
Manufacturing
10 10 10 10
overhead
Distribution 10 1 4 7
Selling and
5 5 5 5
adm.
Profit 5 5 5 5
Total
73 31.23 58.45 (*3) 86.35
DKK/Module
2. Making.price
Cost
(DKK)/module, Box Drip tray Top canister Waste bucket
module
Direct material 42 9.73 19.45 58.35
Direct labour 1 0.5 15 0.5
Manufacturing
10.5 10.5 10.5 10.5
overhead
Distribution 1 0.01 0.01 0.01
Selling and
0.5 0.5 0.5 0.5
adm.
Profit 0.5 0.5 0.5 0.5
Total
55.5 21.74 45.96 (*3) 70.36
DKK/Module
Investment
5.7 2.7 5.25 (*3) 2.7
mill. DKK
The scrap value of the machinery in the “making-price” has not been included in the
calculation. This is because the value is intangible and requires a lot of information
about the machinery which is not at hand. However, it is important to consider that the
scrap value is a crucial economic advantage for the “making-price” in the “make or
buy” decisions.
When including the forecast it is possible to compare the supplier-price with the
making-price from a future-perspective.
Year Year 1 Year 2 Year 3 Year 4 Year 5

Total expected sales 70.00 83.000 135.00 120.00 108.00
0 0 0 0
Cumulative 70.00 153.00 288.00 408.00 516.00
0 0 0 0 0 Whether or
not the capacity in the production lines created in this analysis, can cope with the
exact demand is not known. If the making-price of one of these modules looks

beneficial this could be calculated by using the forecasted demand. Then maybe some
adjustments will have to be made for the investments. However in a superficial
perspective this analysis is a useful guideline.
The box
According to the forecast it would take app. 3.25 years of production before it would
be cheaper to make the box yourself.
The Drip tray
Graph can be seen in appendix? Make or buy graphs
According to the forecast it would take app. 3 years of production before it would be
cheaper to make the drip tray yourself.
The Top canister
According to the forecast it would take a app. 3.5 years of production before it would
be cheaper to make the top canisters yourself. The graph of the top canister is special
because 3 top canisters are needed pr. machine.

The waste bucket
According to the forecast it would take a little more than 2 years of production before
it would be cheaper to make the box yourself.
Pros and cons
Pros Cons
Make: Box - Control of module - Rather long payback time of app.
- Independent on 3.25 years
supplier - Quite complex automated
- Cheaper in the production which requires
LONG run expertise
- Capacity of - Huge investment: 5.7 mill. DKK
production line - Expensive maintenance
exceeding demand. - Inventory space for coils and
finished modules
Buy: Box - Simplifies - Depending on supplier
production - No control
- No investment - Expensive in the LONG run
Make: Drip - Quite simple - Rather long payback time of app.
tray production 3 years
- Control of module - Large investment: 2.7mill. DKK
- Independent on - Inventory space for plastic and
supplier finished modules
- Cheaper in the
LONG run
- Good capacity
Buy: Drip - Simplifies - Depending on supplier
tray production - No control
Make: Top - Control of module - There is a chance that capacity
canister - Independent on have to be expanded at a point due
supplier to the fact that 3 top canister are
- Good payback time needed/machine.
on less than 2 years - Large investment: 5.25 mill. DKK
- Inventory space for plastic and
finished modules
- Complicated production
Buy: Top - Simplifies - Depending on supplier
canister production - No control
Make: - Quite simple - Large investment: 2.7mill. DKK
Waste production - Inventory space for plastic and
bucket - Control of module finished modules
- Independent on

