The Importance of Quality Issues
Hilcrest Auto is a manufacturing company specialized in producing specific parts for automobile assemblers. Hilcrest Auto is currently facing quality control issues, possibly leading to financial issues or threats of losing future contracts. Quality control has been an essential concern for most manufacturing industry. Low-quality control in the manufacturing process could increase the cost of good manufacturing and returns from customers. However, quality control is especially critical in the automotive supply industry. One reason is that there are only limited numbers of consumer firms dominated by Ford, GM, and Daimler-Chrysler. Producing parts that are not “up-to-spec” could result in worsening customer relationship. In Hilcrest Auto’s case, inability to consistently providing “up-to-spec” heater core tubes to top tier assemblers could lead to customer dissatisfaction and potentially losing future business contracts. Theoretical Capacity
Hilcrest Auto’s current manufacturing process for heater core tubes includes three parts: the pressing machine, the bending machine, and the washing machine. The pressing machine takes seven seconds per tube; the bending machine takes 13 seconds per tube, and the washing machine takes 0.06 seconds per tube (60 seconds per 1000 tubes).
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Each of these processes runs simultaneously, so the theoretical capacity is constrained by the process that takes the longest period per tube: the bending machine. Under the current policy, Hilcrest Auto is operating two eight-our shifts a day and five days per week. There is a weekly total of 288,000 seconds in operations, allowing Hilcrest Auto to produce 22153 tubes.
“Good Day” Capacity
In this case, the production output of Hilcrest Auto ranges from 1,000 to 2,000 heater core tubes per shift. Hilcrest Auto considers a shift with 1300 tubes “a good day.” If every day turns out to be a “good day” for Hilcrest Auto, its weekly supply will be 13,000 units. On the other hand, weekly demand from Tier One customer on average equals to 18,500 tubes. Hilcrest Auto is facing 5,500 units discrepancy in the weekly supply for its customers. This discrepancy would be significant to Hilcrest Auto, which is not considering overtime or third shift under the current circumstance.
There are several potential solutions for Bailey, the quality manager and business unit manager of the Small Parts Division of Hilcrest, under this circumstance of the quality issue and shortness of supply. First, Bailey is considering imposing an immediate improvement in quality control. Bailey is also considering adding the third shift or purchasing a new machine to increase productions.
Immediate Improvement
Bailey is considering adding two more steps to the production for Hilcrest in order to improve the quality of heater core tubes: the re-shaping process and the gauging inspection. The re-shaping process takes seven seconds per tube, which is not constrained by capacity. The gauging process, on the other hand, will take virtually no time, but scrap five percent of finish parts. On a “good day” level of production, Hilcrest will reject 65 tubes per shift, resulting 650 units deduction in the weekly supply. Bailey is facing a situation to sacrifice production level in order to ensure quality control. In addition to that, Hilcrest is required to hire an additional full-time operator for $48,000 to supervise new operating processes. Third Shift
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In order to meet the market demand, Bailey can also add a third shift to increase the production level. By adding a third shift, Hilcrest would be ideally operating 15 shifts per week. Assuming that there would be no downtime for bending machine, third shift would allow Hilcrest to manufacture 18,525 units of heater core tubes. The third shift has an increase production of 6,175 units. However, adding a third shift could be very costly. It requires Hilcrest to invest extra money in labors. Bailey has to hire new full-time operator and other employees. On the other hand, Hilcrest would also have to ensure that the productivity of the third shift. While the third shift can be beneficial for increasing the production level, it might be difficult for Hilcrest to operate its bending machine without any downtime. Additional shift might end up not as effective as expected.
New Machine
Acquiring a new bending machine can be a potential solution to increasing production units. For Hilcrest, purchasing an additional machine would cost $70,000. In addition to that, Bailey would also need to hire one more full-time operator ($48,000 annual salary).
It might also slightly increase the overhead cost. However, two bending machines working simultaneously can significantly improve the manufacturing process. Doubling production from bending machine can cut down the length of production from 13 seconds to 6.5 seconds per tube, and transfers the constraint to 7 seconds per tube (pressing machine and re-shaping process).
Theoretical capacity with two machines is 41,142 units per week, which is an increase of 18,989 units per week. Moreover, an extra bending machine provides Bailey the time he needs to overhaul the odd bending machine. The old machine, which lacks maintenance, does not consistently produce “up to spec” tubes. An additional bending machine can improve the quality of Hilcrest’s production. Contract Changes
Bailey could solve the quality issue with lower cost by contacting their customer to widen the acceptance range of variance in shape of heater core tubes. However, this solution might hurt company’s reputation and it might also lose potential business contracts. Shipment Error
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For the “out-of-round shipment error,” Bailey should inform his customer and explain the situation. Although reporting customer results in profit loss to replace tubes and heater core, Bailey would prevent Hilcrest from losing business and possible lawsuits. On the other hand, Bailey should also ensure his customer the imminent improvements for Hilcrest to keep the customer confident enough about its contract. With improvements, Hilcrest has potential of meeting future demand for better contracts.
