Donner Company Group7

Contents

Introduction 2Problems and Causes 2

Data Analysis3Process flow chart.............................................................................................................................5

Recommendations 7Generic recommendations................................................................................................................7

Recommendations involving major changes.....................................................................................7

Recommendation 1: Concentrate only on producing small orders of SMOBCs.................................8

Recommendation #2 - Concentrate on producing only large quantities of simple technology boards (order size >=200) only........................................................................................................10

Recommendation# 3: Use two separate production lines, one each for producing large and small quantities of simple technology boards...........................................................................................13

Conclusion 16

Donner Company – Case Analysis

Introduction

Donner Company, started in 1985, manufactures printed circuit boards, technically called as “soldermask overbare copper” boards, according to specifications of electronic manufacturers. It faces a competition from around 750 manufacturers in United States. With the increase in use of electronic appliances, the printed circuit board industry has witnessed growth. The firm has developed new processes and application and holds patents for these.

The president of the company, Edward Plummer is reviewing the company position in October 1987, before deciding on plans for 1988. During the review he does in-depth study of how various process and operations are carried out and challenges

The basic work process can be divided into three important stages – preparation, image transfer and fabrication. The detailed process flow chart is given in exhibit 1.

The firm has three persons, Diane Schnabs, Bruce Altmeyer & David Flaherty who occupy supervisory roles in the company. Schnabs kept track of delays in the manufacturing process and made sure that clients were informed about possible delays. She also coordinated the serving of rush orders. Altmeyer was involved with the design of computer control and analyzing the customer requirements. He was responsible for locating the errors in customer artwork. David was responsible for overall manufacturing process until the final product was shipped to the client.

Whenever an order was received, price was quoted based on estimations of labour and material costs. Based on acceptance by the client, delivery time of 3 weeks was quoted for orders below 1000 boards and 5 weeks for rest. Meanwhile some rush orders were accepted which needed to be served in four days.

Problems and Causes

Plummer during the review realized that the there were problems related to productivity, quality and delivery systems.

The major difficulty faced in production process design was frequently changing bottleneck process in the manufacturing system. There were both external and internal factors responsible for the perplexing situation. Clients often found the necessity to change the product specifications because of some error and this required worked to be stopped on that product. This created imbalances in the workloads at various workstations. Internal factors like improper management and procurement policies for raw material requirements also introduced delays in the manufacturing process. All this caused difficulty in predicting the amount of workload at various stages of production and hence this led to insufficient utilization of available capacity. The situation was

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aggravated by the rush orders that interfered with the process flows and hence caused imbalances.

Idle machines and incorrectly defined labour hours were a major concern for Plummer. Further the time estimates used by the company were way higher than those of the competition. Besides, Plummer noticed that job methods needed improvements but the major hindrances in bringing about the changes was the pressure of output and frequent shifting of labour.

Lloyd Searby, the sales manager also brought to notice that the company was not meeting the quality standards and even defaulting on delivery deadlines. Enforcement of rigorous formal quality inspection standards could not be applied because of variations in these standards from order to order. Also there were some problems faced because of the policy of despatching shipments for delivery of outputs to clients. The problem is majorly because most of the shipments are despatched towards the end of the month. This can be seen in the figure below:

Searby has expressed serious concerns regarding present problems of the company and says these may cause a decrease in sales. He forecasts that present system may restrict sales to $2 million which can be increased to $3 million if the processes are improved

Data Analysis

Data analysis gave us deep insight into the some of the problems plaguing Donner Company. Some of the observations are mentioned below.

Drilling Process is the bottleneck capacity in general

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The company’s shop floor policy of not using CNC machine for drilling if orders are less than 100 boards is flawed

Different Operations strategy needs to be used depending on the number of boards being manufactured

Please refer to the exhibits at the end of the report. Detailed calculations can be found in the excel worksheet object that has been included. Standard production times with order size of 1, 8 and 200 boards have been worked out in these exhibits.

