Exam Answer — Rondell Data Corpo_savings

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					HUID 305 4924 40 24 TOM Final Exam — Saturday, May 29, 2010

Word count (excluding tables ) ~1,400

Saturday, May 29, 2010

What actions should Jan Havel take to fix the operating
performance and successfully launch the new product?


Key Issues Addresses
    I examined in detail the issue of the immediate purchase of the CNC machine.
    The issue of the purchase of machines for the line is a decision I believe is better made once
     more knowledge of the specific improvements which the CNC machine would yield are
     understood; I’ve therefore suggested putting in place a process to achieve this.
    Furthermore, I examined the scope for operational improvement and improvement of co-
     ordination between the divisions over the new product launch and continual innovation.
Criteria for decision-making
    The options available to Ms Havel were evaluated on the following basis:
        Financial Payback — Expected return-on-investment (payback period) for each option.
        Ability of the Execute — This was evaluated in the context of the organization’s culture,
         skill level and existing work processes. In particular, attention was paid to the constraint
         of the new line due to be opened in under 1 year.
        Risk to Business Processes & Strategy — Not all the options confered equal execution
         risks, nor did they generate equal risks on the company’s ability to compete. As
         qualitative assessment of these impacts was considered.
        Ability to keep improvement “momentum” in the plant. Given the issues which the
         manufacturing process faced, it was important to consider the cultural impact any change
         would generate, and the degree to which is facilitated the ―excitement to improve‖
        Ability to be a platform for on-going process improvement. Any option which was
         implemented would have to offer significant scope for on-going process improvement,
         particularly in the areas of yield and Manufacturing-Lead-Time

Specific Recommendations
    Havel should negotiate the purchase of one CNC machine for full roll-out on the
     SignaSense, line within 6 months. It should position this purchase to the supplier as a test-
     bed for a potential future purchase for the TalkBack line. Depending upon the resulting yield
     improvements this purchase should pay back within 1 –2 years1. In any case, its move makes

1 See Exhibit 1 for analysis

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HUID 305 4924 40 24 TOM Final Exam — Saturday, May 29, 2010

    sense to increase the experience of the workforce and fully evaluate the CNC machine for
    potential use in the TalkBack line.
   Havel should set an agenda for process improvement on the existing line, starting
    immediately. Preliminary analysis of this process improvement2 indicates significant scope
    to reconfigure the Chamber Machining Process. This move should yield significant
    productivity improvements3. Furthermore an investigation should be made of a change of the
    batch size and break from one day-to half day batches, potentially yielding a reduction in
   Havel should charge DesMaisons4 to further investigate customers needs on three
    fronts. Firstly we need to better understand whether customers really want to wait until all of
    their batch is finished before shipping. Secondly, we need to understand whether customers
    would pay more to receive their orders earlier; if this turns out to be true, changes in the
    production line to speed up can easily be implemented.5 Thirdly, we should examine whether
    there is scope to reduce the range of the line, and thirdly to get a better sense of the potential
    demand for the TalkBack product
   Havel should set a committee comprised of DesMaisons, Murphy6, Selfridge7 and Miles8
    to co-ordinate the decision on the TalkBack product. She should set a date for the decision
    of the line configuration 7 months out, to benefit from the increased customer understanding
    and CNC knowledge they should have gained. Furthermore this committee can actively
    address the tensions which are being generated within the organization, as a result of this
    product and ―speak with a single voice‖


Summary Background
The Signatron manufacturing plant is facing significant process and organizational issues.
Customers have become increasingly unhappy as a result of the long-manufacturing lead times
which are now incurred for the delivery of their products. Furthermore yields, at around 75% for
first pass manufacturing could be improved. There is also significant organizational tension,
particularly between manufacturing and product development, driven from the issues being
encountered over the existing problems, together with tensions over the roll out of the new
product. However, the new product is potentially critical to the future of the plant with sales
projected between 10 to 40 thousand units after two years9

2 See Exhibit 2 for analysis
3 In excess of 20%, see exhibit 2
4 Customer Service Manager
5 In particular a shift to half day manufacturing in the Chamber Machining process, which would halve the WIP. This
    would halve the amount of time it takes for a product to get through manufacturing, but in turn would result in
    more cost & time being spent on set-ups; increasing overall cost (and reducing the capacity of the plant). This
    comprimise should be considered if customers are willing to pay more
6 Product Development
7 Operations
8 Production
9 compared with 28,000 units for the existing product

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HUID 305 4924 40 24 TOM Final Exam — Saturday, May 29, 2010

Critical success factors (basis of competitive differentiation)
    Critically, it is important that the manufacturing lead-time is reduced. This is the major
     source of customer frustration.
    Furthermore, it is critical that the yield is enhanced. The current first iteration failure rate
     of 30% is a key driver in the longer lead times, and in increased cost
    Finally, continual innovation is essential in this business. Therefore, any process which is
     put in place should be aimed at orientating the organization around this goal.

