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ID number:539512
Published: 31.08.2021.
Language: English
Level: College/University
Literature: n/a
References: Not used

19.4. Give an example of a machine preparation cost in your factory, indicating the cost components (without quantifying).
In our company the assembly line machines does exact functions to manufacture our product, that's why the preparation costs for most of the machines are basically zero. The only preparation costs appear when we want to start manufacturing different modules or lengths of the product. In this case we have to change the functions in the software of the machines and the tip of the soldering machine and some tools on assembly line. This might be time consuming and that is an additional work for the employees. In conclusion these would be the main preparation costs for the machines in our company.

19.5. What positive and negative consequences would have reduced stocks in your company? Relate with the prior answers.
The storing creates extra costs because we need to have space for it in our plant, we need personnel to handle the storage and we need vehicles to move our products and materials. Also the storing ties capital which we could use for example on new investments which would bring value for our company.
The positive consequences for storing are the flexibility on production. For example, if we receive a huge order from a customer we are able to start producing the slack lines immediately if we have all the necessary materials already in our stock. We are able to start producing the slack lines faster when we don’t need to place the order and wait the materials from suppliers.

The positive consequences of not storing are that we would save money because we wouldn’t need that many personnel to take care of the stock, the space for the storage would be smaller and we wouldn’t need so many vehicles for transporting the raw materials. This means that the capital which would be tied into the storages we could use elsewhere more productively. We would also find out problems in our production systems better without inventories and we could solve the problems and improve the production systems.

Elektronix uses 20 units/month (for 12 months) of a component for an electronic device. Administrative costs of launching a batch to manufacturing are € 250. The machine preparations are 2.5 hours’ time and the machining time of each piece is 1.5 hours. The raw material costs € 200 /unit. The machine’s operator cost is € 20/hour and himself prepares the mechanization. The cost of holding stocks is assessed at 15%.

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