Fall
2013
Fall
2013
Fabritek Corp.
Fabritek Corp.
Fabritek Corp.
HIRAL MEHTA
This document touches various aspects of the Fabritek Corp business. It summaries the issues and determines the underlying causes of the problem. The document also discusses about ethical issues within the organization.
Fabritek Corp.
HIRAL MEHTA
This document touches various aspects of the Fabritek Corp business. It summaries the issues and determines the underlying causes of the problem. The document also discusses about ethical issues within the organization.
08
Fall
08
Fall

Introduction

Fabritek Corporation is a traditional job shop, which specializes in machining castings. Fabritek Corporation received a contract from Pilgrim Corporation for delivery of 17,000 units of a critical engine part over a period of 6 months or until the order is fulfilled. 8 main operations were involved in making castings for Pilgrim Corporation.

1. Unpack and visually inspect purchased casting1 2. Mill Cut 1: Rough-mill the bearing surface 3. Mill Cut 2: Finish-mill the bearing surface 4. Mill Cut 3: Mill the face 5. Mill Cut 4: Mill the keyway 6. Drill eight holes 7. Finish-grind the bearing surface 8. Final inspection and pack

To fulfill its order Fabritek designed in operations in following manner.

Material
Handlers
Material
Handlers
Drilling and Grinding Operations
Drilling and Grinding Operations
Mill Cut 4
Mill Cut 4
Mill Cut 3
Mill Cut 3
Mill Cut 2
Mill Cut 2
Mill Cut 1
Mill Cut 1

Exhibit 1

Starting January 1st, every week on Friday, 650 units were to be shipped. So technically, if everything works as per planning the delivery should be done by end of July. However because of changes in human resources, the delivery of the Pilgrim Corporation was affected.

| Jan 31st | Feb 7th | Feb 14th | Feb 21st | Feb 28th | Mar 6th | Mar 13th | Mar 20-------- End of July | Week 1 | | | | | | | | | Week 2 | | | | | | | | | Week 3 | | | | | | | | | Week 4 | | | | | | | | | Week 5 | | | | | | | | | Week 6 | | | | | | | | | Week 7 | | | | | | | | | Week 8 ----- Week 26 | | | | | | | | |

Exhibit 2 The shipment was delayed on Feb 28th because of the defects and those delays could lead to subsequent delay in shipments and Fabritek can loose it potential customer.

Analysis of Production Process at Fabritek

The Exhibit 2 in the case study describes time taken by each of the four Milling process.

Milling Cuts | Total cycle time | Machine Time | Total Operator Time | External Time | Internal Time | | | | | | | No.1 | 3.594 | 2.6 | 1.139 | 0.994 | 0.145 | No.2 | 2.964 | 2.22 | 0.992 | 0.744 | 0.248 | No.3 | 3.301 | 2.42 | 1.244 | 0.881 | 0.363 | No.4 | 1.725 | 1.118 | 1.035 | 0.607 | 0.428 | Total | 11.584 | 8.358 | 4.41 | 3.226 | 1.184 |

