Gathering the Information

ACI Pars includes 10 departments which are Production, Supply Chain, Projects, Human Resources, Engineering, Renault Production System, Quality, Purchasing, Finance, and IT&IS. As the warehouse and supplier quality sections are placed in Supply Chain and Quality departments, the required information is gathered from these sections. In fact, Supply Chain department has six sections including customer service, internal logistics, external logistics, customs, PHF, and warehouses. Besides, quality department has two sections which are customer quality and internal quality (http:www.acipars.co.ir), Appendix F/F.1.

The information has been gathered for two main parts that are Brake Disc and Rear Hub Drum as depicted in Figures 6.3 and 6.4 respectively. The mechanism of Brake Disc is briefly shown in Figure 6.5. When the piston (part number 3) is pushed by a class 2 lever (part number 2), it squeezes a hydraulic brake fluid (part number 4). This process causes the force to another piston located in the wider cylinder (par number 5). The Brake Disc is the part number 8 and it causes the wheel stops when the wider piston (part number 5) pushes the brake pad shown as part number 6 and 7.

Figure 6.4: Rear Hub Drum 8' painted

Figure 6.5: Function of the Brake Disc (www.explainthatstuff.com) Woodford (2016)

Figure 6.6: Function of the Rear Hub Drum (www.auto.howstuffworks.com) Nice (2016)

Rear Hub Drum works on the same principle as Brake Disc. In this system, as shown in Figure 6.6, the surface is called a drum. Usually automobiles have Rear Hub Drums (drum brakes) on the rear wheels and disc brakes on the front. Although drum brakes have more parts than disc brakes, they are less expensive to produce. They are harder to service for the manufacturer.

Table 6.1 shows the demand for automobile which is announced by Renault Pars to ACI Pars. Then, according to the available data, eight contracts have been considered between ACI Pars and its supplier (MSTOOS). A period between 2012 till 2015 which the duration of each contract is divided to 6 months is considered.

For more clarifications, lets explain the first contract. This contract is started from January 2012 till Jun 2012 between ACI Pars and MSTOOS. According to this contract, the parts of 7200 automobiles should be satisfied by the ACI Pars that is the supplier of

Pars Renault. As our models are investigated for the Brake Disc and Rear Hub Drum, the demand of these parts are calculated in Table 6.2 and 6.3 respectively. It is clear that each chassis produced by ACI Pars needs two Brake Discs and Rear Hub Drums. The related information of the demand in Table 6.1 has been extracted according to the statistics revealed by the Iran Vehicle Manufacturers Association (Appendix F/F.2).

Table 6.1: Value of the demand for chassis announced by Renault Pars

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

7200 8000 9500 12550 12000 14800 16750 18100

Table 6.2: Value of the demand for Brake Disc announced by ACI Pars to MSTOOS

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

14400 16000 19000 25100 24000 29600 33500 36200

Table 6.3: Value of the demand for Rear Hub Drum announced by ACI Pars to MSTOOS

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

14400 16000 19000 25100 24000 29600 33500 36200

Variable costs include raw materials cost, production wages of workers, sales commissions, packaging supplies, and shipping costs. Tables 6.4 and 6.5 show the variable costs for Brake Disc and Rear Hub Drum respectively. Although variable costs may vary from one month to the other one, it is considered averagely for each contract.

Table 6.4: Variable costs for Brake Disc (Rial*/Unit)

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

99000 100000 112000 113000 120000 122500 128500 136200

*Iran's currency (1$ ≈ 34400 Rial)

Table 6.5: Variable costs for Rear Hub Drum (Rial/Unit)

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

Fixed costs are those that do not change with fluctuations in production level or sales volume. They usually include such expenses as rent, insurance, equipment leases, payments on loans, depreciation, and other costs for running the business such as management salaries, and advertising. Tables 6.6 and 6.7 show related data for fixed costs of ordering the Brake Disc and Rear Hub Drum for considered contracts.

Table 6.6: Fixed costs for Brake Disc (Rial/Order)

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

1089000 1100000 1120000 1135000 1200000 1220000 1385000 1402000

Table 6.7: Fixed costs for Rear Hub Drum (Rial/Order)

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

990000 900000 1020000 1025000 1170000 1180000 1300500 1306200

Selling price of good quality Brake Disc and Rear Hub Drum and selling price of defective Brake Disc and Rear Hub Drum are presented in Tables 6.8 and 6.9. These prices are based on the derived information from Saipa (Appendix F/F.3). It is assumed that selling price of defective items is 25 percent of the selling price of the good quality ones.

Table 6.8: Selling price of good and defective quality Brake Disc (Rial/Item)

Year _{2012 2012 2013 2013 2014 2014 2015 2015}

Month _{Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec}

G* _{199050 200000 222100 232000 250000 275000 300500 320000}

D** _{49763 50000 55525 58000 62500 68750 75125 80000}

*Good items, **Defective items

Table 6.9: Selling price of good and defective quality Rear Hub Drum (Rial/Item)

Year _{2012 2012 2013 2013 2014 2014 2015 2015}

Month _{Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec}

G* _{189050 190500 212100 222000 245000 265000 285500 290000}

D** _{47262 47625 53025 55500 61250 66250 71375 72500}

Tables 6.10 and 6.11 present costs of screening of items for all contracts. This process is done by the person in charge from the quality department. Each time that a lot is received through the steel pallets, the items are checked and defective items are separated from non-defective ones manually. Figure 6.7 shows a pallet made of steel.

Figure 6.7: Steel pallet for screening

Table 6.10: Screening costs for Brake Disc (Rial/Unit)

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

1000 1000 1200 1300 1500 1650 1700 1800

Table 6.11: Screening costs for Rear Hub Drum (Rial/Unit)

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

990 1000 1100 1250 1400 1450 1600 1650

Screening rate of Brake Disc and Rear Hub Drum are shown in Tables 6.12 and 6.13. Because Brake Disc has a more complex structure, analyzing the quality of it needs generally more time in comparison with the Rear Hub Drum.

Table 6.12: Screening rate of Brake Disc (Unit/Time)

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

Table 6.13: Screening rate of Rear Hub Drum (Unit/Time)

2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

25000 30000 40000 48000 50000 60600 65500 70200

After separation of the defective and non-defective items, they should be held in different warehouses. The holding price of good and defective quality items are presented in Tables 6.14 and 6.15.

The main costs that should be taken into account for holding costs include rent of the warehouse, cost of the maintenance of warehouse, opportunity cost, equipment cost, insurance and security cost, and other direct expenses. Therefore, it is clear that the holding costs of the good items and the defective items are different as it is supposed in chapter 4. Information related to Tables 6.4-6.7 and Tables 6.10-6.15 were derived according to the dealerships of Iran Khodro (Appendix F).

Table 6.14: Holding costs of Brake Disc items (Rial/Unit/Time)

Quality 2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

Good 1000 1000 1200 1300 1450 1500 1650 1700

Defective 200 200 250 250 300 300 450 500

Table 6.15: Holding costs of Rear Hub Drum (Rial/Unit/Time)

Quality 2012 2012 2013 2013 2014 2014 2015 2015

Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec

Good 900 950 1100 1250 1350 1400 1550 1600

Defective 150 150 200 200 200 250 350 400