AMAT-UL MATEEN NOOR 104205-067(BBA)

BMX CYCLE CASE SOLUTION

1. What business is LCI in? What are the key success factors? How can operations contribute? LCI is in manufacturing cycle business. It was the only Pakistani manufacturer producing plastic rim bicycles.LCI( Lahore Cycle Industries, located in Ferozepur Road, eighteen miles south of Lahore Pakistan was founded in 1994 by Sheikh Ubaidullah, a former chairman of Pakistan Cycle Cooperative Society Limited (makers of Sohrab bicycles).LCI marketed its bicycles under the brand name of Leader Cycles. In May 2002, LCI started producing BMX Cycles. 1b.What are the key success factors? The key success factors of LCI are BMX cycles were very popular among six to eleven year old children. It had a large target market. In June 1999,Razak Dawood, Managing Director of Descon( an engineering consultancy firm acquired LCI in a strategic move into the light engineering industry Descon took manufacturing and technological rights from Hercules of England .Hercules of England also provided engineering help in plant and tool setup. The only competition of BMX Cycles was the more expensive bicycles from Europe and the Far-East or the lower quality bicycles from China. There was no other Pakistani company in competition with BMX. Government price controls had not been imposed either on bicycle industry at that time. There were no special taxes on cycle industry. Demand of BMX was high due to being single local company which created monopoly of BMX. BMX had strong brand image. It had reliability and durability. Also it was providing big range of products .It was producing ten different BMX cycles in different styles and colors. Senior management had invested significantly to produce bicycles and wanted to capture the market before the competition moved in. Plants had capacity to meet the demands With subcontracting LCI had incentive to utilize resources and avoid numerous problems 1. c How can operations contribute?

AMAT-UL MATEEN NOOR 104205-067(BBA) Operation contributes a lot in manufacturing a product. It is the set of activities from raw material to final valuable goods. If operations are not performing well a product cannot successes.BMX cycles have a lot of demand in market. Marketing department estimated 4000 cycles per month while BMX was producing 1200 cycles per month. There was a big gap in demand and supply. The need is to be making the operation process in its full capacity. Operation process should be better by using machines properly, full utilization of labor and timings. Provide suitable equipment to manufacturing process. There were many machines which were fully manually operated and they took a lot of time for production. The need was to replace them with new technology. There was only one supervisor for whole shop floor and the production was practically zero. The need was to hire new staff for supervision. There were machines but most of them were of low capacity for manufacturing and more labor was required to operate the process.

2. What is the analysis of the BMX production process? How would you characterize this process?

The BMX production process starts from raw material store. Then it is sent to machine shop, rim shop and cutting shop. From cutting shop, parts are sent to handle shop, press shop and helding shops. Parts from machine and rim shop are sent to transit stores. From transit shop parts are sent to electroplating shop and enameling shop. Then sent to finished goods store and assembly and packing areas. First raw material is bought and sent to Cutting Shop. Cutting shop was operating at 60% of capacity. At the start 40% raw material became useless. The rim machine could produce 3000 rims per shift. Rim machines were utilizing at 20% capacity. The machine shop was producing check-nuts, wheel wave and lock-nut. It was operating at 50% of its capacity. Handle shop has the capacity of 200 handle bars per unit. Press shop manufactures rear flange, dust washer and lock washer. It was working 5% for BMX cycles parts and 70% was utilizing for Leader parts In Saddle, Brake and Hub shop hubs are produced. Its capacity can be increased manifold times by adding extra manpower. Bottom Bracket shell shop was working at 55% of its capacity. Although shell shop has low ranging machines for pressing with 600 tons pressure. BMX Enameling and Phosphate shop: In this area cycles are colored. After phosphate treatment parts are baked in ovens for 15 minutes. Then they are manually colored although machines are automated. Electroplating shop: Electroplating is the electrical precipitation of one metal on another to secure improved appearance and greater resistance to corrosion.BMX parts

AMAT-UL MATEEN NOOR 104205-067(BBA) used a small portion of the electroplating shops and there was room for at least four fold increase in production BMX Welding line Final Assembly line Conclusion

3. Given the investment in BMX cycles manufacturing line, what is the payback period? LCI engaged in a major expansion of its physical facilities. This expansion costing Rs 16 million would almost double the covered plant area. Two new final assembly line units for BMX cycles cost 2.4 million each. The special BMX welding line was bought for approximately Rs 2 million, while a ten year old enameling unit was purchased for 3 million. Pay back:

4.Assume that the enameling plant capacity is 3000 bicycles per month, as Senior Planning Engineer, what alternatives are available to increase BMX cycles production? Rim plant was rusting in press shop. Need is to reactive that plant.

What is your recommendation and why? Instead of buying finished parts for both leader and BMX cycles such as seats, pedals, handle bars, frame pads and tires LCI should produce these products. They should expend LCI by installing plastic factory for plastic products. LCI should prefer steel which are in uniform in thickness Should utilize their machines properly because machines were there but not performing in full capacity or at least at 95% Should increase their labors for operating Further supervision is required Replace their machines such as BB shell of low capacity because they operate with more timing and energy. Manual process should be convert at least semi-automatic processes In Enameling Plant production should be in balance. Some parts are producing more than other so balance is required in resources Baking time is 50 minutes. It should be reduce Coloring time is 10 minutes, should be reduce

AMAT-UL MATEEN NOOR 104205-067(BBA) Phosphate and Enameling machines could handle automatically .So there labor work could be reduce.