Donner Company is a contract manufacturing company. It is into the business of production of printed circuit boards. The company basically has two kinds of orders:
Standard PCB’s: These orders have same kind of large number of PCB’s.
Specialized circuit boards for experimental designs and for pilot production runs: These have lesser number of PCB’s per order. However, Donner charges a high premium on these orders.
The market is very competitive with number of companies operating in the same field. Donner enjoys the reputation of producing highly complex and quality PCB’s. The
Company has quality overall manpower. Also Donner has a MLT of approximately 4 weeks on special orders, which sets it apart from its competitors.
The specialization for Donner was to produce circuit boards for experimental devices and for pilot production runs. The president and the design engineer at Donner believed that “Donner was more adept then its competitors at anticipating and resolving the problems inherent in new designs and prototype production techniques.” We could imply the above statement as the major competitive advantage of Donner Company.
Despite the competitive advantage that Donner had, the company was facing with operating problems concerned with three aspects of its operation: productivity, quality, and delivery. These problems resulted in unstable gross profit in percentage as seen in exhibit 1 “Donner Company Summary of Profit and Loss” in the original case.
The quick look at the current production reveals that it is more like a production line with a sequence of tasks to be performed one after the other. Presently, customers provide PCB specifications and design engineers at Donner analyze the customer requirement and provide them cost estimates. After customer acceptance of the bid, Design Engineer places the purchase order and then the production is scheduled as shown in Exhibit 1.
Donner used “soldermask over bare copper” or SMOBC as its manufacturing process. This SMOBC process could yield to denser circuit pattern and greater reliability. The process consisted of three stages: preparation, image transfer, and fabrication. Altogether, there were 15 operations in the overall manufacturing process (exhibit 3). However, some operations could be added or skipped depending on the design of circuit boards.