Lahore Cycle Industries (lci) Case

Background

Lahore Cycle Industries (LCI) is located in Lahore at Ferozepur Road which was fpunded by Sheikh Ubaidullah in 1980. He was a former chairman of Pakistan Co-operative Society Limited that were makers of Sohrab bicycles. In 1985, LCI was acquired by Razak Dawood, Managing Director at Descon. LCI marketed its bicycles under the brand name of Leader Cycles.

According to Mr. Dawood, this company was bankrupt when taken over with production practically zero. Their main objective was to get the management group together to develop a really productive team. They made efforts to set all necessary systems and procedures like production, planning, scheduling, inventory control and quality control. In may 1988, LCI started producing BMX Cycles by getting the rights from Hercules of England.

Problem Statement

Review the production process of plastic and steel rim Cycles for improvements to increase its capacity on a ratio of 60:40 respectively.

Analysis

* Qualitative

Senior Planning Engineer Mansoor Warraich at LCI was under pressure after a few weeks of producing the new BMX Cycles. The pressure was from Marketing Department to increase the production with simultaneous production of both models but the difference in assembly time was resulting lower productivity. Steel rims required considerably more time assembly time than cycles with plastic rims. They were earning gross margin of 8.3% at 1200 BMX cycles per month but could earn 15% at each cycle if 4000 BMX cycles are produced. The production of plastic and steel rim cycles was wanted to be on a ratio of 60:40 respectively on a daily basis. Hence, Mr. Mansoor wanted to carefully review the production process of BMX Cycles and look for improvements. Hercules agreed to send their engineers to Lahore for ten weeks period only and LCI engineers could also go for training in England for similar periods. LCI purchased numerous parts for both Leader and BMX Cycles from several suppliers. They had to depend over these suppliers to complete their production process. If any problems are faced by these suppliers, have indirect impact over LCI as well. Manufacturing and assembly process for BMX cycles included Cutting Shop, Bottom Bracket Shell Shop, Handle Shop, Machine Shop, BMX Welding Line, BMX Enamelling and Phosphating Shop, Rim Shop, Press Shop, Saddle Brake and Hub Shop, Electroplating Shop and Final Assembly Area.

* Quantitative

There were no other producers in Pakistan to produce similar cycles and the demand was over 4000per month. Cutting Shop was operating at 60% of capacity with four full time employees and a supervisor. Bottom Bracket Shell Shop was operating at 55% of capacity with 12 full time workers along supervisor. In Handle Shop, pipe blanks from cutting shop were formed on a semi-automatic machine with capacity of 200 handle bars per shift. It had eight full time workers. Machine Shop was operating at 50% capacity with eight full time machinists plus a supervisor. BMX welding line had an average production