supplier
- Acceptable
payback time on a
little more than 2
years.
- Good capacity
Buy: Waste - Simplifies - Depending on supplier
bucket production - No control
Conclusion
Now the analysis of the four modules has been made. The make or buy decisions will
be the next step in the establishment of the production. The make or buy decisions
should not solely depend on this analysis, if necessary it should also rely on other
important factors such as the core competences, overall manufacturing system,
supplier, strategy. When it has been decided which modules to make in the factory this
will be followed by a more detailed analysis of the exact demand of capacity along
with the investigation of three manufacturing systems.
Make or buy decisions - Core competences
In the make or buy decisions it is necessary to include the strategic choice of core
competences in the production. The investigation of the four modules shows that it
will be profitable to make the waste bucket and drip tray, but not the top canister.
Based on this information a potential core competence could be plastic production.
Another possibility is to focus on the metal (the box) instead. However, compared to
the plastic competence this does not look as beneficial especially because of the
longer payback time.
The modules in this analysis are not A-items. The reason for this is that these are too
complicated to make and it would require a large investment in knowhow and a
production line. Normally you say that it is optimal if you are capable of making your
own A-items because these are important and need special attention. However, it has
been chosen to look at some more simple modules instead, which is regarded as a
more realistic approach for the subset.
When looking at the overall, it is an advantage that a company to some extend has
some core competences and not outsource/subcontract everything to suppliers. When
you outsource you can improve the cooperation with your supplier, but it is difficult to
improve the production of the specific module that you outsource. Thus the control of
the module can be a great advantage production-wise. It has been chosen to outsource
most of the modules in the two vending machines, but the company also needs core
competences. Based on this factor and the analysis this is the reason why it has been
chosen to establish production lines for the following modules:
Make Buy
The waste bucket PSU
The drip tray Primary print
The box Water system and boiler
Backboard Fresh brew

White insides Espresso brew
FB-Canister
Mixing item
Mixing item ES
Guide for canisters
Top canister
Basic display
Main door
Card reader
Coin slot
The make or buy decisions should also depend on the company’s strategy. However
when the project consist of several different manufacturing systems this only can be
done within the analysis of each. This means that changes to this make or buy analysis
can be made if it seems appropriate according to the specific manufacturing system.
Suppliers
The suppliers we are going to use has not been mentioned specifically, only their
geographical location has. The table below shows the colours which each represent a
supplier. The same table also shows the importance of the relationship between the
subset and the current supplier.
Suppliers Category Priority

Primary 1
Primary 1
Primary 2
Secondar
3
y
Secondar
3
y
It is necessary to form a partnership with the suppliers with highest priority. Second
priority suppliers are important but not vital, because it is possible to find another one
who can do the same. On the basis of that the third priority explains itself. Below the
items make-items can be seen. The suppliers for this are located in Denmark. What is
worth noticing is that the supplier of steel will be of special importance to the subset
because of the short delivery time. From a JIT-perspective this means that there will
be a order-system saying that the steel coils needed in the production will not be build
up in stock but ordered when needed. This can be done because of the short lead time.
It is not appropriate to do this for the plastic items since this would mean to frequent
orders and be to far from the EOQ calculated.
Make Raw material Supplier location Delivery time (hours)
The waste bucket Plastic flakes Denmark 0,5
The drip tray Plastic flakes Denmark 0,5
The box Steel coils Denmark 0,5

Backboard Steel coils Denmark 0,5

White insides Steel coils Denmark 0,5
The semi-finished modules will be bought from suppliers in China. They have cheap
manufacturing alternatives compared to other countries in the world. Since the quality
is found as being the order winner it will be necessary to make sure that you have a
close partnership with the suppliers delivering the special, high-value modules. In this
way it will be possible to maintain a high quality and end up with a good product.
Supplier
Buy location Delivery time (weeks)
PSU China 5
Primary print China 5
Water system and
boiler China 5
Fresh brew China 5
Espresso brew China 5
FB-Canister China 5
Mixing item China 5
Mixing item ES China 5
Guide for canisters China 5
Top canister China 5
Basic display China 5
Main door China 5
Card reader China 5
Coin slot China 5
INTROTO MANUFACTURING SYSTEMS
Manufacturing systems – FMS
Here the flexible manufacturing system (FMS) will be investigated. Generally the
advantages by using FMS are the following:
- Better manufacturing outputs:

o Quality
o Cost
o Performance
o Flexibility
- Fast setups
- Expertise in new technology
The following points are important principles when making a FMS:

