Date of Defense

12-6-2016

Date of Graduation

12-2016

Department

Industrial and Manufacturing Engineering

First Advisor

Azim Houshyar

Second Advisor

Bob White

Abstract

Amway Corporation wanted to investigate the feasibility of producing its entire collection of manually assembled products internally at its manufacturing facility located in Ada, Michigan. Currently, Amway uses third part contractors to complete these manual assemblies because they are generally low volume products with complex packaging configurations that make it infeasible to produce on automated lines. However, they continue to experience problems with increasing costs, reoccurring quality issues and long lead times that leads to the question, “Can Away perform these manual assemblies better and more cost effective in house.”

A cost analysis was performed to provide management with a complete and accurate estimate of the current cost of producing these manual assembled items externally. After including the costs associated with labor, transportation, handling and carrying, the external cost of manual assembly was found to be $846,845.50. The cost equation developed for the external costs was used similarly to calculate the projected internal cost of manual assembly, assuming these operations were brought in house and performed without any production improvements. Time studies were performed to provide baseline cycle times to which internal labor costs could be calculated from. These times were adjusted using learning curves and confirmed using the MTM-1 system of predetermined standard times. Additionally, a location analysis was conducted to identify the ideal manual assembly location within Amway, which could then be used to calculate transportation and handling costs. The Midwest Regional Service Center was selected as the ideal location for manual assembly for several reasons including no additional transportation costs, available production space, and the availability of labor. The estimated internal cost of manual assembly was found to be $726,370, which translates to an immediate savings of $120,498. An additional $180,351 one time savings would be realized with the reduction in inventory that would be necessary if manual assembly operations were performed internally.

To improve the internal cost of manual assembly, a video analysis was completed on an existing manual assembly line, the Legacy of Clean kit, located in the Midwest Regional Service Center. The performance of four different scenarios for this line were evaluated using time studies and simulation software, including the current state and a lean modular layout. Next, the performance improvement seen from the modular layout was extrapolated to the 10 currently externally produced products, assuming similar improvements could be achieved using the same modular layout and line balancing methodology. The lean modular cost led to a 41.97% reduction in total cost, or a savings of $411,154 savings from the current state internal estimate of the 10 currently externally produced products. A stochastic analysis found that the 95% confidence interval for these savings is between $216,171 and $569,271. If the two currently internally produced products are included in these savings, the overall 95% confidence interval is between $326,781 and $917,802.

Lastly, the economic production model was evaluated for the current method and an alternate method of bright-stocking. This was completed after performing a video analysis of the other currently internally produced product, the Product Welcome kit. The results of this analysis showed that bright-stocking method did not reduce costs significantly enough to warrant the implementation of this new system.

Access Setting

Honors Thesis-Restricted

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