`Key Options Evaluated
The major options considered are detailed in the table below

Option             Details                 Principal             Key Questions          Analysis /         Conclusion10
                                           Sources of                                   Rationale
                                           Enhancement /
                                           Cost Reduction
1. Implement        This initiative is     Increase in          Is it there scope     Exhibit 2         Going ahead
Performance          aimed at                customer              for significant        indicates          with
Improvement          reducing the            satisfaction          improvement            scope for          operational
on SignaSense        overall                Reduction in          within the             improvemen         improvement
line                 manufacturing           WIP inventory         confines of the        t of at least      now yields
immediately          lead time, which        resulting in          existing               20% in the         benefits in
                     is a key driver in      savings in            process?               Chamber            terms of
                     customer                working capital      Is a radical           Machining          culture and
                     frustration            Increase in           change – e.g. a        process line       an
                    Furthermore,            overall product       switch to             Further            orientation to
                     yields on the           yield resulting       process flow           improvemen         improvement
                     product line need       in cost savings       manufacturing -        t can be           down the line
                     to be increased         as well as            - too risky?           gained            Furthermore,
                                             significant          How price              through a          change is
                                             rework and            sensitive are the      change in          essential to
                                             time savings          buyers?                the process        create
                                                                  To what degree         flow;              momentum
                                                                   is it important        particularly       in rolling out
                                                                   to generate the        considering        the new line.
                                                                   momentum for           a move to         Introducing
                                                                   operational            smaller            this change
                                                                   improvement            batches and        now also
                                                                   now?                   ―half-day‖         sends a clear
                                                                                          change overs       signal to the
                                                                                          between            workforce
                                                                                          stations in        and upper
                                                                                          the Chamber        management
                                                                                          manufacturi        that ―we’re
                                                                                          ng area            serious‖
2. Implement        Same initiatives       Same benefits        In addition to        No specific       The scope
Performance          as above, but           as above, just        above:                 analysis was       for existing
Improvement          pushed back 6           pushed back in       Is the                 carried out,       improvement
Program a few        months or so and        time                  disturbance to         except to          is so great
months out on        focused mainly         Reduced risk of       the existing line      examine the        and would
the new              on the TalkBack         disturbance to        of process             scope for          yield
TalkBack line        line                    the existing          improvement            improvemen         significant
                                             production line       now too low?           to the             ―motivation‖
                                            Reduce risk of       Is the risk of         existing           improvement
                                             workforce             process                process            s, that it

10 In case of no analysis being carried out, this conclusion is a hypothesis, together with a the supplied rational

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HUID 305 4924 40 24 TOM Final Exam — Saturday, May 29, 2010

Option           Details               Principal            Key Questions      Analysis /        Conclusion10
                                       Sources of                              Rationale
                                       Enhancement /
                                       Cost Reduction
                                         being hit by         improvement        (exhibits 2         should be
                                         ―two initiatives     now too low?       & 3)                initiated
                                         at once‖                                                    immediately
3. Purchase       Running a new        Reduced             What is the       Exhibit 1          The CNC
CNC machine        CNC machine on        rework on            direct cost        demonstrate         machine
for existing       the Chamber           existing line,       saving from        s that the          should be
line now, to       Machining line is     resulting in:        reducing           CNC                 purchased for
improve yields     expected to          Direct cost          rework?            machine will        roll out on
                   reduce the            savings from        What is the        pay back in         the existing
                   amount of             reduced              saving in time     between 1           line.
                   rework necessary      wastage of           from reducing      and 2 years        This will
                                         material and         rework?            just from           enable
                                         time                Will the CNC       direct              Signatron to
                                        Large indirect       machine ―pay       improvemen          explore the
                                         savings in           back‖ in time?     ts in rework        extend of
                                         manufacturing       What is the       In addition,        resulting
                                         lead time,           saving in          purchase of         yield
                                         increasing           overall            this machine        increases
                                         overall              manufacturing      will yield          before
                                         customer             lead time in       significant         making a
                                         satisfaction         reducing           experience          decision on
                                                              rework?            benefits            the new line
                                                                                                    Furthermore,
                                                                                                     purchase of
                                                                                                     the machine
                                                                                                     now enables
                                                                                                     the training
                                                                                                     necessary for
                                                                                                     a future roll
                                                                                                     out on the
                                                                                                     new line to
4. Purchase       Introducing CNC      Reduction in        What is the       We do not          The decision
New CNC            machines for the      rework and           decrease in        have enough         on the
machines for       new line will         increase in          rework we          information         purchase for
new line only      increase the          reliability on       would see?         on the              the new line
                   quality of those      new line            Can workers be     performance         should be
                   products and                               trained in the     impact of           deferred until
                   reduce the                                 new machine?       this machine        more
                   overall cost, if                                              yet to make         information
                   rework on the                                                 an analytical       on the
                   new CNC                                                       judgemenet.         performance
                   machines turns                                               Furthermore,        of the
                   out to be lower                                               the data on         machine is in
                                                                                 potential           (see above)
                                                                                 customer           A process
                                                                                 demand for          should be set
                                                                                 the new             up to record
                                                                                 product             the necessary
                                                                                 needs to be         performance
                                                                                 more                data, and
                                                                                 concrete            make a
                                                                                                     decision in
                                                                                                     due course
                                                                                                    Further

