Taylor, Inc Case Study

RUNNING HEAD: Taylor, Inc

Taylor, Inc

Leesa Deal

ISCOM 305

July 25, 2011

Ardenetti Goodwin

Taylor, Inc. needs to improve processes to reduce injuries and wasted efforts, and maximize production and profits. Currently, wasted labor time, lifting requirements, and the number and cost of worker's compensation claims are causing the assembly line for Widget X to cost the organization time, effort, and money.

A cost-benefit analysis was conducted based on the only two alternatives Taylor, Inc. has, which are outlined below.

Current Alternative 1 Alternative 2

Number of Personnel 17 6 9

Labor Wage Per Shift $5,848 $2,064 $3,096

Labor Wage Per Year $2,105,280 $743,040 $1,114,560

Claims 4 0.3 1.9

Claim Cost Per Year $436,000 $32,700 $207,100

Wage + Claims Cost $2,541,280 $775,740 $1,321,660

Capital Expenditure 0 $1,300,000 $967,000

Savings in Wage + Claim Cost 0 $1,765,540 $1,219,620

Year 1 Cash Flow $465,540 $252,620

Year 2-5 Cash Flow $1,765,540 $1,219,620

Output 208 392 288

Weight Limit 42 12 23

Template taken from Microsoft excel

Making the changes in conjunction with Alternative 1 will allow Taylor, Inc. to save $1,765,540 per year in wages and worker's compensation claim payments. The weight limit is reduced to 12 pounds, causing fewer injuries to workers' backs. The time lost will be reduced to .3 claims per year because of the weight reduction. After paying out the initial capital investment Alternative 1 provides the organization with a cash flow of $465,540 in year one and $1,765,540 in years two through five. Reducing the wasted efforts of walking for parts needed to complete the task to a mere 1% will increase the production output to 392 pieces per 8-hour shift. Although the initial investment is higher in Alternative 1 than Alternative 2, the equipment is expected to last an additional two years. Taking into consideration the prior information, Alternative 1 proves to be the best project for Taylor, Inc. to invest in.

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