Merida Material Management

Merida Material Management

Director：Amy J. C. Trappey

Ben Chang, Fenix Chang

Department of Industrial Engineering and Engineering Management

National Tsing Hua University

Hsinchu (300), Taiwan

ABSTRACT

In these years, the society has emphasized the environmental awareness, and promoted reduction of carbon, therefore, there are some government and environmental organization become suggested that people riding bicycle replace cars and motorcycles.

In this climate, bicycles quickly lead a trend to become the new favorite of the community. This trend also leads the growing of the bicycle industry, then, the rapid increase in orders has raised the company's load. That makes the company's operations must be much more quickly, this changing which also results in the emerging of materials management problem, this problem also decreases the company's production efficiency with the delivery. In order to solve this problem, we try to find the root causes of materials management problems and found that some of the unnecessary processes, and lack of coordination, resulting in loss of materials often occur. On this point, we recommend the abolition or merging redundant workstations, and later add a process to the hope of achieving a zero material loss goals.

1. INTRODUCTION

1. Production and Market

2008 value of Taiwan's bicycle manufacturers，and 512.2 billion NT,，representing 31.4% growth in 2007。Bicycle parts and components production value of 391 billion NT， growing by 20%。

2008 Taiwan exported bicycle total of 5.4042 million bicycles, it is the highest in recent years， high growth of 13.72 % over 2007。 2008 bicycle export amounted to 1.055 billion U.S. dollars， more than in 2007 soared 31.62 %， cycling an average output price jumped to 256.83 U.S. dollars in one fell swoop，to rewrite the record high, increasing 15.74% compared with 2007. 2008 bicycle parts export performance is also very brightest, the total exports amounted to 548 million U.S. dollars, annual growth rate of 29.81%。

2008 events are: Changhua County Government plan to set up industrial park, a bike-cum-museum, Changhua; Merida to the "modern technology and ancient aesthetic encounter", launched its flagship store in Taichung; yen Hurricane transmission SHIMANO cycling rose 10%~ 20% ; Merida simultaneous participation of partners into the design, significantly reduce switching-year period. Merida simultaneous participation of partners into the design, significantly

reduce switching-year period.

According to Taiwan by the Institute survey, in 2009 Taiwan-made bicycles that 77.78 percent of domestic production will become a good, 22.22% thought the same. 100% of its average unit price that will get better. 44.44% believe that foreign sales will become a good, 44.44% said the same, 11.11% think it will deteriorate.

1, Taiwan's production and marketing changes

2008 value of Taiwan's bicycle manufacturers, and 51.22 billion NT, represent 31.4% growth in 2007. Bicycle parts and components production value of 391 billion NT, growing by 20%.

2. Giant and Merida red head results

Global bicycle industry and the economy are indispensable, not only grew up in Taiwan for at least 30% but also China, Russia, Japan and Europe, demand is strong on the bike, the global bicycle market in 2008 than in 2007 grew 10 %, as more and more attention to each person health, this wave of heat is not a bike or a skateboard as it was tart but short-lived.

Giant 2008 consolidated revenues reached a record high of more than 4 billions of dollars that even the general distributor of the Giant Bicycle Company in 2008 hit a historical record revenues of 4 billion NT, annual rate of more than 140%, domestic sales of 39 bicycles 10000, is better than 70 percent surge in 2007. Profit of 20 billion NT. 2008 results show a huge domestic market in Taiwan, "Price and Quantity everything else does too," the boom.

Merida Taiwan's bicycle factory in 2008 sales reached 850,000 units, average unit price of the product rose 21 percent, the highest all-time high revenue of 12.24 billion NT. More than 2007 year 10.066 billion NT, growing 22%. 3.97 NT per share after-tax surplus

3. In 2008 export price 256 U.S. dollars a record high

Taiwan Bicycle Association, according to the output statistics, in 2008 Taiwan's exports reached a total bike into a car 5.4042 million, the highest in recent years, high growth of 13.72 percent over 2007. 2008 bicycle export amounted to 1.055 billion U.S. dollars, more than in 2007 soared 31.62 percent, driven in one fell swoop last year's bike average output price jumped to 256.83 U.S. dollars, to rewrite the record high, increasing 15.74% compared with 2007. Taiwan's bicycle exports to the EU average unit price, the 2008 break 200 U.S. dollars, a record high. Save energy and reduce carbon-green wave of malpractice, not only to promote bicycle sales, the level of people to buy a bike and the price also increased to promote industrial upgrading.

2008 Taiwan-made bicycles parts export performance is also very brightest, the total exports amounted to 548 million U.S. dollars, annual rate of 29.81%.

Bicycle exports to the EU average in 2008 is priced at 201.58 U.S. dollars, with a record high, but the North American market, both the quantity and average unit price of vehicle export growth, are far better than in Europe, a higher proportion of the huge sales the United States, the overall performance of the maximum benefit rate

1.2 Case Introduction

Merida was founded in 1972, with thirty years has always been the same vision and determination, now has become a world-renowned bicycle brand. There are factories In Taiwan, China and Vietnam which manufacture MTB, cross bike, road bike, triathlon bike, fitness bike and pocket bike, and sold around the world.

In a few years ago, because the financial meltdown and a weakening of bicycle industry, allowing Merida facing a major crisis, but fortunately they make a successful investment which make them revive. In recent years, bicycle movement has become popular, that makes Merida grows continuously.

But Merida just focus on manufacturing, while neglecting the material management and long-term down makes the raw material is often lost, jointly and severally also affect the production department, that causes delays in production and delivery, thus affect the company's goodwill.

