Reference no: EM13873159

Seaburg Construction Company, formed in 1950by James Seaburg, was initially en­gaged in residential construction in Mobile, Alabama.Later, Mr. Seaburg's business was expanded to include the construction of of­ficebuildings and apartment complexes. In 1965, an industrial division was added totake advantage of the industrial expansion in the Gulf coast region.

Seaburg's industrial division performs both newplant construction and contract maintenance for existing plants. High qualitywork and strict adherence to dead­lines have made Seaburg a favorite among thecompanies that have expanded their in­dustrial capacity in the region.Moreover, Seaburg maintains good relationships with the local trade unions. Hestill carries a union card as a carpenter even though he has not worked at thetrade for the past 20 years. As a result, Seaburg's jobs are rarely interruptedbecause of labor disputes.

Because of this positive image, several firmsretain the Seaburg Construction Com­pany to perform contract maintenance on thefacilities that it built. Also, this reputa­tion has enhanced the company'sability to capture contract maintenance for plants that were constructed byother firms. Sea­burg's construction superintendents work closely with theproduction managers of those plants that have signed maintenance contracts withSeaburg. Even though most contracts are cost-plus, Seaburg enjoys sav­ing moneyfor his client companies. In fact, he has instituted work sampling to ensurethat his maintenance crews are productive. In particular, he takes pride in thework of his operations research staff. In this part of his company, Seaburg hasadopted opera ltions research techniques used by the AlliedForces in World War II. (The British Admi­ralty used operations research teamsto in­crease the size of convoys. Larger convoys reduced the vulnerability toGerman sub­marine attack.) While Seaburg's knowledge of operations researchtechniques was not acquired through formal training, he has been successful inacquiring, through indi­vidual effort, considerable expertise in the use ofPERT/Cost and other basic tools. Consequently, he now relies heavily on thosetechniques which he understands and which have application in the constructionindustry. Seaburg particularly likes having his operations research staffreduce the complexity of a large-scale maintenance turnaround. Through the useof network models, planning and control of turn­around activities areeffected.  Seaburg's su­perintendents aresensitive to the lost pro­duction incurred by their clients during theseturnaround periods. They know that restoration of production is especially im­portantfor a "sold-out" plant.

THE TURNAROUND PROBLEM

In the spring of 1980, one of Seaburg's cli­ents,a chlorine complex in nearby McIn­tosh, Alabama,was operating at 1OO percent of capacity-"sold-out." A maintenanceturnaround was scheduled, however, to per­form major repairs to the facility.Turn­around activities, expected times for their completion, and sequencingconstraints were as shown in Table 1 (below)

It should be notedfrom the above se­quencing constraints that job C (removal of the existingchlorine compressor and instal­lation of a new unit) constrained job N(changing the heat exchanger on the first ­effect evaporator) because a largecrane was needed for both jobs. Plans called for the crane to perform thecompressor job (C) before moving to the heat exchanger job (N).  Seaburg's staff advised the production managerthat a second crane could be rented so that both jobs could be performedsimultaneously.  The rental of the cranewould cost a base fee of $10,000 plus $8,000 per day.  Contribution to profit and overhead from theproduction complex was estimated at $40,000 per day.

DISCUSSION QUESTIONS

A.      Should the second crane be rented?  What is the minimal cost or maximum profitresulting from using the second crane? Assume in the analysis that "8" hours is equivalent to "one" daysoperation.   Also assume that Seaburgconstruction owns a crane and that  theiris no cost associated with it's operation for this case.  Therefore, only the cost of the second craneis applicable for your analysis.

B.        Seaburgconstruction company is considering subcontracting an outside construction firmto assist  in completing theproject.  This construction firm willsupply a second crane and work hand in hand with the Seaburg constructionstaff.  The overall effect will be thatthe project may be completed sooner than expected as a result of supplyingadditional resources.  Seaburg managementteam has outlined the cost and time savings benefit for the tasks that can beaccelerated as a result of hiring the outside firm as follows: 

                                                NORMAL       CRASH          ADDITIONAL

        ACTIVITY                       TIME               TIME               COST to ACCELERATE

            B                                 16hrs             8 hrs               $15,000

            C                                 72hrs             48 hrs             $ 50,000

            E                                 24hrs             16 hrs             $ 10,000

            F                                  36hrs             24 hrs             $ 15,000

            K                                 16hrs             8 hrs               $ 15,000

            M                                 24hrs             16 hrs             $ 35,000

        Should Seaburg hire this firm?  If so, what activities should be crashed andby what amounts?  Assume Seaburg can hirethe firm for only the appropriate tasks needed.