In: Economics
Confidential Role Information for the CRAWLEY PLANT MANAGER Phillips and Crawley are two separate plants and profit centers owned by Universal Computer. You have been quite concerned about the quality problems on some of the modules your plant sends to the Phillips plant. Over the last several months considerable progress has been made and you intend to keep pushing on the matter and expect some further improvement, although it will probably not be as great as that realized before. Some poor quality items are bound to occur with a product as complicated as a module. Given the volume at which these are produced, 100% inspection is impossible and sampling, especially at the 95% level of acceptance, is an accepted practice, even though it means that some faulty items will get through. You feel that the position taken by the Phillips plant manager that your plant accept the costs of repairing all faulty parts is ridiculous. You have to bear the expense on repairing items from your outside vendors when faulty pieces are not returned to them, and you do not see why the same practice should not apply to within‐company vendors too. Of course, if shipments were refused because of poor quality they could be shipped back to your plant ‐‐ just as faulty shipments are returned to outside suppliers occasionally. You would like to avoid having the faulty shipments returned to you since you would also have to pick up transportation expenses. If you had to repair a rejected lot of modules it might be cheaper to send a repair person to the Phillips plant. You are particularly puzzled and troubled that twelve types of modules are found to be below the desired quality level when they arrive at the Phillips plant even though they were apparently at the desired level when they left your plant. It is a company policy that plants are responsible to see that products shipped meet stated quality levels, regardless of whether they go to an outside or a within‐company buyer. Overall, all modules shipped to the Phillips plant are above the 95% level, so you think that you are complying with company policy but you are nonetheless concerned about the twelve modules that at times do not measure up to the standard, first because you want to get the plant output to a high standard, and secondly because you fear that if this matter gets to higher management, they may revise the interpretation of how the 95% level of quality is to be applied, making it applicable to each individual type of product line rather than to the overall output of a plant. If you had to accept any of these expenses, you would like to charge part of them to the department in the plant that makes the faulty modules and part to the final inspection department, to give them feedback on their performance and to put pressure on both of them to improve. In addition, the Phillips plant manager has been urging that you absorb overtime costs that come from delayed production, caused by shortages of modules when a great number of them have to be rejected. You think Phillips is way out of line on this matter and would never accept any arrangement like that. Unfortunately, while this dispute has gone on, modules have been rejected at incoming inspection at the Phillips plant at a rate of about $15,000 a week. The plant manager at the Phillips plant is just letting them sit there while trying to get you to accept responsibility for them. Before long, this will come to the attention of the Vice President of Manufacturing, and when it does you feel that both you and the Phillips plant manager will be called on the carpet for not having solved this problem. The Phillips plant manager has set an appointment with you this afternoon at your plant, for what is said to be one last try to settle the matter.
issues, interest, goals, strategies and rational approach
There are two basic issues faced by the Crawley and Philips plants :-
i) manufacturing defects and quality issues - faced by Crawley
ii) delayed productions and shortages of modules - faced by Philips
Both Crawley and Philips management wants to improvise the adversities in the interest of their companies and to achieve the set goals. The major areas of strategy control through a rational approach are:-
i) to maintain the quality of the product by ensuring minimal or no defects
ii) if in case any item is defected it should be repaired on time by Crawley, whether by sending some repair person to Philips or by taking it back and getting repaired.
iii) to ensure that the modules are transported properly in its best condition and reach Philips plant as it left Crawley after being checked and packed.
iv) the over expenses of repair must be levied and extracted from the manufacturing and quality inspection department.
v) The overtime cost and rejection of modules caused by delayed production can be ignored by meeting the production time deadline or the turn around time (TAT).