Managing Operations is Sound Prioritization:

The Mexicana Wire Works Case

I. Case Background

Mexicana Wire Winding, Inc. is a subsidiary of Westover Wire Works based in Texas
which is a medium-sized producer of wire windings of electrical transformers. Ron Garcia is
the new management trainee, who studied operations management in his MBA program but
lacks any technical knowledge about the manufacturing process. He is tasked to help the
company in solving the increase in booking orders for April.There will be new equipments
coming in the next several months but these won‘t help them fill the April orders. (Render &
Stair, 2012)

To better understand the case the group researched on the sequence on how to produce
wire windings as discussed in the case:

1. “Wire Winding- the metalworking process used to reduce the cross-section of a wire by
pulling the wire through a single, or series of, drawing die(s). There are many applications
for wire drawing, including electrical wiring, cables, tension-loaded structural
components, springs, paper clips, spokes for wheels, and stringed musical instruments.
Although similar in process, drawing is different from extrusion, because in drawing the
wire is pulled, rather than pushed, through the die. Drawing is usually performed at room
temperature, thus classified as a cold working process, but it may be performed at
elevated temperatures for large wires to reduce forces

2. Wire Extrusion- the process used to create objects of a fixed cross-sectional profile. A
material is pushed or drawn through a die of the desired cross-section. The two main
advantages of this process over other manufacturing processes are its ability to create
very complex cross-sections, and to work materials that are brittle, because the material
only encounters compressive and shear stresses. It also forms finished parts with an
excellent surface finish

3. Wire Winding- simply the process of accumulating wire on a package or spool to

facilitate the packaging process

4. Inspection is, most generally, an organized examination or formal evaluation exercise. In

engineering activities inspection involves the measurements, tests, and gauges applied to
certain characteristics with regard to an object or activity. The results are usually
compared to specified requirements and standards for determining whether the item or
activity is in line with these targets. Inspections are usually non-destructive

5. Packaging is the technology of enclosing or protecting products for distribution, storage,

sale, and use” (Wikipedia, 2012)

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 II. Statement of the Problem

Mexicana Wire works is booking more orders than they can fill. How can
Mexicana’s profits look as good as possible in April? Which orders to run and which to
back order?

III. Answers to Case Questions

1. What recommendation should Ron Garcia make, with what justification?

Provide a detailed analysis with charts, graphs, and computer printouts
included

Based on the given constraints, we recommend that Mexicana Wire Works,

Inc. should manufacture 1,100 units of W00075C, 250 units of W0033C and 600 units
of W0007X, with these number of units they can maximize profits to $59,900.

The group used the QM Software for windows to get the answers above. Here
are the actual results of running the data given in the case.

Mexicana Wire Works

Linear, Integer or Mixed Integer Programming

Signs
< less than or equal to
= equals (You need to enter an apostrophe first.)
> greater than or equal to

Data Results
X1 X2 X3 X4 LHS Slack/Surplus

Objective 34 30 60 25 0 59900
Constraint 1 1 0 0 0 > 150 1100 -950
Constraint 2 0 0 0 1 > 600 600 0
Constraint 3 1 2 0 1 < 4000 2200 1800
Constraint 4 1 1 4 1 < 4200 1950 2250
Constraint 5 1 3 0 0 < 2000 1850 150
Constraint 6 1 0 3 2 < 2300 2300 0
Constraint 7 1 0 0 0 < 1400 1100 300
Constraint 8 0 1 0 0 < 250 250 0
Constraint 9 0 0 1 0 < 1510 0 1510
Constraint 10 0 0 0 1 < 1116 600 516

Results
Variables 1100 250 0 600
Objective 59900
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 2. Discuss the need for temporary workers in the drawing department

Maintain the status quo. Bringing in temporary workers in the Drawing

Department would not help.

IV. Alternative Courses of Action

Since the primary objective of any company is to maximize its profits and minimize its
costs, the group zeroed in on the effects of these scenarios to the profit of Mexicana Wire
Works Co. Before proceeding in the discussion of each scenario it is pertinent to note that the
group considered the base case as its present situation on which the data were derived from
case itself.

SP/u Material Labor Overhead Total Cost Profit/u

W0075C $ 100.00 $ 33.00 $ 9.90 $ 23.10 $ 66.00 $ 34.00
W0033C 80.00 25.00 7.50 17.50 50.00 30.00
W0005X 130.00 35.00 10.50 24.50 70.00 60.00
W0007X 175.00 75.00 11.25 63.75 150.00 25.00
Total $ 149.00

It should be noted that the Present Situation data is used by the group as the base
case of this section. The total profit per unit is USD 149.00

Scenario 1: All departments will render overtime to accommodate all orders

for the month of April.

