Donner Company – Case Analysis

Operation Management

Case Analysis

Submitted to Prof. Haritha Saranga

Indian Institute of Management Bangalore

        Submitted by:

Group No. 7 (Section E)

Alok Kumar Jain (0911290)

Mayank (0911319)

Rajeev Kumar (0911333)

Sunil Kumar (0911348)    

Tarun Kumar (0911349)

Contents

Introduction        

Problems and Causes        

Data Analysis        

Process flow chart        

Recommendations        

Generic recommendations        

Recommendations involving major changes        

Recommendation 1: Concentrate only on producing small orders of SMOBCs.        

Recommendation #2 - Concentrate on producing only large quantities of simple technology boards (order size >=200) only        

Introduction

Donner Company, started in 1985, manufactures printed circuit boards, technically called as “soldermask overbare copper” boards, according to specifications of electronic manufacturers. It faces a competition from around 750 manufacturers in United States. With the increase in use of electronic appliances, the printed circuit board industry has witnessed growth. The firm has developed new processes and application and holds patents for these.

The president of the company, Edward Plummer is reviewing the company position in October 1987, before deciding on plans for 1988. During the review he does in-depth study of how various process and operations are carried out and challenges

The basic work process can be divided into three important stages – preparation, image transfer and fabrication. The detailed process flow chart is given in exhibit 1.

The firm has three persons, Diane Schnabs, Bruce Altmeyer & David Flaherty who occupy supervisory roles in the company. Schnabs kept track of delays in the manufacturing process and made sure that clients were informed about possible delays. She also coordinated the serving of rush orders. Altmeyer was involved with the design of computer control and analyzing the customer requirements. He was responsible for locating the errors in customer artwork. David was responsible for overall manufacturing process until the final product was shipped to the client.

Whenever an order was received, price was quoted based on estimations of labour and material costs. Based on acceptance by the client, delivery time of 3 weeks was quoted for orders below 1000 boards and 5 weeks for rest. Meanwhile some rush orders were accepted which needed to be served in four days.

Problems and Causes

Plummer during the review realized that the there were problems related to productivity, quality and delivery systems.

The major difficulty faced in production process design was frequently changing bottleneck process in the manufacturing system. There were both external and internal factors responsible for the perplexing situation. Clients often found the necessity to change the product specifications because of some error and this required worked to be stopped on that product. This created imbalances in the workloads at various workstations. Internal factors like improper management and procurement policies for raw material requirements also introduced delays in the manufacturing process. All this caused difficulty in predicting the amount of workload at various stages of production and hence this led to insufficient utilization of available capacity.  The situation was aggravated by the rush orders that interfered with the process flows and hence caused imbalances.

Idle machines and incorrectly defined labour hours were a major concern for Plummer. Further the time estimates used by the company were way higher than those of the competition. Besides, Plummer noticed that job methods needed improvements but the major hindrances in bringing about the changes was the pressure of output and frequent shifting of labour.

Lloyd Searby, the sales manager also brought to notice that the company was not meeting the quality standards and even defaulting on delivery deadlines.  Enforcement of rigorous formal quality inspection standards could not be applied because of variations in these standards from order to order. Also there were some problems faced because of the policy of despatching shipments for delivery of outputs to clients. The problem is majorly because most of the shipments are despatched towards the end of the month. This can be seen in the figure below:

Searby has expressed serious concerns regarding present problems of the company and says these may cause a decrease in sales. He forecasts that present system may restrict sales to $2 million which can be increased to $3 million if the processes are improved

Data Analysis

Data analysis gave us deep insight into the some of the problems plaguing Donner Company. Some of the observations are mentioned below.

  • Drilling Process is the bottleneck capacity in general
  • The company’s  shop floor policy of not using CNC machine for drilling if orders are less than 100 boards is flawed
  • Different Operations strategy needs to be used depending on the number of boards being manufactured

Please refer to the exhibits at the end of the report. Detailed calculations can be found in the excel worksheet object that has been included. Standard production times with order size of 1, 8 and 200 boards have been worked out in these exhibits.

Process flow chart

        

        

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Recommendations

Generic recommendations

Hold an inventory of raw material to reduce the time an orders spends waiting for the purchase to happen.

Change the policy of using CNCs for drilling for order greater than 6 boards

Change the policy of using CNCs for drilling for order size greater than 200 boards unless the machine is idle.

Change the policy of shipping more in second fortnight of the month, make it more equally distributed.

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