Pros and cons of each alternative:
Alternative 1: Increase in Shift
Pros:
One of the major advantages for the company in choosing this alternative is an increase in production and reduction of shift from nine to eight hours. In addition to this, the company would be able to save the cost that can be incurred in installing a new assembly line. Other than that, the company would be able to achieve maximum utilization of the capacity of the plant. Another important benefit with this option is that fixed costs will not change to a larger extent.
Cons:
To cope up with the increasing demand through making an increase in shift has some disadvantages as well. First of all, it will increase the training expense of the company. Another cost that will be increased from this would be a variable cost that will be incurred if the company decided to increase the shift. In addition to this, management of the company is not ready to take this step and not in favor of it as well.
Alternative 2: starting a new line of production
Pros:
The major benefit of choosing this alternative is the ample increase in production that was the main goal of the company to achieve. In this option, there will be less variable cost because the alternative is based on a one-time investment. In addition to this, the capacity of the plant will also increase with this alternative. Moreover, there will be a need of only one-time expense in implementing this alternative.
Cons:
One of the major disadvantages of this alternative will be a rapid increase in the fixed cost of the company by implementing a whole new assembly line. Another disadvantage of choosing this alternative would be the un-utilized capacity to its maximum level. Last but not the least, installation cost will also increase.
Explanation of alternatives:
Increase in shift:
By increasing a shift from two to three in a day, the company would be able to get 145 to 152 units in a month by having total shift time of eight hours that comprise lunch and tea break for an hour. Furthermore, the company will have to pay salaries on a regular interval and thus it will increase the overall monthly expense of the company. Moreover, expense will also increase in terms of the cost that will be incurred in the training and development of the workers.
A new line of production:
If the company goes for the second alternative, the production will be 138240 units per month. In addition to this, salary for only one working panel will increase, and the expense will be non-recurring in nature. Last but not the least, training expense will be minimal with this option.
Conclusion and recommendations:
To meet the market expectation, the company should choose the first alternative i.e. increasing a shift. Even though the management of the company is not willing to train and recruit more employees, but the cost will not be a waste and the result that will be drawn from it will be positive. By going for this alternative, the company would be able to handle the workload on each and every employee, and they do not need to work extra hours in a day.
Along with this, overall efficiency and productivity will also increase, and employee morale will remain high. In addition to this, AIC would also be able to save money in terms of fixed cost as well. Lastly, the capacity of the plant will be utilized fully by using this alternative........................
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