- A FMS is a group of automated vehicles connected to an automated material

handling system. The production is controlled by a supervisory computer.
- An FMS produces many different products in low volumes.
- Products are produced in batches (1 batch = 1 customer order)
- Production is “make to order”.
- FMS is a line flow production system, but the layout is cellular.
- Small number of operators. Maintenance is high-priority
- Specialized personal in the current machinery.
- Many suppliers, small irregular orders
- Medium-sized, new and clean facilities
These factors are essential for a FMS and will therefore be taken into consideration
throughout the whole investigation for FMS.
Redesign
When using a FMS you use very advanced equipment in the production. In the case
about the vending machines FB7100 and ES7100 this includes some complications.
The thing is that parts of the product are difficult to assemble for a machine. Mainly
the parts that has to be assembled with screws are an obstacle. When using FMS it is
therefore necessary to redesign the product and use a so-called click-system instead of
screws. After investigating the product31 it has been found possible to make this
comprehensive redesign. Thus the robots and machines that would have to assemble
the vending machines can do it simply by pushing the modules into the machines. In
general this could be a possible time-saver no matter what production is chosen.
However the disadvantages about this solution are that the redesign would take up a
great investment in labour expertise and experiments.
By choosing FMS as a art of the assembly line you would need to make a large capital
investment also including an extra expenditure in redesigning the product. The exact
investment in redesign has been estimated and calculated to be:
Cost Labour Prototype Redesign / Evaluatio Iterative Other Total
eleme productio experimen n redesign Details redesign
nt n ts process cost
es
Cost 500000 2000000 2000000 100000 200000 200000 1310000
DKK 0 0 0 0
Exactly how long the payback time is compared to the other alternative is of
continuing with the same design depends on what production system you would use.
That is why this has not been calculated.
OPL
EPL
In an equipment-paced line flow production (EPL) system is designed to produce high
volumes of products. EPL produces a small range of products with regular volumes.
31
Appendix? Prdouct BOM, product trees, and so on

Furthermore it is limited to produce a standard product with a small number of

options.32
There will be made an investigation of what is important when designing an EPL
system. In an EPL the production rate is a continuous flow, it is fast and cannot be
varied.
If an operator leaves the line, it must be stopped, this means that a fixed number of
operators are needed in order it keep the production running.
In addition to the material flow, the equipment and tooling is designed to produce a
small number of products at low cost and with high quality.
Evaluation of EPL
The evaluation of the EPL system will be based on figure XX in Manufacturing
Strategy.
When looking at the EPL; delivery, cost and quality is some of the strengths of this
system. As seen in the figure, both delivery and cost are characterized as good, which
means that the cost is low and the delivery is fast and good.
As mentioned in pervious chapters quality is the order winner for the two vending
machines, it is seen in the figure, that quality is good because the black scale is almost
filled out. When looking at the process there will be applied in the production, it fits
the EPL very much.
Push and Pull

EPL is a functioning push-system, as mentioned in the paragraphs above, works with
a continuous flow. This sets the pace of the manufacturing output and the capacity;
therefore a pull system will not fit this manufacturing system. But this does not make
the manufacturing system less effective, it just requires some more planning to give it
a 100% exploitation of the system.
RESULT OF THE MANUFACTURING SYSTEM CONCLUSSION
Capacity Planning
Capacity planning is used to find out how much manpower and machine power which
is needed in order to meet the forecasted demand. The numbers that are used for the
calculations in this paragraph are the maximum demand found earlier in the hybrid-
calculations. This is maximum demand that the production potentially have to cope
with.
Work hours for one week
Availability
The availability is set at 90 % of a week.