Total
SP/u Material Labor Overhead Profit/u
Cost
W0075C $100.00 $ 33.00 $ 29.70 $ 23.10 $ 85.80 $ 14.20
W0033C 80.00 25.00 22.50 17.50 65.00 15.00
W0005X 130.00 35.00 31.50 24.50 91.00 39.00
W0007X 175.00 75.00 33.75 63.75 172.50 2.50
Total $ 70.70

In this scenario, it should be noted that the group assumed that labor cost will be
tripled per Mexican Labor Law and that overhead cost is retained/fixed. The resulting
profit per unit is USD 70.70.

Scenario 2: Hire former workers on a contractual basis for the drawing department

Additional
Total
SP/u Material Labor Labor Overhead Profit/u
Cost
Cost
W0075C $100.00 $ 33.00 $ 9.90 $ 2.48 $ 23.10 $ 68.48 $ 31.53
W0033C 80.00 25.00 7.50 2.50 17.50 52.50 27.50
W0005X 130.00 35.00 10.50 - 24.50 70.00 60.00
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 Additional
Total
SP/u Material Labor Labor Overhead Profit/u
Cost
Cost
W0007X 175.00 75.00 11.25 2.81 63.75 152.81 22.19
Total $141.21

For scenario 2, it should be noted that the group assumed that overhead cost is
retained/fixed. The only difference of this model is additional labor cost which is
computed as the proportion of the drawing bill of labor to the total bill of labor
multiplied by the per unit labor cost. The resulting profit per unit is USD 141.21.

Scenario 3: Subcontract product W0033C & W0005X

Subcontract
Cost (80%
Total
SP/u Material Labor of reg. Overhead Profit
Cost
hourly
labor rate)
W0075C $100.00 $ 33.00 $ 9.90 $ - $ 23.10 $ 66.00 $ 34.00
W0033C 80.00 25.00 - 6.00 - 31.00 49.00
W0005X 130.00 35.00 - 8.40 - 43.40 86.60
W0007X 175.00 75.00 11.25 63.75 150.00 25.00
Total $194.60

For scenario 3, it should be noted that the group assumed that the production of
W0033C and W0005X will be subcontracted to a third party. With this, labor cost and
overhead cost will only be applied to W0075C and W0007X the product lines which
are in demand in April. The group assumed that cost of subcontracting is 80% of the
regular labor cost. The resulting profit per unit is USD 194.60.

Summary of all Scenarios

Present Scenario Scenario 1 Scenario 2 Scenario 3

Product SP/u Total Total Total
Total Cost Profit/u Profit Profit Profit
Cost Cost Cost

W0075C $100.00 $ 66.00 $ 34.00 $ 85.80 $ 14.20 $ 68.48 $ 31.53 $ 66.00 $ 34.00

W0033C 80.00 50.00 30.00 65.00 15.00 52.50 27.50 31.00 49.00

W0005X 130.00 70.00 60.00 91.00 39.00 70.00 60.00 43.40 86.60

W0007X 175.00 150.00 25.00 172.50 2.50 152.81 22.19 150.00 25.00

Total $ 336.00 $ 149.00 $414.30 $ 70.70 $343.79 $ 141.21 $290.40 $194.60

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Graphical Representation

The graph shows that in terms of total cost per unit, Scenario 3, which is to
subcontract, has the lowest financial effect to the company. Likewise, in terms of the bottom
line of the Mexicana Wire Works Co., Scenario 3 produced the highest value.

3. Discuss the Plant Layout

The Plant Layout is retained so as not to incur additional cost in a total overhaul of the

floor plan. It should be emphasized, however, that drawing, winding, extrusion, inspection
and packaging are sequentially situated to save time and resources in the transportation of
work in process goods from one department to another. The group also deliberately increased
the space for the rework department to give priority of transforming defective products to be
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quality ready. Consequently, the group deliberately decreased the space for the rejected
product storage because bulk of products for disposal is foreseen to be recycled or sold.

V. Recommendation and Implementation

 Maintain status quo.

No additional workers will be hired. There will be changes in the layout of the plant,
giving bigger space for the Rework Department.

 Subcontract

There will be a party hired by Mexicana to produce the product a service level
agreement to assure that the subcontractors will be fully obligated with the terms of
the company.

Bibliography

Render, B., & Stair, R. M. (2012). Quantitative Analysis. New Jersey: Prentice Hall.

Wikipedia. (2012). Retrieved June 01, 2014, from Wikipedia: www.wikipedia.org