Case Study Microlite S.A.: The Pan-Orient Decision

Abstract
Microlite S.A. which is located in Brazil was the largest producer of batteries in South America with a mighty 55% share of the Brazilian battery market. Top Management had decided to shut down all but one out of three of the dry cell battery factories in Guarulhos. This opened up the chance for Luiz Pinto, manager of Microlite's battery factory in Jaboatão, to take over this market share and do further investments in his company.
This report is going to describe three basic different proceedings on how he can increase his production. Take over the old machines from the factories in Guarulhos, invest in new machines from Pan-Orient or come up with new ideas how the current …show more content…

We would then invest in the new automated assembly line from PAN-Orient, Inc. and sell all the not required machines from the plant in Jaboatão. With this machine the plant has even the possibility to excess the required capacity of 540 units/min by 21 (exhibit "alternative 1") and reduce the needed number of operators by 32.

Financial Analysis (see exhibit)
Phase I
The transporting and installing of one additional machine from Guarulhos and the sale of the remaining equipment will result in a one-time revenue: 138'889$.
Two more workers are needed: 14'000$/year.

Phase II
The costs of this phase can't be easily determined; we assume expenses of: 20'000-30'000$
If we reach the goal, the elimination of the test cycle would result in savings of: 364'014$

Phase III
Total one-time cost 1'781'778$
Savings with test cycle 255'137$
Savings without test cylce 619'151$

Payback with test cylce 7.0 years
Payback without test cycle 2.9 years

Conclusion
We decided to split up the solution finding process in three phases because we can't solve all the problems at once. The first goal was to overcome the outfall of the Guarulhos production. Buying the Pan-Orient machine would have been a solution but in our sense, it is to radical. People in the company didn't feel comfortable with this solution and we didn't wanted to rush on spending the 2M$. A Kaizen-like approach to overcome the shortfall wouldn't be feasible as this process takes more time and we