32
Pg. 407-408 in Manufacturing Strategy, John Miltenburg- 2005

Average demand:
A normal working week is 5 days and a whole year has 50 weeks in a calendar year.
There are 11 Danish public holidays in a calendar year, so these are subtracted from a
calendar year.
Actual demand for the Fresh Brew (maximum demand for the 5 years with yearly
fluctuation of 5%)
Actual demand for the Espresso (maximum demand for the 5 years with a yearly
fluctuation of 5%)
Worst case scenarios
Case no. 1: Machinery breakdown
If for example the metal machine breaks down totally and needs more than an
experienced operator and spare parts for repairing it, it is necessary to contact an
expert from the supplier of the machinery. Before the specialist has arrived, defined
the problem and found a solution it will take up until 5 days. This means that the
planned production for the current week will not be met and this will not only mean a
tangible loss in sales but also in goodwill which is not to be underestimated. In exact
numbers this would mean:
Tabel 3, Metal Machine Break Down

Sales, random Problem Goodwill Production Total
week, profit x solving estimated replanning
sales without
insurance
6000000 DKK 2000000 DKK 1000000 DKK 1000000 DKK 10000000
DKK
All these numbers have been estimated. There is no reason for any further
investigation of these since they, no matter what, will be based on estimations.
Nevertheless the total number above is a useful guideline describing a rather
significant loss for the company. To decrease the risk-level you can make sure that
you have contract with the supplier of the machinery that states an insurance to your
advantage. In this case it would mean that the supplier would also take care of the

repair of the machinery economically and the subset would not have to pay all
2000000 DKK.
The best solution to make sure that this case wouldn’t occur is to provide frequent and
thorough maintenance by people with special skills for all machinery. This will of
course mean an extra large expense but as seen above the risk is also a high
expenditure so it may is beneficial for the subset.
The conclusion in this case is that the support functions which have not yet been
defined will have to be highly prioritized. These are essential if you want a smooth
production without delays and expenditures like the example above.
Case no. 2: Supplier-problems
Another problem is if the supplier is not capable of delivering the goods ordered for
the subset. If for example the supplier of prints and chips comes all from China it is
likely that something could go wrong on the way. The EOQ for this has been
calculated to be 1 delivery/week. If not having a safety stock the production would be
delayed for a week which would mean an expenditure of app. The same as for case
no.1 however it has been decided that the subset should have a safety stock but how
big?
The subset would have to use whatever safety stock it has to keep production running
but what if that isn’t enough? Then you could find a very expensive supplier with a
short lead time in Europe. This would be a very expensive solution so the conclusion
is that the safety stock must cover the current time it takes before a new delivery
arrives. This will be taken into consideration when calculating the inventories.
BUILDING AND LAYOUT
Inventories
In the factory the following inventories are needed:
- Incoming goods
- WIP
- Finished goods
- Maintenance, repair and spare parts
Before the analysis it is necessary to state the overall objective of inventory

management. N&W Global Vending put a lot of effort on good customer service.
When talking about the incoming goods in this matter, it is important to always keep a
safety stock if an order should be delayed. If this is the case a buffer will be available
and it would not disturb the assembly line. In that way the customer can always trust
the subset on being reliable when it comes to the delivery. A safety stock for one week
will be implemented in this inventory. The background for this decision is also
considering the worst case scenarios described earlier.

In order to secure that the assembly line is fully functional a maintenance and repair
department will be established in the warehouse. This will play a significant role in
the maintenance of the whole warehouse so everything will run smoothly.
In the analysis the following factors will form the basis of the choice of inventory:
- ABC-analysis appendix?
- Control of items
- Type of inventory
- EOQ – Supply and demand patterns appendix?
- Design and layout
- Cost
The incoming goods inventory

