CASE-3A PROD-ENG= MAINTENANCE ENGINEERING DESIGN - Copy - Copy

8/19/2019 CASE-3A PROD-ENG= MAINTENANCE ENGINEERING DESIGN - Copy - Copy

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TECHNOLOGY-BASED

PRODUCTIVITY

MAINTENANCE

ENGINEERING

CASE -A

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CASE

Manufacturing Engineering Company Plc, just bought a set of

machines early this year at a total cost of $ 30.000. The facility tobe used to produce a certain type of machine parts andcomponents at a capacity of .000 do!ens at the first year. "orthe follo#ing years, the capacity #ill be increased by 300 do!ensper year until the third year and 00 do!ens per year after#ards.%t is e&pected that the useful life time of the manufacturinge'uipment #ould be ( years #ith the sal)age )alue of $ *.000.

+ased on the pre)ious e&periences, about 0 of effecti)e #or-ing days #ere #asted by do#n time due to une&pectedmachine brea- do#ns and repair #or-s. %n addition, there #asabout ( of products produced #asted due to defect.

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ccording to Manufacturing /epartment eports, unit cost ofproduction at factory le)el is $ .00 for materials, labours and

energy #hich ha)e a composition of 10 , *( and ( e&cluding repair 2 maintenance cost and depreciation charge.eneral and dministrati)e e&pences #ere estimated at theamount of $ .(00 per year.

4ales /epartment eport estimates that the selling price of theproduct is predicted $ 5.00 per do!en including ( commissionfee for distribution and promotion partner company. The "inancial/epartment eports resumed that, the company6s financial

performances is considered that this project #ill be satisfactorycompared #ith its sister manufacturing company #hich achie)ed% less than ( in the same periods of time


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The financial analysis indicated that the main problem of thecompany stemmed from unplanned maintenance system of thee'uipment #hich caused the company lost its effecti)e #or-ing

days. %n addition, there is another cost to pay for reparing the bro-enmachines. %t #as estimated that annual repair cost is about 0 ofthe initial cost of the e'uipment.

%n order to impro)e the financial performance of the company,eneral Manager had de)eloped ne# policy on maintenancesystem. Pre)enti)e maintenance rather than brea-do#n systemshould be performed. ccording to engineering and cost analysis,

pre)enti)e maintenance to be scheduled e)ery * months. %t isestimated that effecti)e #or-ing days lost #ould be reduced to aminimum le)el of 1 and ( for the first and second year and annualy for the last three years

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nnual repair cost #ould decrease to be only * of the initial

cost of the e'uipment. The amount of product defects #ould be

reduced to be only 3 and * for the first and second year and for the last three years. The cost of implementing the

pre)enti)e maintenance system #as estimated $ .000 per

annum.

Prepare an analysis of producti)ity impro)ement both total

producti)ity and partial producti)ity of capital for ( years

operation. 7se the follo#ing data format for the analysis.

ssumption 8 9 :o of annual #or-ing days ; *(0 days

9 %nterest rate ; 0 < annum

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A. Under Breakdown Maintenance System (Existing System)

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Description Year

* 3 (

=or-ing days >days days do!ens?

The amount of defects >do!ens?

The amount of sales >do!ens?

Total sales >$0?

:et sales

epair 2 maintenance cost >$$


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A1. Profit and Loss Account

Description Year

* 3 (. :et sales >$?

*. Costs of production >$?

9 Material costs

9 @abor costs 9 Energy costs

9 epair 2 maintenance

9 /epreciation charge

9 eneral 2 adm e&pences

Total production cost

3. ross profit >$?

. %ncome ta& *0

(. :et profit >$?


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A2. Cashfow Projection

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Description 0 1 3 4 5

. %nitial cash >$?

*. Cash in >$?

9 :et sales

9 4hare

Total cash in

3. Cash out >$?

9 Machinery purchase

9 Materials

9 @abor

9 Energy


9 eneral 2 adm e&p.

9 %ncome ta& payment

Total cash out

. +alance >$?


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A3. Net Present Value (NPV)

Year !apita"#$t"ay

(%)

!as&'roceed (%)

et !as&(%)

'resent a"$eat 1 *

0

*

3

(

(

+ota"


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A4. Internal Rate of Return

Aear Capital

Butlay>$?

Cash

Proceed>$?

:et Cash

>$?

Present

alue at(

Present

alue at

*

0

*

3

((

+ota"


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A5. Productivity o Ca!ital

Description Year

1 , -

Butput >$?%nput >$?

9 Material

9 @abor

9 Energy

9 eneral 2 adm costs

9 Maintenance 2 repair


Total input

Producti)ity Measurement

. Total Producti)ity >$$


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B. Under 're/enti/e Maintenance System

t the beginning of the fourth year, the pre)enti)e maintenance system

#as implemented. %t resulted in an impro)ement of the numbers of both

effecti)e #or-ing days and good 'uality products.

Aou are as-ed to de)elop 8

a. Profit 2 @oss ccount

b. Cash "lo# Projection

c. :et Present alue

d. %nternal ate of eturn

e. Total Producti)ity and Producti)ity of Capital.

i)e your comment if the changing of the maintenance system pro)ideda significant impro)ement

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Productivity Analysis

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Description Year

* 3 (

=or-ing days >days days do!ens?

The amount of defects >do!ens?

The amount of sales >do!ens?

Total sales >$0?

:et sales

epair 2 maintenance cost >$$


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B1. Profit and Loss Account

Description Year

* 3 (

. :et sales >$?

*. Costs of production >$?

9 Materials

9 @abor 9 Energy



9 eneral 2 adm e&pences Total production cost

3. ross profit >$?

. %ncome ta& *0

(. :et profit >$?


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B2. Cashflow Projection

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Description 0 1 , -

. %nitial cash >$?

*. Cash in >$?

9 :et sales

9 4hare

9 Bther

Total cash in

3. Cash out >$?

9 Machinery purchase

9 Materials, labor etc


9 eneral 2 adm e&p.

9 %ncome ta& payment

Total cash out

. +alance >$?


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B. !et Present "alue #!P"$

Aear CapitalButlay

>$?

CashProceed

>$?

:et Cash>$?

Present alueat interest of

emar-

0

*

3

(

(

Total


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B4. Internal Rate of Return #IRR$

Aear CapitalButlay

>$?

CashProceed

>$?

:et Cash>$?

Presentalue

at *

Presentalue

at (

0

*

3

(

(

Total


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B%. Producti&it' of Ca(ital

Description Year

1 , -

#$tp$t (%)np$t (%)

9 Material

9 @abor

9 Energy9 eneral 2 adm costs

9 Maintenance 2 repair


+ota" np$t

'rod$cti/ity Meas$rements

. Total Producti)ity >$$

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CASE-3A PROD-ENG= MAINTENANCE ENGINEERING DESIGN - Copy - Copy