AIC Netbooks: Optimizing Product Assembly Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Case Facts:

Advanced Integrated Circuitry, Inc., that was afterward renamed as AIC Systems, which was a Taiwanese company established in 1992. The main task done in the company was producing printed circuit boards. It also focuses on graphic cards and motherboards for the personal computer business. In the beginning, AIC was engaged in competing for business as a low-cost manufacturer in the industrial zone of Xitun, focusing on the PCI bus chipset that instigated with the Intel Pentium CPU in 1993. Afterwards, AIC Systems got engaged in the supply of famous manufacturers with well-known brand names of laptops along with desktops such as Dell, Hewlett-Packard, and Compaq. Whilst AIC Systems entire volume was lower than Taiwanese opponents’ Elite group Computer Systems, ASUS, and MSI, the company’s persistent focus on cost management permitted it to be a competitive foundation.

During the start of 2000, AIC Systems had changed into what the industry considered an original design manufacturer (ODM). As an ODM, the corporation took a vigorous role in inventing and designed each new production of components. If a company does its development in-house, it was able to promote more exclusive and long-term relationships with its clientele. AIC Systems also secluded its position as a low-cost dealer by opening its Kaizhi plant outside Shenzhen in early 2001 when the restrictions by the Taiwanese government were relaxed in mainland China. The company was among the first of the Taiwanese firms to transfer all of its manufacturing volume to China. Management’s ferociousness in transitioning away from Taiwan-based manufacturing facilitated the process team to shift rapidly down the learning curve and take benefit of the lower labor costs.

Problem statement:

Soon after the launch of Netbooks in the market, the demand for Netbooks increased and so does the demand for employees. The scenario forced managers at AIC to make employees work for more than nine hours. The management at AIC was not willing to start a third shift as they were not willing to make an investment in recruiting and training. The extra overtime was neither cost effect, nor sustainable. Further, the Chief Strategy Officer of the company was also expecting to have a rise in demand by Netbook by more than 130000 units in the coming months. The basic issue that the company was facing was related to maintaining efficiency and increasing productivity in the assembly line. Moreover, the company was also facing issues in terms of variance in labor efficiency.

Analysis (Quantitative):

As per the given information in the case and case exhibits, the company is now engaged in the production of QuiN 816 netbooks. The production of this product has been processed in 4 assembly lines each of 16 meters in length. Each assembly line consists of 10 working stations, and every worker is supposed to work with full efficiency. In addition to this, tow skilled managers known as Floaters have assigned to each working station just to ensure non-stop and efficient work flow. Furthermore, the company is engaged in having two shift each of nine hours. These nine hours include 1 hour of lunch and tea break as well. The production takes place in six days in a week. Estimated units of production in one hour shift are found to be 700 units and 1400 units in a day. However, the actual production in the company is about 650 units in a shift. Refer excel spreadsheet for the estimated value.

Recommendation:

Thus, it is highly recommended to change the current production system that will be achieved through the implementation of 24 hour production line. In addition to this, a shift in a day should increase from 2 to 3 with total 8 hours for each shift. Along with this, working hours for each shift needs to be changed as well that are from 8 hours to 7.25 hours (7 hrs and 45 min). The calculation for the above alternative has been done in a spreadsheet. As per the calculation done in a spreadsheet, it is evident that the number of units has increased to more than 130,000 units and thus, forecasted demand can be easily met now.

Analysis (Qualitative):

To meet the efficiency level along with desired efficiency at AIC, the management has an availability of two options. One alternative that is available to the company was increasing the number of shifts from.............

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