The incoming goods inventory contains all the goods from the suppliers. This raw
material and semi-finished items will at some point be transported to the different
workstations in the assembly line after being stored in the inventory.
ABC
From the ABC analysis Appendix? It was found that the incoming goods inventory
will contain:
A-items B-items C-items
5 5 11
The items will be placed together in their respective categories. This will make the
control easier.
Control of items
The ERP system controlling the goods in the incoming goods inventory will make
sure that inventory will run optimally. Besides that each incoming material will be
given it’s own part-number according to the BOM appendix?. Raw material like the
plastic flakes will be standing in separate containers and these will not have a part
number.
Type of inventory
There are two relevant storage alternatives;
1. Conventional pallet racking
a. The commonest type of racking for unit loads.
2. Double deep racking
a. Pallets stored in “two deep” which enables four pallets to be stored
between each pair of aisles. A truck with telescopic forks handles the
pallets.
Storage system Conventional pallet racking Double deep racking

Pro/Con

Pros - Simple and well- - Handling cost

known system - Space utilization
Cons - High handling cost - Capital investment
- Space utilization
The obvious point by this comparison between the two systems is that the running
cost is cheaper when choosing the double deep racking system though the bigger
investment is a con. It has been chosen to put more focus on a method that is cheaper
in the long run which means that the double deep racking system is chosen.
EOQ – Supply and demand patterns
The EOQ has been calculated for every item and afterwards it has been adjusted to
find a more realistic order-figure. The EOQ tells how much space is actually needed
in the warehouse and also how frequent you will receive new goods from the
suppliers. A parameter which can describe app. How many pallets the inventory will
receive/workday is necessary when trying to find out how many people should be
employed:
Remember it has to include the safety stocK?!P!!?!IO=”I

This means that the inventory receives approximately 57 pallets/workday. Two men
will be employed to unload the trucks with incoming goods. Subsequently, one man
will place the goods in the inventory using a truck with telescopic forks. The same
worker will also be able to help with the unloading if necessary.
Design and layout
For the design and layout a specific tool is used called Warehouse calculator33. Atlet
have made this software and they are experts in inventory efficiency and this is the
reason why this tool has been used. The calculation and use of the tool is showed in
appendix?. The inventory layout has been included in the total layout of the factory in
appendix layout?.
Incoming goods table

Running cost
Employees Maintenance Electricity Total
(2-shift) and other
Number 6
Cost 32560 5000 1000 38560
(DKK)/wee
k
Capital investment
Racking Trucks Other Total
system equipment
Number 3
Cost 5000000 1500000 500000 7000000
(DKK)
33
www.atlet.com

Work in process
The production system has been analyzed and planned in the Production system
section. The red line in the chosen production system EPL is a conveyer belt
transporting the vending machines to the different workstations before ending up at
the packing station where it will be transported to the finished goods inventory.
ABC
The operator can see if the item is an A, B or C item by a visible mark on the shelf he
picks it from.
- A-items shelf has a red mark
- B-items shelf has a green mark
- C-items shelf has a blue mark
In this way the operator knows when to take extra attention with transporting and
handling of the items.
Control of items
All the items will be supported with a number according to the ERP system to keep
track of them. The ERP system will be integrated in the production. This means that if
a machine not has been into a particular workstation then it will enter next time it
passes by. If there are too many machines in this workstation the system will register
this and know not to add another one. The machine will just stay on the main
conveyer belt until it has been through all workstations and arrives on the packing
station. Thus the system will also know when the number of machines on the main
conveyer has reached the limit. If this is the case the first workstations must wait
adding new machines to the production.
When using a system like this the advantage is that every data will be collected
electronically and if something goes wrong it is easier to say where and what is wrong
in the production. It creates a good overview. Another pro is that the operators at the
respective workstations do not need to focus on registering the machines every time.
An appendix about the conveyer belt has been made for further details of why this has
been implemented in the production system. APPENDIX conveyer?
Supply and demand patterns
The supply of goods to the production comes from the incoming goods inventory and
depends on what kind of strategy which is chosen for the production. In a 5-year
perspective the production is hybrid and also adjustable but when focusing on shorter
period like one year the production is adjusted every quarter according to the forecast.
level or hybrid?
Design and layout
The production layout has been included in the total layout of the factory in appendix
layout?.
WIP table
Running cost
(2-shift) and other
Number 34
According
to
workstations
Cost 142880 30000 10000 182880
(DKK)/wee
k

