Case Study - Replacement and Capacity Expansion Decisions at an Airplane Engine Manufacturer
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| Audience/Grade: | College Junior-Graduate |
| Discipline(s): |
Engineering Management Industrial Engineering Manufacturing Engineering |
| Special Topic(s): | |
| Learning Resource Type: |
Teaching - Case Study |
| Media Type: |
Unknown |
| Author(s): |
Chan Park |
| Description: | Case Study designed to complement Chapters 7,9,12 and 15 of the textbook titled: Contemporary Engineering Economics. Concepts illustrated: Incremental analysis, replacement analysis, and sen- sitivity analysis. Introduction: "The U.S. Technologist Corporation (USTC), a leading airplane engine manu- facturer, makes a series of airfoils that are used in the production of commer- cial and military jet engines. Two years ago, this contractor built a factory to produce ve di erent sizes of jet engines, using a total of 84 di erent airfoils. The plant, which currently has about 750 employees, has a designed annual capacity of 1,300,000 compressor blades and 12,000 disks. The 700,000 square foot facility is one of the most advanced of its kind in the world. Most of the manufacturing processes are highly automated, as are the material handling and quality assurance systems. The factory was built to support a 10-year requirement, and it is projected that it will be operating at full capacity in its fth production year. The original design speci ed the following airfoil manufacturing sequence: a spindle/vibratory operation, in which bar stock material would be cut and deburred, followed by a bu ng operation to provide a speci ed finish and nally extrusion and forging operations. As the factory began operations, di culties were encountered in the bu ng operation. These di culties led to a more than two-fold increase in process cycle time, which e ectively re- duced the machining and bu ng handling capacity to 600,000 airfoils per year. As this bottleneck problem remains unsolved and the projected pro- duction schedule increases, the plant will eventually reach its design capacity during the fourth year of operation. Attempts were made to improve the e ciency of the bu ng operation, but the tremendous process time increase could not be overcome. A study was also conducted to examine the feasibility of using subcontractors to supplement the in-plant operation, but security and responsiveness problems made this option infeasible. The contractor researched several technology alternatives to alleviate the capacity shortfall in the middle of the second year of operation. After screen- ing, the plant engineer concluded that the following two alternatives appear to be most practical and economically viable: 1. Purchase three additional bu ng machines, like the ones already on hand. 2. Purchase two advanced abrasive ow machines that will be used to perform all deburring and nishing operations. |
| Rating: |
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| Related Resources | |
| Keywords: | engineering economics |
| Is Component of: |
Contemporary Engineering Economics |
| Usage Tip | |
| Related ABET Criteria: |
(h) Understand global, economic, environmental, and societal context Professional Skills |
| Use of Resource: |
Discussion questions: "1. What should you recommend? 2. Based on the information provided in the case, what is the opportunity cost if the company has decided to do nothing? 3. In replacement analysis, determination of the salvage values for the chal- lenger as well as the defender is rather di cult task. If you were given the task of estimating these salvage values, how would you go about them?" |
| Difficulty: |
Difficult |
| Interactivity Level: |
Very low |
| Version Info | |
| Publication Date: | September 2003 |
| Platform/Format: |
Cross Platform |
| Cost: |
Free |
| Download URL: | http://www.eng.auburn.edu/~park/documents/case_study/case5.pdf |
| Metadata: |
IEEE LOM Record |
| Collection: |
NEEDS
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