1.3 Analysis the Case Problem

Figure.1 Merida Production Flow Chart

As figure.1, there are so many complex processes between receiving order and manufacturing, especially in materials management, they have two different raw materials warehouse, then through the quality management department to select. Just the raw material sent to the manufacturing department to go through many steps to. If the final product is defective, it will be disassembled then sent back to storage of raw materials, in the process, often missing material. Another problem is that sometimes the prepared materials in warehouse may not be able to load the number of orders, for example, the production received 100 orders , but the materials may not be enough, sometimes the material departments may misplaced the materials, then resulting in the production department troubles

1.4 Analysis what cause the main problem

Because of Merida has the product line, each line manufactures different type bicycles, some type bicycles may need the same material. However, the production department the materials department and the quality management department often do not coordinate, and sometimes material information appears on the drop, they information of side may be different. And in the factory, there always use manpower to check out and classify the materials, man-made factors may also derive a lot of problems, so these issues are constantly taking place.

Because the bicycle industry, belong to traditional industries, in order to maintain product quality standards, so it is still the use of manpower majority. In a few years ago, Merida introduction of JIT management methods to improve production efficiency, product quality, and materials management. But the JIT needs of computer-aided, and Merida, it is only a focus on the manufacturing and quality improvements, but in materials management, there is not a significant improvement, so in overall terms, the production efficiency is still not improved much.

2. As-Is MODEL

2.1 Organization Model

Figure.2 Merida’s Organization Cart

The top is the boss, the following three departments are purchasing department, quality management department, and the production department, following the purchasing department is the warehouse. Following the production department are material department and manufacture department. Following the manufacture department are prepare material and balance warehouse.

(1). Purchase Department

The purchasing department is responsible for the procurement of production of raw materials and components needed to be used, if the other departments there need to buy tools, equipment, etc., but also by the purchasing department is responsible for purchasing

a. Warehouse

Store all the necessary materials and equipment, when other departments need to use the time, you must first apply to determine the well inventory, if there is stock, can be requisitioned from the warehouse.

(2). Quality Department

Responsible for inspecting the raw materials from the warehouse, will be sent to the production department if they are perfect; if they are defective products, they should be returned to storage. The finished product is also produced by the quality management department inspection and testing. Defective products to be disassembled and reassemble back to the productive department.

(3). Production Department

Manufacturing department is the major production place; following departments are the manufacture department, and the materials department.

a. Material Department.

Material department calculate how much raw material for each order of production models, and then applies to the warehouse, and sent these materials to the manufacturing department, if the materials are not enough, and then feed back the information to the purchasing department.

b. Assemble Department

Use the raw materials which from material management department to assemble into a bicycle, then put the remaining stock into prepare materials if it was balance material, then sent to the balance warehouse

c. Balance Warehouse

According to the orders to separate the new material and used material, if there was not sufficient for the orders, the remaining material that was not used for production would be sent to here.

2.2 BEHAVIOR MODEL

Figure.3 Merida’s Behavior Model.

As get a customer’s order; later the purchase department will make procurement for materials into the warehouse. Then the production department will schedule the manufacturing time. The material department will take the materials from warehouse or balance warehouse. Afterward the manufacture department assembles them into bicycles; next the quality management will inspect and test them for sure they work well.

2.2.1 Schedule

In Merida, product engineer will schedule two type of order:

1. First manufacture：If customer orders new type or the type of bicycle that product lines

didn’t manufacture before, the purchase department have to purchase the never-use-material and put it into the warehouse ,then material department will sent them to manufacture department.

2. Not First manufacture ：Material department will take the used-material directly from balance warehouse and sent them to the manufacture department.

2.2.2 Balance

Sometimes in production, certain types of raw materials will be insufficient, and then the output will be equal to the number of this kind of raw materials, the remaining other kinds of materials are called balance.

If a bicycle is made with 3 materials (A.B.C),a customer order 100 bicycles and there have 100 material A ,50 material B , and 50 material C, so it is only 50 bicycles could be finished. And 50 material A are called balance, then they will be put to the balance warehouse until next manufacture. In Merida, if the balance number less than 14, it will be put to manufacture department directly

2.2.3 Quality Control 1＆2

Quality management 1:This quality management is to inspect new type of bicycle or first manufacture order by quality engineer

Quality management 2:This quality management is to inspect the defective bicycles of operator manufactured by manufacture manager ,and the defective bicycle will be disassembled then re-manufacture again.

2.3 OBJECT MODEL

Figure.4 Merida Object Model

(1) Order Information

It is include customer name、bicycle number、deliver、bicycle type、Bom、material，in normal time，the order information will put to every departments，not only purchase department but also manufacture department、material department、production department and quality department。

(2) Manufacture Department

It is include material、bicycle type、Bom、prepare material，it is very interesting in Merida，because prepare material is attached to manufacture department，it means prepare material is work in process(WIP) by manufacturing。

(3) Deliver

Because Merida have many foreign customer ，so there is lot of ports 、country 、language information ，and prepare material also need to prepare user manual for every country。

(4) Worker

Because there are many type of bicycles ，the high-price bicycle need high-skill operator to manufacture ，so the order also decide “who to do” 。

(5) Material

Where customer decide the order of the bicycle type，and there are many materials of the bicycle ，then the material will include place of production and size because not any material can be used。

(6) BoM

The Bom is the heart of the manufacture，it include material number、material resource、material type，but it not only manufacture department get but also production department、quality department、material department。

(7) Purchase、Material、Production department

They both need material information.

3. To-Be

3.1 Behavior Model

Figure.5 Adjusted Merida’s Behavior Model.

We add assemble and disassemble departments to there production flow chart, and simplify the organization, and reduce unnecessary actions.

(1) While a customer make an order, the purchase department would purchase the materials that the order needs, then sent them into warehouse.