Zachary Harris (#112177795) 11. 09. 2010 Donner Company FIT Analysis I. Opportunity * Customers: Electronics manufacturers; IBM, AT&T, Digital Equipment are customers for large orders of simple boards or small orders of prototype boards: Specializes in making circuit boards for experimental devices and pilot production runs * Costs: * Variable costs: raw materials, direct labor, selling expense * Fixed Costs: manufacturing overhead, indirect labor, administrative expense * Competition: * 750 printed circuit board manufacturers in U.
S. * Classified as captive or contract manufacturers * Context: Circuit board industry growth parallels computer, telecom & defense industry growth rates * Key Success Factors: 1. Increase manufacturing productivity 2. Improve product quality 3. Determine actual manufacturing time by tracking boards through production system * Hope to better predict production time so delivery dates can be accurately estimated and met 4. Price orders by required delivery date (charge premium for rush orders) II. People Edward Plummer – President – intimate understanding of production process (helped create it); believes in superiority of the company’s designs and production processes * Bruce Altmeyer – Design Engineer – also very knowledgable of production process; also in charge of locating design errors, preparing CNC equipment, identifying & solving production problems * Diane Schnabs – Expediter – tracks orders, investigates production problems * David Flaherty – Supervisor – in charge of manufacturing from order until shipment; supervisers 22 production employees (large responsibility)
* Shop Employees – qualified (often in 1+ areas), experienced, must exercise skill & care * Managers & Engineers have ample experience & intelligence in electronics industry III. Deal: Donner needs to better determine its production process in terms of standard production times required and should focus on improving the quality of its products to avoid returns and to improve customer satisfaction. * Donner should try to incorporate more standardization into its production process so that it can group smaller orders together in the production process in order to increase productivity and profits * Donner should focus on attracting customers who order in large quantities, because this will increase productivity and profitability IV. Systems * Track board throughput time in the production at regularly to measure increases in productivity * Compare product return rates over time to measure improvements in product quality * Measure and improve direct labor utilization rate
Study Questions Question 1 The normal process flow for the production of printed circuit boards at Donner Company consists of three distinct stages: preparation, image transfer, and fabrication. Each stage is comprised of several steps of operations that require standard production in terms of setup and run times. Because Donner company’s intricate manufacturing process is a collection of numerous tasks and operations that can be best described with the use of a process flow diagram. Exhibit 1 displays a distinct process flow diagram for Donner Company’s printed circuit board production process, including stages, operations, and production times. Question 2
Although Donner Company has computer numerically controlled (CNC) drilling and routing machines, it has not set a formal standard for the productive use of these machines based upon size of an order. Minimum order sizes required for the use of these CNC machines can be determined via a breakeven analysis comparing the CNC method with the manual method for both image transfer and profiling. Standard production times for the alternative methods for both of these operations are contained in Exhibit 2. For the drilling operation comparison, a breakeven order analysis was conducted in order to determine the minimum order size required for the CNC drilling production time to become less than the manual drilling production time.
As seen in Exhibit 3, the breakeven order number for equal production times is approximately 5. 92 boards. Thus, for orders of 6 or more circuit boards, Donner Company should use the CNC drill. The manual drill should be used on all orders of less than 6 circuit boards. For the profiling operation comparison, a breakeven analysis was also conducted to determine the minimum order size needed for the CNC routing production time to become less than the punch press production time. As evidenced in Exhibit 4, the breakeven order number for equal production times is 200 circuit boards. At this point, both profiling methods require 250 minutes production time.
Thus, for orders of more than 200 circuit boards, Donner Company should use the CNC router. The punch press should be used for orders of less than 200 circuit boards. Question 3 The dry film photoresist (DFPR) operation is an integral step in the image transfer stage. It is comprised of three sub-steps: panel prep, laminate & expose, and develop. This operation has been identified as a potential bottleneck in the production process based upon supervisor observations. An effective method to test to see if the DFPR operation is causing operating problems is to examine how its current daily capacity changes based upon order size. The assumptions required for such a test are contained in Exhibit 5.
These include the assumption of an 8-hour work day, an initial assumption of 8 boards per order, and no lag time between sub-steps or in between orders. The total DFPR production time for an order was determined to be 47. 40 minutes, which equated to a daily capacity of 10. 13 orders (81 boards). Further analysis of DFPR production times (as shown in Exhibit 6) revealed that production time increases at a decreasing rate as order size increased. Additionally, daily DFPR capacity, as measured in number of boards, increases at an increasing rate as the order size is increased (See Exhibit 7). This correlates to DFPR production time per board being significantly reduced as the order size is increased.
Thus, it is easy to see why a bottleneck might sometimes occur in the DFPR area of there are several small orders going through back-to-back. If viewed in the same manner as costs in economics, the setup time in this operation can be viewed as a fixed cost incurred regardless of production amount. The rum time can be viewed as variable costs that are incurred at an incremental rate as production is increased. Thus, smaller orders have a higher percentage of their production time represented by setup time (fixed) as opposed to run time (variable). Question 4 A last useful analysis is to examine the standard labor times required for various order sizes.
Exhibit 8 displays the total standard labor times for order sizes of 1 board, 8 boards, and 200 boards. As expected, total labor times increase with increasing order size. 1 board takes approximately 383 minutes, while 8 boards require 615 minutes. An order of 200 boards would require 1840 minutes. It is interesting to note the how the amount of labor time require per board significantly decreases with increasing order size. An order of one board requires 383 minutes to produce, an order of 8 boards requires 77 minutes per board and an order of 200 boards requires only 9. 20 minutes per board. Thus, significant economies of scale in production can be gained by filling larger orders as opposed to smaller orders.
RECOMMENDATION After having analyzed Donner Company’s production process, it is clear that it is not operating at maximum productivity or profitability. It needs to more accurately determine its standard production time based upon order size in order to be able to more accurately estimate and meet promised delivery dates. This can be accomplished by physically tracking boards through the production process. Higher prices should be charged for rush order to accommodate for having to interrupt normal orders in the production process. The company should also strive to improve its production productivity by eliminating bottlenecks in its production process.
Because the majority of its orders are over 6 boards, it should consider adding another CNC drill to avoid bottlenecking in the drilling operation. Dry Film Photoresist is another operation prone to bottlenecking under the current production process. The addition of a second DFPR area and additional inspection in this area could help to avoid this bottlenecking and improve quality. The company should also focus on improving the quality of its products in order to lower its return rate. Although customer standards for quality differ, instituting the highest possible quality standard would help to alleviate its product quality problem. Another area that has not been explored in depth is the direct labor utilization rate.
The managers should determine the current labor utilization and subsequently consider reducing or increasing the number of employees at each operation process. Additionally, the layout of the production process should be reevaluated in order to eliminate all unnecessary interruptions incurred from moving from one place to another. DIAGRAMS & SUPPORT NUMBERS Exhibit 1: Process Flow Diagram Exhibit 2: Drilling & Profile Production Times Exhibit 3: Drilling Breakeven Order Size Exhibit 4: Profile Breakeven Order Size Exhibit 5: Dry Film Photoresist Daily Capacity Exhibit 6: Dry Film Photoresist Production Times by Order Size Exhibit 7: Dry Film Photoresist Daily Capacity by Order Size Exhibit 8: Total Standard Labor (Production) Times by Order Size