Verity Insurance: Orders Are Piling Up
Operations
easy35 min0 submissionsMorgan Stanley
Scenario
Verity Insurance is a insurance operation in US. Demand is 1,289 units per day and rising, but the site is not shipping it. Work-in-progress is accumulating and the plant manager is asking for capital.
The line has four stages, each with its own maximum rate:
| Stage | Capacity |
|---|---|
| Intake | 2,083 units/day |
| Processing | 1,079 units/day |
| Quality check | 1,756 units/day |
| Dispatch | 2,257 units/day |
Other facts:
- The plant manager has requested $10 M to upgrade the Dispatch stage, because that is where the visible backlog sits
- Each additional unit shipped contributes $536
- Overtime is available at any stage, at a premium
The site director wants to know whether to approve the request.
Supporting data
proposal
- cost
- 10
- stage
- Dispatch
economics
- contribution per unit
- 536
derived hints
- bottleneck stage
- Processing
- system throughput
- 1079
- unmet demand per day
- 210
demand units per day1289
stage capacity units per day
- intake
- 2083
- dispatch
- 2257
- processing
- 1079
- quality check
- 1756
Your task
Advise the site director. Your answer should provide:
- Analysis — what the site's actual throughput is and where the constraint sits, computed.
- Risks — what your answer depends on.
- Recommendation — where to spend, and the throughput it should buy.
State any assumptions you make.
Ready to move forward? Up next: Basil & Co: Build the Line or Keep Buying?Next question
How you'll be graded
100 points, 60% to pass.
- root cause25
- recommendation20
- problem structuring25
- quantitative analysis30
Hint
Reveal suggested structure
Stage capacities; theory of constraints; value of relieving the bottleneck; re-check the next constraint