Capital investment
Production Other Total
system equipment
Number
Cost 10000000 7000000
(DKK)
The cost of the production system in the capital investment has been calculated using
the following method:
The calculation considers the already investigated workstations in the make or buy
section. Further on it includes the rest of the workstations and these have been
estimated to cost 1500000 each for the establishment.
Finished goods inventory

The finished goods inventory is the final storage for the vending machine. It is the
inventory where the machine is being picked up by the mother-company and
transported to the customer.
Control of items
When the vending machine is assembled it is being transported from the package-
station to the finished goods inventory via conveyor. After that it is taken by the truck-
lifter and stored in the inventory. Each different vending has a unique number which
is given through ERP system. Thus, the machine is easy to identify and administrate.
Compared to the incoming goods inventory the finished goods inventory is much
easier to control because you only are dealing with two different products. The
finished goods inventory will therefore be divided up in FB7100 and ES7100.
Type of inventory
The finished goods inventory will make use of a double deep racking system as the
incoming goods inventory where the advantages about this method is described. The
safety stock will then be placed in farthest inside row.
Supply and demand patterns
The finished goods inventory is holding up storage according to the forecast –the
anticipated demand. The finished goods inventory will receive finished products
according to the cycle time in the production. The demand perspective very much
depends on the mother company who controls the selling and administrative element.
It is therefore very important that the communication between the subset and the
mother company is optimal. The finished goods inventory will besides the safety
stock have to hold up to two days of production if there should be a negative
fluctuation in the demand. This is necessary when you produce to stock despite the
fact that many vending machines will be picked up by the mother company at the end
of one workday. It all depends on the demand from the consumers.
Finished goods table

Running cost
(2-shift) and other
Number 6
Cost 32560 5000 1000 38560
(DKK)/wee

Capital investment
Racking Trucks Other Total
system equipment
Number 3
Cost 5000000 1500000 500000 7000000
(DKK)
Maintenance, repair and spare parts

When talking about this inventory you could interpret it as being a quality control
inventory holding spare parts for the product itself and fixing the machine for the
customer if something went wrong according to the warranty. The thing is that the
products are being sold to people all over the world and it would insufficient if the
customer would have to send the product back to the subset in Denmark for repairing.
This would take to much time and also it would cost a lot of money. To optimize this
process the mother company is again taken into use. They have factories and service
departments established all over the world and these should be used for the purpose of
service after the machine has been sold. This of course is another argument supporting
that the cooperation between the mother company and the subset has to be good. If
there is any need for a specific part or expertise it is just up to the service center to
contact the subset who will deliver what ever needed. This will be cheaper for both
the customer and the subset depending on the warranty – also it will shorten the LT.
This means that a specific service office will have to be established in the
administration where service centers can contact the subset for help if necessary.
This inventory only deals with the maintenance and repair of the machinery in the
production. The spare parts are only for the machinery. The department/inventory is
very important for the production and serves a great purpose of quality. If something
goes wrong in the production system it has to be fixed effective and efficiently. Since
the quality management issue in this project has been highly prioritized 2 mechanical
experts and 2 experienced handymen are hired for the maintenance, repair and spare
part inventory. The product quality is the subset’s order winner and that is why the
maintenance, repair and spare part inventory is of special significance.
Control of spare parts and tools
All items in this inventory will have a specific part number when they arrive. They
will be stored in the following categories:
1. Conveyer belt
2. Workstations
3. Inventories
4. Miscellaneous
Type of inventory
The inventory for maintenance and repair will be drawers in pallet racking system.
The system allows many size-different items to be stored in the shelves. Three low-
level trucks with rising platform and forks are being used. The staff will be able to

transport all sorts of goods on this truck. But in order to ensure that there are no
queuing problems the aisle width is made so that there is space for two trucks.
Since there are no specific order frequency it is estimated that it will be enough to
have an unloading bay for one van at a time in this inventory.
It would be very time-consuming to find out precisely what kind of machinery spare
parts that will be beneficial to keep in stock. This is therefore estimated.
Estimation of maintenance and repair spare parts:
10% of total value of machinery and equipment in assembly line34:
This figure will cover the value of the whole stock in the maintenance and repair
inventory.
10% of total space of machinery and equipment in assembly line35:
Finished goods table

