Team-based Case Assignment

Fred’s Auto Service is a thriving, independently owned and operated firm located in Springfield. It was founded in 1986 by Fred Cooper. Fred was born and raised in Springfield, OH.  Fredis well-known and trusted by the residents of the town. As a teenager, he was a star football player for the high school team.  In his spare time, he enjoyed working on cars and had a special talent when it came to cars.  After college, this hobby led Fred to start his own business – Fred’s Auto Service.   Freddoes a wide variety of work on vehicles of all makes and models. The shop also offers a variety of parts and supplies at retail. Fred spends a great deal of time conversing with customers, most of whom he has known his whole life. His reputation for honest and reliable work has earned him many repeat customers, with the positive word of mouth helping him to expand his business.   His wife, Diane, runs the office, and takes special care to acknowledge customers on their birthdays with hand-written cards that include coupons for discounted services. Customers often reflect that Fredoffers the kind of service you can only find from a small-town mechanic. While Fredis slightly more expensive than the chain establishments that have recently moved into town, customers testify that the friendly environment and quality service are worth the price.   Operational details   Fred’s shop has grown steadily over the years. Originally, Fred maintained a modest three automobile bays at his shop, and he and his long-time buddy, Al, conducted most of the work except oil changes which were handled by a part-time apprentice. Currently, Fredshop has six bays (the layout of the shop is shown in Figure 1) and seven mechanics (as not all of the service activities require a bay). Each of the bays is identical so that any employee can work at any station.   Four of the employees (including Fredand Al) are full-time (work at least 40 hours per week), and three are interns who work part-time (work fewer than 40 hours per week). Fred and Fred are the only two mechanics permitted to do work beyond the basics, and so more involved car services can take some time getting through the shop. Most mechanics at Fred’s Auto Servicewere trained at the area vocational school, and those with particular skill are taken on as apprentices who work under Fred and Al on the more involved projects. Cooper provides all the tooling necessary, and is respected as a fair and caring boss. In return, Fred’employees are loyal and hard-workers; seldom is absenteeism a problem, and turnover is rare. One of the high-potential apprentices Galen is gradually being involved in more demanding repair work.  Recently, he was asked to replace the gasket cover on an engine after the more complex parts were installed.  This requires a carefully calibrated torque wrench to ensure just the right tension.  For the Camry just being prepped for customer pick-up, this spec is 60 foot-pounds + or – 4%. Typical industry practice requires shop mechanics to provide their own tools (though not the heavier shop equipment).  Since Galen was a recent hire and still paying off his trade school loan, he tried to save money where he could.  So, his Pittsburgh Pro torque wrench purchased at Harbor Freight came with a warranty promising a standard deviation of up to 0.6 foot-pounds from the tool’s readout.  (By contrast, the higher quality tool that Al uses from Napa has a standard deviation of 0.3 foot-pounds.)   The employee schedule for a typical week is shown in Table 1.  The numbers shown in Table 1 are all devoted to working on vehicles.  The shop closes for one week in the winter.   Inventory Although the shop is primarily a service provider, all of the services require materials in addition to labor, and so there are inventory considerations that Fred must manage. A variety of other parts and supplies (for example, oil filters and oil) must be kept available due to the regularity of use; it would be difficult to meet the high expectations of customers if these items are not available. This has become a particularly high priority ever since national service chains moved into town, as the speed of their services such as oil changes is already far superior to that of Fred’s Auto. As a result of these competitive pressures, Fred sets a 98% target service level.   Fred is dedicated to using a high-quality brand of parts and supplies, most of which are available from a single supplier.  Note that these parts and supplies are not only used to support services but also sold as retail transactions to customers who wish to perform their own repair work.   Currently, a continuous review policy is used for all car parts and supplies, but Fred believes this system may require too much time to maintain for all inventory items.  A sample of some of the items offered, the volumes used in services and sold at retail, and the associated costs are shown in Table 2.Fred has determined that to call the supplier, pay for transportation, and put a shipment away costs approximately $50.  The stockroom is relatively small and does not require special equipment or personnel.  There is virtually no theft of product, so the annual holding costs are approximately 25% of unit cost.  Delivery of orders takes about one week from the local supplier. Your Mission Your team has been hired as consultants to analyze the Fred’s Auto Servicebusiness and to provide Fred Cooper with recommendations to consider.   Your answers to the following case questions should be clearly numbered and are NOT intended to be presented as a narrative;answer each question and sub-part, cross-referencing, where applicable, your specific Exhibits that support ananswer:  

1. What elements of the service package take place above the “line of visibility”?

 

2. If Galen’s torque wrench measured a mean value of 61.4 foot-pounds in his re-assembly of the Camry engine, should Fred allow him to perform this work? Explain your answer.

 

3. Capacity requirements (Please refer to your applicable exhibit; no discussion needed)
   1. What is the utilization by day? By mechanic? (Two, separate Tables)

HINT:  The systemwide or overall Utilization for the Week MUST be identical regardless of measure (i.e. by Day or by Mechanic).  

1. What is the average capacity cushion? Is this too high, too low?

HINT: Following the logic of part a., there can be only ONE Cushion Measure for the entire system each week.  

4. Inventory policy (Please refer to your applicable exhibit; no discussion needed)
   2. Create a spreadsheet for ALL parts listed in Table 2. The format must include, in this sequence: EOQ, Safety Stock levels, Reorder points, and- separately- the annual Inventory costs (Ordering and Holding inventory, including Safety Stock)using the continuous review system.  Separate from the Summary Table please provide a calculation breakdown for Brake Padsonly for each measure requested.  (NOTE: The evaluation of your work will assume EACH calculation by item followed the same steps.)

 

5. Identify and describe TWO recommendations you would make to Fred

Cooper to improve Operations and/or to lower costs.