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HUID 305 4924 40 24 TOM Final Exam — Saturday, May 29, 2010

Option         Details            Principal         Key Questions      Analysis /     Conclusion10
                                  Sources of                           Rationale
                                  Enhancement /
                                  Cost Reduction
                                                                                        should be
                                                                                        sought from
                                                                                        customers to
                                                                                        demand for
                                                                                        new product

Discussions of Options Considered & Summary Decisions
1. Implement Performance Improvement on SignaSense line
immediately versus 2. Implement Performance Improvement
Program a few months out on the new TalkBack line
As the table and exhibit 2 & 3 illustrates there is considerable scope available now for improving
MLTs and overall yields on the line. Although pushing for improvement now risks exacerbating
the already difficult tensions within manufacturing and potentially even disrupting a line which is
working reasonably well, the prize for improvement is so large and the need from customers for
reduced lead-times so great that I feel we cannot wait. Furthermore, putting in place a continuous
improvement process now will send a strong signal to upper management that we’re serious about
this, in addition to raising the bar & hopefully getting the organization focused around these

3. Purchase of the CNC Machine Now
As the table above illustrates the purchase of this machine now is expected to yield considerable
benefits in terms of reduced rework and corresponding knock on in reduced ML-times.
Furthermore the purchase now provides a platform for training the organization around the use of
this new machine; establishing ―change momentum‖ and sending a signal to upper management.
The analysis of payback indicates a 1 –2 year payback, depending upon the yield increase. On the
downside, a purchase now involves some financial risk, together with potentially distracting
manufacturing from the task of improving the line. On balance however, I feel that the potential
for learning and payback criteria are attractive; the risk is limited, and the machine should be

4. Purchase New CNC machines for new line only
Without more explicit data on the performance of the CNC machines, and the expected
improvements they are likely to yield it is difficult to make a financially motivated decision for
them. This is compounded by the uncertainty around customer demand for the new product as
well as how that demand is likely to ramp up over time. Whilst pushing back the decision by 7-
months, until we have more data on the CNC machine purchased for the existing line risks
delaying the introduction of the new product, I feel that this risk is worth taking. Customers don’t
seem ―desperate‖ to buy the new product; they are reasonably locked into to our existing line, so
whilst innovation in this case is important, a delay is not mission critical. Furthermore delaying
the decision, but purchasing just one CNC machine, gives us leverage over the supplier and they

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HUID 305 4924 40 24 TOM Final Exam — Saturday, May 29, 2010

may be more helpful in supplying the necessary data we would like11 before making a final


Details of implementation

Short Term Implementation Plan (0 weeks to 3 months)
Short term we need to put in place quick process improvements and metrics to improve the
MLTs, get going on the new CNC machine and understand its likely performance impact and
understand more fully customer buying behavior.

Action              Expected Impact         Leader            By When         Measurability      Contingency
                                            Responsible                       Method &
1. Set up            Enables                Havel staffed    Immediately    Meet once         NA
committee to          organization to         by other                          every week
oversee new line      make best               deparment                         and charge
                      decision on             heads                             each member
                      construction and                                          with
                      rollout of new                                            collecting
                      line                                                      relevant info
                                                                                e.g. on CNC
                                                                                demand etc
2. Order CNC         Enables them to        Selfridge,       Immediately    Put in place      If machine
machine and           understand              Miles, Synder                     metrics to         does not
push for quicker      performance of          & Havel                           understand         pay back
than 6 month          CNC machine                                               performance        or does not
delivery & setup      and likely                                                impact of          hit
                      impact on future                                          CNC machine        performan
                      line                                                      and likely         ce criteria,
                                                                                impact on          consider
                                                                                new line           alternative
                                                                               Monitor            decision
                                                                                payback            on final
                                                                                against pre-       line
                                                                                agreed critera   
3. Put in place      Enables CNC            Selfridge        Over next 3    Carry out         NA
training for new      machine roll out                          months          frequent
CNC machine           to be successful                                          worker
                     Puts in place                                             surveys and
                      trained work                                              just ―talk to
                      force if we                                               them to keep
                      decide to carry                                           an eye on
                      out full scale roll                                       ―how it’s
                      out later                                                 going‖
4. Put in place      Generates              Selfridge        Immediately    Put in place      If we see
continuous            momentum                working with                      metrics based      customer