Running cost
(2-shift) and other
Number 8
Cost 81400 1000 200 82600
(DKK)/wee
k
Capital investment
Racking Trucks Spare Other Total
system parts equipment
Number 3
Cost 2000000 750000 5000000 200000 7950000
(DKK)
Inventory cost table
Incoming Work in Finished Maintenance,

goods process goods repair and spare
inventory parts
Running cost
(DKK/week)
Capital
investment
(DKK)
34
Andrius
35
From the WIP section in the report?

- Spørg om EOQ?
- LAv finished goods inventory og maintencae
- Hvad er vores production strategy hybrid/ level?
- Hvormange workstations har vi?
- Skal vi kopiere vores individuelle fra sidste år?
- Hvor skal vi skrive om vores production... det der svarer til 2. Fase sidste pr? I
mit WIP?
- What is total cost in the hybrid table? 2500?
- Outsourced expenditures? Hvor skal vi skrive om dem?
- Hvor skal vi have maintenance med?
- Måske skal customer service med et andet sted?
Total space of inventory
This paragraph contains the total space of the warehouse and land. It will sum up the
important figures from the previous inventories and add some new calculations of
other space requirements.
Administration
The administration space requirement is calculated by multiplying the total space the
inventories takes up with 20%.
So the total space for the administration is 235m2.
Parking lot
The parking lot space requirement is calculated in this paragraph. The calculations are
done with help from a software program called “Cube-IQ”.
Finished goods inventory parking lot:

According to ”Cube-IQ” there are space for 54 vending machines in one 20’ feet
container. Below a table of the utilization of the container is shown followed with a
picture of the container storage.

Data: Space Utilization

Loaded volume 22.68m3 68.61%
Length used 550cm 93.33%
Loaded weight 3780kg 17.38%
Packages 54
Blocks 9
Now the maximum amount of the containers, which occupies space in the parking lot,
can be found.
10 containers is the maximum which occupies space on the parking lot.
Now the space can be found for the parking lot because one container fills up 30 m2
and they are stabled in four layers.
75m2 is needed for the finished goods parking lot.
Incoming goods inventory parking lot:

The same method is done for the incoming goods parking lot.
Employee’s parking lot:

It is estimated that 50 employees is needed for the inventories and in one shift there is
needed 25. On top of that the administration employees are added.
One car fill up 9 square meters, so now the space calculations can be done
for the parking lot.
225m2 is needed for the inventory employees.

To get the space for the administration employee 225m2 is multiplied with 20%.
45m2 is needed for the administration workers, so now the total space can be found.
270m2 is the total space for the employee’s parking lot.
Down under a table is shown of the total space needed for the warehouse and area.
Inventory/space Note M2
Incoming goods 184
WIP 749
Finished goods 94
Spare parts 76
Maintenance 72
Administration 345
Toilets Estimated 60
Parking lots 75m2+397m2+270m2 742.5
Inventory/administration/
Total 2322.5
Distribution of finished goods
When the subset has finished making a product it has to be decided where it must go?
The mother company is taking care of selling and administrative aspects which means
that they hold all information about the customers. Already, they even have
established logistics to their customers around the world. That is why the smartest
thing in this case is to rely on the mother company’s experience and have them to
expand their distribution system to include the subset. The other alternative of the
subset distributing the products would require a great investment in a new logistics
department and expensive expertise. By having the mother company to take over in
this matter also means that you can plan your distribution to have a better quantity
economically instead of dealing with smaller more frequent loads. To outsource this
element using the mother company also means that there should be fewer problems
when it comes to loyalty and trust. Since the mother company is keen on success for
the subset this should be a win-win situation.
Thus when the products are finished they go to the finished goods inventory. Here
they are being held until the mother company arrives and loads up their trucks. This is
of course planned thoroughly with cooperation between the mother company and the
subset. What system is being used in this connection is yet to be found.
Website àWittenborg
Website
Wittemborg
Costumer Order treatment
Orders transferred to
Subset
Truck
Subsidairy à Wittenborgs truck picks the prder and SUbsidairy

