QUESTION: Identify and describe two recommendations you would make to Arnie Cooper to improve Operations and/or to lower costs.

Information that would help with the question.

Operational details

Arnies shop has grown steadily over the years. Originally, Arnie maintained a modest three automobile bays at his shop, and he and his long-time buddy, Al, conducted most of the work except oil changes which were handled by a part-time apprentice. Currently, Arnie shop has six bays (the layout of the shop is shown in Figure 1) and seven mechanics (as not all of the service activities require a bay). Each of the bays is identical so that any employee can work at any station.

Four of the employees (including Arnie and Al) are full-time (work at least 40 hours per week), and three are interns who work part-time (work fewer than 40 hours per week). Arnie and Al are the only two mechanics permitted to do work beyond the basics, and so, more involved car services can take some time getting through the shop. Most mechanics at Arnies Auto Service were trained at the area vocational school, and those with particular skill are taken on as apprentices who work under Arnie and Al on the more involved projects. Cooper provides all the tooling necessary, and is respected as a fair and caring boss. In return, Arnie employees are loyal and hard-workers; seldom is absenteeism a problem, and turnover is rare.

One of the high-potential apprentices Galen is gradually being involved in more demanding repair work. Recently, he was asked to replace the gasket cover on an engine after the more complex parts were installed. This requires a carefully calibrated torque wrench to ensure just the right tension. For the Camry just being prepped for customer pick-up, this spec is 60 foot-pounds + or 4%.

Typical industry practice requires shop mechanics to provide their own tools (though not the heavier shop equipment). Since Galen was a recent hire and still paying off his trade school loan, he tried to save money where he could. So, his Pittsburgh Pro torque wrench purchased at Harbor Freight came with a warranty promising a standard deviation of up to 0.6 foot-pounds from the tools readout. (By contrast, the higher quality tool that Al uses from Napa has a standard deviation of 0.3 foot-pounds.)

The employee schedule for a typical week is shown in Table 1. The numbers shown in Table 1 are all devoted to working on vehicles. The shop closes for one week in the winter.

Day*	Available Shop Hours by Day	Mechanic Work Schedule							Total Work Hours by Day
		Full-Time				Part-Time
		1	2	3	4	5	6	7
Monday	10	10	10	10	10	8	8	8	64
Tuesday	8	8	-	8	8	4	-	-	28
Wednesday	10	10	6	-	10	-	4	4	34
Thursday	8	-	8	8	4	4	4	4	32
Friday	10	10	10	10	10	10	10	10	70
Saturday	6	6	6	6	-	-	-	-	18

Inventory

Although the shop is primarily a service provider, all of the services require materials in addition to labor, and so there are inventory considerations that Arnie must manage.

A variety of other parts and supplies (for example, oil filters and oil) must be kept available due to the regularity of use; it would be difficult to meet the high expectations of customers if these items are not available. This has become a particularly high priority ever since national service chains moved into town, as the speed of their services such as oil changes is already far superior to that of Arnies Auto. As a result of these competitive pressures, Arnie sets a 98% target service level.

Arnie is dedicated to using a high-quality brand of parts and supplies, most of which are available from a single supplier. Note that these parts and supplies are not only used to support services but also sold as retail transactions to customers who wish to perform their own repair work.

Currently, a continuous review policy is used for all car parts and supplies, but Arnie believes this system may require too much time to maintain for all inventory items. A sample of some of the items offered, the volumes used in services and sold at retail, and the associated costs are shown in Table 2. Arnie has determined that to call the supplier, pay for transportation, and put a shipment away costs approximately $50. The stockroom is relatively small and does not require special equipment or personnel. There is virtually no theft of product, so the annual holding costs are approximately 25% of unit cost. Delivery of orders takes about one week from the local supplier.

Products	Retail Sales Price (in $)*	Volume used in shop per week (in units)**	Volume sold thru retail per week (in units)**
Brake Pads	15.00	86	24
Battery	55.00	9	2
Spark Plugs	17.50	40	10
Fuzzy rearview mirror dice	35.00	0	20
Decorative license plate frames	12.00	0	20