11 Or even leasing us some machines to mitigate the risk

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HUID 305 4924 40 24 TOM Final Exam — Saturday, May 29, 2010

Action              Expected Impact       Leader           By When              Measurability        Contingency
                                          Responsible                           Method &
improvement           behind reducing       Miles and                             on both              satisfactio
process for           MLTs which are        Snyder for                            manufacturin         n slipping
reducing MLT &        critical to our       production                            g process and        further the
increasing yield      on-going             DesMaisons &                          process seen         more
This unit should      customer              Customer                              from                 radical
examine the           satisfaction          Technical                             customer             action will
economics and                               Support                               point of view        need to be
implications for                            Enginner                              (e.g. lead           take to
moving to a half-                          Reporting to                          time,                improve
day schedule                                Havel                                 satisfaction         processes;
Put extra                                                                         indicators etc)      however
machine against                                                                  Benchmark            for now
slow step in                                                                      this against         continuous
Chamber                                                                           historical           improvem
machining                                                                         customer             ent should
process                                                                           satisfaction         be okay
                                                                                  and ask             If moving
                                                                                  customers            to a half
                                                                                  about their          day
                                                                                  other                schedule
                                                                                  suppliers            turns out
                                                                                                       to not
                                                                                                       yield the
                                                                                                       then more
                                                                                                       s (e.g. a
                                                                                                       JIT line
                                                                                                       should be
5. Carry out         Really               DesMainsons     Over next 3         Detailed            If
detailed customer     understand how                         months               analyic and          customers
survey to             much customers                                              microeconomi         strongly
understand            value quick                                                 c (elasticity of     indicate
buying habits         delivery times,                                             demand)              that JIT
                      and how much                                                based look at        delivery is
                      they are                                                    customer             become
                      prepared to pay                                             demand at            essential
                      for this                                                    different price      for their
                     Understand                                                  points               business
                      when demand                                                Analysis of          then more
                      for new product                                             components           analysis
                      is likely to ramp                                           & importance         will be
                      up                                                          of customer          necessary
                     The output of                                               demand, in
                      this study                                                  particular
                                                                                  important of
                                                                                  JIT – how
                                                                                  much do they
                                                                                  value it?
6. Inform senior     Keep                 Havel           Once initiatives    NA                  NA
management of         management in                          are in place and
recent moves to       the loop and                           you have
improve line and      create change                          sometime to
of decisions on       momentum                               report – around
CNC machine           around process                         1 week

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HUID 305 4924 40 24 TOM Final Exam — Saturday, May 29, 2010

Action               Expected Impact      Leader        By When          Measurability    Contingency
                                          Responsible                    Method &
                       across the
7. Inform all         Gain buy in of      Havel                                       
workers of recent      workforce on
moves to               new initiative
improve line and      Prepare them for
of                     potentially
productivity/yield     radical changes
drive                  ahead

Long Term Implementation Plan (3 months to 12 months)
Longer term actions should continue the momentum established above, and should include

    7 Months — Once early results from CNC machine are in, Hazel and manufacturing
     committee should assess viability to roll out on new line
    3 months — Customer data should be used by joint committee to make decision on expected
     demand for new product & therefore economic implication of line
    3 months — Once analysis of scope for process improvement has been completed, and
     metrics have been collected, committee should consider re-aligning the incentives of
     everyone in the organization against new MLT and customer focused led criteria Furthermore
     if ―radical changes‖ are carried out on the line, entire workforce should be informed

Expected impact of actions on issues identified
I would expect to see significant data being collected on customer demand & their needs within a
few weeks (particularly from interviews with the sales people) – this will yield benefits in terms
of decision making on the line
In terms of process improvements, the analysis which I’ve charged Selfridge with – looking at the
implications of moving to a half-day cycle – should be completed within a couple of weeks; that
will enable us to be well placed to change the line.

Principal Risks & Contingency Actions
The principal risk of this approach is that by not having taken a more aggressive approach up
front to reconfigure the line immediately we risk increasing customer dis-satisfication. Careful
monitoring of customer needs should be undertaken on an ongoing basis to mitigate this.

In the scope of their business the financial risk on the CNC machine is slight but nevertheless the
pay back should be monitored carefully

It will also be essential to actively manage the perception of the parent to ensure that they are kept
on board with all the changes and do not become disillusioned.

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