drive to costumer
ORGANIZATION STRUCTURE
ECONOMY
CONCLUSSION
EVALUATION
LIST OF SOURCES
MANAGEMENT REPORT

What needs to be put in:

Support Functions
MPS
An Intro and a red line, some of the paragraphs needs to be moved.

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Manufacturing in a Global View

- Appendix?: A list of facts for both machines.

Group 2 Author: Shoaib Nashir Page 1 of 44

Make or buy decisions

Modules Box Waste bucket Top canister

Market Analysis and Segmentation

Group 2 Author: Shoaib Nashir Page 2 of 44

Group 2 Author: Shoaib Nashir Page 3 of 44

servomat steigler brings automatically Italian • Innovative

The name "Sielaff" is in the best way imported • Quality

We make coffee automatically success! Since

Group 2 Author: Shoaib Nashir Page 5 of 44

The decision of maturing the design of the product is solely up to Wittenborg.

Regions Pro Con

Group 2 Author: Shoaib Nashir Page 6 of 44

end it is a huge expense.

Group 2 Author: Shoaib Nashir Page 7 of 44

Group 2 Author: Shoaib Nashir Page 8 of 44

Wittenborg’s corporate strategy

Sales offices all

R&D Department – R&D Department –

Figure X illustrates the corporate strategy of Wittenborg

Group 2 Author: Shoaib Nashir Page 9 of 44

Figur 1 - The Product/Volume - Layout/Flow matrix

Group 2 Author: Shoaib Nashir Page 10 of 44

Competitors’ names Market Qualifier Order Winner

Mother Company Market Qualifier Order Winner

Subset Company Market Qualifier Order Winner

Group 2 Author: Shoaib Nashir Page 11 of 44

reliability when it comes customer expectations and

Group 2 Author: Shoaib Nashir Page 12 of 44

Group 2 Author: Shoaib Nashir Page 13 of 44

• Smooth production run

• No need for excessive capacity

Item Total cost Production rate

Group 2 Author: Shoaib Nashir Page 14 of 44

Make or buy decisions

Group 2 Author: Shoaib Nashir Page 15 of 44

The four chosen modules:

Material Sheet metal Plastic Plastic Plastic

Group 2 Author: Shoaib Nashir Page 16 of 44

a. Direct material cost/module

Group 2 Author: Shoaib Nashir Page 17 of 44

Direct material cost/module

Street Plastic Prices Report (Updated July 3, 2007)

Submit your plastic pricing

Group 2 Author: Shoaib Nashir Page 19 of 44

Direct material prices for the four modules:

Module Box Drip tray Top canister Waste bucket

Direct labour cost/module

Group 2 Author: Shoaib Nashir Page 20 of 44

Compared to the forecast the potential capacity is too large.

Estimated direct labour cost/module: 1 DKK/module

Estimated direct labour cost/module: 15 DKK/module

Group 2 Author: Shoaib Nashir Page 21 of 44

Waste bucket and Drip tray

Estimated direct labour cost/module: 0.5 DKK/module

Direct labour cost for the four modules:

Waste bucket and

Group 2 Author: Shoaib Nashir Page 22 of 44

Manufacturing overhead cost/module

“Make or buy” Supplier-price Making price

Transport and distribution cost/module (supplier-price only)