Table 1 As observed for a standard output rate of 100 units/day, the total cycle time is 11.584 minutes per unit. Also we can observe that the total machine time is 8.358 minutes per unit for a standard output rate of 100 units/day. Hence the estimated cycle time for the milling process for 133 units is ((11.584 * 100)/133) = 8.709 minutes/unit. The table below shows the estimated output for different capacities Output | Observed Cycle time | Estimated cycle time (in minutes) | | | | 100 units/day | 11.584 | 11.584 | 133 units/day | | 8.709 | 135 units/day | | 8.581 | 167 units/day | | 6.936 | Table 2 Since Arthur Moreno is now working at the 167 units/day which means cycle time of 6.936 minutes/unit. This is way below the total machine time of 8.358 minutes. Machine time cannot vary unless there is a new advanced machine, which is not the case here. This proves that Andrew Moreno may be skipping some steps and/or neglecting some checks and/or compromising on external time. The reason why Arthur Moreno is performing tasks at a high speed is because he is unhappy with his pay scale. After he was transferred to this new project, his ability to earn reduced by approximately 19%. This unhappiness led to quality issues and in turn led to delays in shipments. The underlying cause of this issue is that employees are rewarded based on the total output irrespective of whether it is a good output or bad output. This makes employees very money oriented and less oriented towards meeting company’s goal. In my opinion this issue should be brought to General Manager’s attention but not immediately. May be after few warnings if Arthur Moreno does not show any improvement in his actions this matter has to be escalated to the General Manager. Frank Deere should first talk to Arthur Moreno and explain him that his style of working is actually affecting the quality and standard that Fabritek follows instead of encouraging him to do more work without taking quality into consideration. He should also listen to Baker and give a thought as to why these defects are rising. Stuart as a manager can directly inspect the process and get to the roots of the problem. If he does not have Frank’s support he can talk directly to Arthur Moreno and explain him that his attitude towards work is not doing any good to the company and if this continues he stand a chance to loose his job in the long run. Because of Arthur’s higher output rate, the defect rate for the week of Feb 28th has increased from almost negligible to approx. 14% (considering standard output rate of 135%). This increased defect rate could lead to miss fulfillment of Pilgrim order. Ethical Issues Since the compensation is based on the total output, employees like Arthur Moreno do not have incentive to do good for the company. The main ethical issue here is not thinking about the company and just focusing on one’s pay scale. In long run this does not prove to be good. Memo Dear Frank Deere, It was observed that after moving Arthur Moreno to milling department quality of weekly shipments was affected. Considering a standard output rate of 135% the defect rate has increased by 14%. This is too high and is not a good sign since it can eventually lead to the delay in order fulfillment. Fabritek can be at risk of loosing Pilgrim as a potential customer and it can also affect the reputation of the corporation. As per the data, Arthur is working at a rate of 167 units/day, which is approximately 24% higher than the standard output rate of 135%. As per the analysis this means that the estimated cycle time for output rate of 167 units/day is 6.936 minutes/unit. This time is way below than the total machine standard time of 8.358 minutes/unit. Since he is an experienced professional it is convincing if the external time is reduced but cycle time below machine standard time, which cannot change unless high tech machines are used, is a red flag. Based on the data and analysis it looks like Arthur is not following all the processes. Also, based on Clark’s comments it looks like Arthur may skip step 2 or he may just run the first two steps to get more output. To solve this problem following are the recommendations. 1. Improve the compensation method. Since the incentives are based on Total output instead of good output, employees such as Moreno has an incentive to produce more putting quality at a risk. This compensation model has to be modified such that people have incentive to produce quality output as opposed to more output. May be rate performance of employees based on the defects and assign the pay accordingly. 2. Do not take hard action against Moreno in short run Though Arthur is not doing quality work he is still a productive worker and knows his job well. The fact that he took over this new project within half a day proves that he is highly skilled. So Temporary until these 17000 units are delivered there has to be no change in Human resources. Changing compensation model should take care of the issues in short run. A new person on the job may not be a wise option in short run. 3. Move Moreno to grinding department Since Arthur is highly skilled worker, he can be moved to grinding department. This would reduce the amount of inventories that has piled up before grinding department and make the whole process little smoother. This option could prove to be another way to address ethical issue 4. In long run increase capacity of the process Fabritek is known to have high capacity operations to avoid machine interference. So considering that Pilgrim will be a customer for Fabritek after this trial order, Fabritek should consider increasing its capacity in long run 5. Have additional cross-trained workers From the resource backup perspective, Fabritek should consider training more people so that in event of unavoidable circumstances the order on hand is not affected and planning can be better. In my opinion at least 2 to 3 more workers should be there on every project. If everything goes well these employees can help in ensuring quality. 6. Improve Quality check at each level Define standards and processes at each department level to develop high quality product From all the above-suggested solutions the immediate action would to redefine the compensation policy and make Arthur and the entire team aware of the quality issues. I will also forward this email to Stuart Baker for his review. Please let me know in case you have any questions.
Thanks,
Hiral Mehta