Donner Company Case Solution

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2.2 Layout problem

The shop floor layout was designed to efficiently utilize the space available. The plating processes which released large volumes of acid vapors had been located far from the machining operations to avoid the corrosion of the machine tools. Though this generated stellar results in the form of longer lifetime of the tools but it highly reduced the productivity of the plater. The plater had to simultaneously inspect panels as well as carry them to the plating tanks. The large distance between the operations consumed 15% of the plater’s time. She was also interrupted every 3 to 4 minutes to inspect the panels in the tanks. The productivity of the plater could be increased by decreasing the distance between inspection panel and the plating process. The two could be separated with highly insulating material to avoid the corrosion and increase machine life time along with plater’s productivity.

2.3 Operating problems

One major problem faced by the management was the shifting bottlenecks problem. This was caused due to varying order sizes and differences in circuit design.

25% of problems in job delay process were caused due to design problems encountered by engineers after placing the order. This once again led to bottlenecks as workers had to await further specifications of the new design. This shifts the bottlenecks to other operating procedures.

Also there was no quality specification for raw materials which may turn out to be defective. This may cause disruptions in the work of operators working on a specific project, they may require additional raw material (which takes about 1 – 2 days to locate, then a few additional days to be delivered to the company). Eventually there might be delay in the entire production cycle..

Donner promised a 4 day delivery to customers who placed rush orders. The company already suffered from bottlenecks on a daily basis but still promised a 4 day delivery system. Clearly this meant that, no matter what, rush orders were a priority (This was also due competitive pressures faced by Donner). If raw material was needed for rush orders, it was obtained from the existing inventory, which was originally bought to fulfil large orders. This causes shortages in inventory, which means that Donner’s purchasing has to locate and purchase additional material (which normally took 2 days). The result is possible stoppage of operation process until new raw material was obtained, which also meant down time for the operators (down time at one process, hence a bottleneck at a specific process).

2.4 Productivity problems

With so many operating problems, many productive problems were obviously expected. With frequent changes in orders size and designs, management noticed that machines were idle for many hours than was expected. In addition, standard labor time for each process was not accurate time as it did not include the time spent by workers on orders which required reworking. The management also faced a dilemma in using manual labor (for drilling and punch press) or the CNC machine for the same purpose. Evidently the management did not use the breakeven point to solve this issue.

2.5 Delivery problems

Since all the processes were interconnected, also there were high rates of re-works and customer returns (which increase from 1% to 3%), Donner failed to meet is delivery dates. However, rush orders remained unaffected causing bottlenecks as these orders were treated as special cases wherein raw materials, workers and other processes were fetched to fulfill these needs on a special basis.

Finally, the new sales manager for Donner stated his concerns that Donner’s sales may not be able to reach $2M in sales (in 1988) if it continued to have such productivity and delivery problems. So he believed Donner should continue bidding for low volume orders and improve their quality standards, so that sales reach $3M.

3. Standard Labor Time and Bottleneck

3.1 Break-even order size

As per the process described in the case, there are two options, viz. the process can be carried out either with CNC machine or without it. The break even size of order in terms of boards is calculated as follows:

Standard Production time

CNC

Punch press

Setup

150

50

Run

0.5*

1*

*Run time per circuit board

Let the number of circuit boards in 1 order be N. (N is the order size)

Total time setup= Setup Time + Run time

Using the Break-even analysis, it is the point at which time consumed by CNC router is equal to taken by Punch Press.

Therefore,

150+0.5*N = 50+1*N

100= 0.5N

N =200

Inference:

- If number of circuit boards ordered is more than 200, Donner Company should go for CNC drills.

- If number of circuit drills ordered is less than 200, then Punch press shall be used,

- If it’s exactly 200, then either of the two can be used.

3.2 Standard labor time

Standard labor time for order size 1, 8 and 200 is as follows (Exhibit 2)

Order Size

1

8

200

SLT (min)

396.55 = 6.61 hr.

799.4 = 13.23 hr.

11849 = 197.48 hr. or 8.22 days

As calculated in the table in Exhibit 2, the bottleneck is as follows:

- Operations without using CNC machine