The Donner Company was responsible for producing printed circuit boards for multiple electronics manufacturers. The manufacturing process consisted of a production line. Initially, customers would provide the artwork for the boards and the company would customize them accordingly. After this initial stage, the company would proceed to mass-produce the boards.
The Donner Company was a factory that produced a significant number of circuit boards. It utilized batch flow in its manufacturing process, which consisted of distinct stages as shown in Exhibit 1. However, the company faced challenges in terms of productivity, quality, and delivery. The most puzzling issue was the ever-changing production bottleneck, which would shift from one operation to another without any discernible pattern. This was primarily due to variations in order size, design, and operations. The shop supervisor, Flaherty, found it difficult to predict when work would accumulate or be completed.
Secondly, the standard labor hour did not take into account time spent on reworking parts that failed inspection or were returned by customers, as well as time needed for board movement between operations. Moreover, the standard did not consider potential shop improvements. President Plummer, however, was hesitant to modify the standard at the moment due to concerns about potential new issues arising.
Furthermore, there was a decrease in the quality of boards, primarily caused by incomplete operations and subsequent reworking. Additionally, actual deliveries in August, September, and October were consistently late, averaging ten, eight, and nine days respectively.
Based on the mentioned issues, I have five suggestions for Mr. Plummer. Firstly, the Donner Company can offer a variety of template boards for customers. Given the technological limitations in 1987, the process of drawing and designing artwork was time-consuming. Additionally, not everyone possessed proficient design and drawing skills. By providing pre-made templates, Donner Company can significantly reduce the time required for customers to create their own artwork. Customers could simply select the template they preferred and make necessary modifications if they had any specific requirements.
Secondly, an option for the company is to split the workshop into two sections, with one handling small order sizes (less than 100) and the other dealing with large order sizes (100 or more). Additionally, each worker should be assigned specific tasks and should not be responsible for both order sizes simultaneously. When there is a rush order, certain workers should be selected to solely focus on completing the rush order. Thirdly, the company should modify the standard labor hours to account for time lost in reworking parts and returning items from customers. Lastly, it is crucial to establish a unified quality standard.
Unless customers had specific requirements about the qualities, the company should complete the operations very carefully and avoid returned boards. Part 2 Analysis of EIIC EIIC inspected and insured a wide range of industrial equipment, ranging from small compressed air tanks to large steam turbines. In the U. S. boiler and machinery industry, 80% of the total annual premiums were accounted for by the top five companies. The competition was very fierce while EIIC was able to build its premium income to over $65 million a year. EIIC provided inspection and insurance services for its customers.
EIIC was a job shop and service operation, specifically a small manufacturing business that handled job production. Job production involved custom manufacturing processes such as small to medium size customer orders or batch jobs. However, EIIC started encountering multiple problems. Firstly, there were issues arising from industry trends. 1 These trends included an increasing move towards consolidation among agents, which meant that if one policy was delayed, the agent could not bundle it together with other coverage. Consequently, EIIC would suffer a significant financial loss. 2 Additionally, there was a trend towards self-insurance due to rising insurance costs.
Therefore, EIIC would lose some customers’ resources. There had been a trend where multiple companies began underselling and driving industry profits down. Underselling had a significant impact on EIIC, as machinery insurance was their main business, unlike other companies where it was a subsidiary business. This underselling proved to be a heavy blow for EIIC. Additionally, there were problems caused by the organization. The turnover rate of inspectors was exceptionally high despite their high salaries. Within the insurance industry, the inspectors’ salary at EIIC was competitive. I believe the high turnover can be attributed to three reasons.
At first, EIIC opted not to recruit college graduates for inspector positions due to concerns about their ability to withstand hardships. However, they found that college graduates were more manageable and loyal compared to job-hoppers. Additionally, their salary was relatively low and they could enhance their skills after a short training period. EIIC failed to recognize the advantages of hiring college graduates and solely focused on the disadvantages. Furthermore, there was a lack of stringent management for inspectors at EIIC. The company permitted inspectors to have part-time jobs as long as it did not hinder their primary duties.
The impact of a person’s part-time job on their full-time job can be significant. If someone discovers that they can earn more money through their part-time job, they may choose to resign from their full-time job, resulting in increased turnover. Additionally, the chief inspectors exhibit a sense of self-importance and possess veto power, often leading to careless work and ridicule towards salesmen and underwriters. The frustration, lack of decision-making responsibility, and belief in a lack of long-term career prospects among underwriters contribute to the high turnover rate in this department. The engineering area lacks coordination, flexibility, and planning, which leads to branches failing to meet the delivery goals set by the home office. Inspectors struggle to complete inspections on time, leading to frequent interpersonal conflicts. To address these issues, I propose three suggestions for EIIC: Firstly, hiring college graduates as junior inspectors and providing them with training to become senior inspectors in the future. Secondly, enforcing a prohibition on inspectors engaging in part-time jobs and terminating those who break this rule. Lastly, assisting underwriters in building confidence in their career prospects and establishing regulations for relationships among inspectors from different regions.
Part 3 Conclusion: The Donner Company (hereinafter referred to as DC) and EIIC had several differences. Firstly, DC operated as a factory and production line, utilizing batch flow. On the other hand, EIIC operated as a job shop in the service sector, employing continuous flow. These differences were due to their distinct business types. DC specialized in manufacturing printed circuit boards according to specific electronics manufacturers’ requirements, while EIIC focused on inspecting and insuring various industrial equipment. As for the problems encountered by both companies, they differed in nature. DC mainly faced issues related to its manufacturing process.
Initially, the production bottleneck at EIIC was puzzling as it unpredictably shifted from one operation to another on a daily basis. This was primarily due to variations in order size, design, and operations. Moreover, the standard labor hour did not account for all the required time. Consequently, the company experienced not only low productivity but also delayed delivery and decreased quality standards. These challenges mainly stemmed from administrative issues faced by EIIC. One such issue was the high turnover of inspectors, which was attributed to three reasons. Firstly, the company had a policy of not hiring college graduates. Secondly, inspectors were allowed to seek part-time employment.
Thirdly, the company failed to address the arrogance of inspectors and took no action to resolve the issue of high turnover among underwriters or foster better relationships among inspectors in different regions.
In addition, both DC and EIIC faced problems stemming from industry trends. DC encountered difficulties due to the growing use of electronics in people’s lives, making the printed circuit board industry susceptible to the volatile ups and downs of these sectors. On the other hand, EIIC experienced losses resulting from agent consolidation, self-insured policies, and underselling within the industry. Both companies required changes to overcome their current challenges.
Exhibit 1 illustrates the manufacturing process of Donner Company, which involves three stages: Preparation, where artworks and computer control tapes are created while raw materials are readied for processing; Image transfer, where the conductor pattern is transferred onto a dielectric base stock; and Fabrication, where the base stock is cut and shaped to produce individual printed circuit boards.
Exhibit 2 presents information about the supervisors at Donner Company. Diane Schnabs holds the role of expediter and reports directly to the president.
