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9609 · 9.3.2

Flexibility and innovation — practice questions

Practice and worked examples for 9609 Flexibility and innovation. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Sportswear firm must switch production between World Cup kits (high volume, 3 months) and regular lines. Current changeover takes 5 days. Advise improvements.

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Problem: 5-day changeover kills product flexibility — late to market after tournament starts.

Solutions: SMED — pre-stage materials, parallel changeover teams; target hours not days.

Volume flexibility: Temporary labour + outsourced cut-and-sew for peak (9.3.1).

Innovation: Digital printing for limited kits — mass customisation (4.1.4).

People: Multiskilled teams (9.3.4) + Kaizen bonuses for changeover time reductions.

Worked example 2

Artisan Furniture Co. is considering a $250,000 investment in a Flexible Manufacturing System (FMS) to improve product flexibility. Currently, it costs them $5,000 to changeover production between different furniture styles, and they do this 12 times a year. The new FMS would reduce the changeover cost to $500 per switch. This would allow them to switch 20 times a year, generating an extra $40,000 in contribution annually from increased product variety. Calculate the payback period for the investment and advise the company on whether to proceed.

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Step 1: Calculate current annual changeover costs. Cost per changeover × Number of changeovers 5,000×12=5,000 \times 12 = 60,000

Step 2: Calculate projected annual changeover costs with FMS. New cost per changeover × New number of changeovers 500×20=500 \times 20 = 10,000

Step 3: Calculate the annual cost saving. Current costs - Projected costs 60,000−60,000 - 10,000 = 50,00050,000

Step 4: Calculate the total annual net cash inflow from the investment. Annual cost saving + Additional annual contribution 50,000+50,000 + 40,000 = 90,00090,000

Step 5: Calculate the payback period. Initial investment / Annual net cash inflow 250,000/250,000 / 90,000 = 2.78 years

Advice: The payback period is 2.78 years (or 2 years and 9 months). This is a relatively quick payback for a major capital investment. Given that the FMS also provides strategic benefits like increased variety and responsiveness to trends (which are hard to quantify), the investment appears financially viable and strategically sound. The company should proceed, provided it can fund the initial outlay and the cash flow forecasts are reliable.

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