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Process flow chart

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Donner Company Production ProcessDonner Company Production Process

Preparation StagePreparation Stage

Aligning of panels for drilling, imaging, and routingAligning of panels for drilling, imaging, and routing

Punching of location holesPunching of location holes

Sheets sheared into 12” X 18” panels Sheets sheared into 12” X 18” panels

Inspection of sheet for visual defectsInspection of sheet for visual defects

Master artwork (received from customer)Master artwork (received from customer)

Purchase of 2 sided copper clad epoxy sheet (36” X 48” sheet; 0.059” thick)Purchase of 2 sided copper clad epoxy sheet (36” X 48” sheet; 0.059” thick)


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Image Transfer StageImage Transfer Stage

Operator pins a panel to drillOperator pins a panel to drill

CNC (Automatic)CNC (Automatic)

Drilling of 500 holes

Drilling of 500 holes

Manual DrillingManual Drilling

DFPR (panels are washed, scrubbed, and coated with dry film photo resist)

DFPR (panels are washed, scrubbed, and coated with dry film photo resist)

Metallization (Copper immersion bath)Metallization (Copper immersion bath)

Placement of customer artwork on panelsPlacement of customer artwork on panels

Passed through DFPR developing machinePassed through DFPR developing machine

Electroplatation of bare panelsElectroplatation of bare panels

Flash plantation of Tin over copper platingFlash plantation of Tin over copper plating

The DFPR that is not exposed to UV light is chemically exposed (At the end of the step, the circuit pattern would be created on

both sides of board)

The DFPR that is not exposed to UV light is chemically exposed (At the end of the step, the circuit pattern would be created on

both sides of board)


Recommendations

Generic recommendations Hold an inventory of raw material to reduce the time an orders spends waiting for the purchase to happen.

Change the policy of using CNCs for drilling for order greater than 6 boards

Change the policy of using CNCs for drilling for order size greater than 200 boards unless the machine is idle.

Change the policy of shipping more in second fortnight of the month, make it more equally distributed.

Recommendations involving major changesHaving looked in to situation and problems faced by Donner, we suggest following recommendations.

Currently, Donner is fulfilling low-volume (<100), high-volume (>100) and rush (<8) SMOBC orders, with more focus on larger orders. The average order size is 96.01 (See exhibit 4). Diversification may be a desirable option many at times but there are several compelling

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Fabrication StageFabrication Stage

Each panel is dipped into molten solder bath and exposed copper plates are covered with solder

Each panel is dipped into molten solder bath and exposed copper plates are covered with solder

Circuit boards are separated from the panel and reduced to its required “profile”Circuit boards are separated from the panel and reduced to its required “profile”

Computer control is necessary for the CNC router is prepared for the customers’ artwork

Computer control is necessary for the CNC router is prepared for the customers’ artwork

Boards are visually inspected, electrically tested, packaged and shipped

Boards are visually inspected, electrically tested, packaged and shipped


reasons for Donner to concentrate on fulfilling one type of order, namely those that are low-volume and fast turn-around , high volume and decent turn around. We therefore first present two options which are centred on focused order size either doing only larger orders or doing only smaller orders. Subsequently we also discuss rendering both the services with separate production lines.

Recommendation 1: Concentrate only on producing small orders of SMOBCs. (Use CNCs for drilling and manual labor for profiling

The important factor to note is the TAM for smaller orders. Rush orders and small size might not be able to give the volumes. With the assumption that there is enough market for short orders below we present implications of focusing on smaller order size.

The following reasons call for a smaller order size -

First, Donner has highly skilled employees which alone can complete all steps of an order, therefore focus on a small order size will help drastically reduce the idle time of labour.

Second is that small orders rarely involve design changes as compared to the larger or bulk orders, this will not only reduce the WIP but also will create a more smother shop floor operation. Another advantage is less rejection ratio for smaller orders as compared to for larger orders.

The firm is relatively stronger in anticipating and resolving problems encountered during the design and production of small volumes of boards when compared to the competition. Coupled with management’s desire to continue fulfilling low-volume orders (where they experienced no problems with rejects or on-time delivery), the firm should look into serving this market segment since it possesses both the experience and confidence to assure a high degree of success.

Implications with recommendation 1 -

Processes and Strategy related

If the firm decides to pursue a policy of producing only small volumes of quick turn-around boards, it will enjoy productivity gains, better labor utilization and improved quality assurance, with slightly inefficient usage of available machinery and more importantly will have to be satisfied with low revenues. Below are the impacts of, positive and negative, which will be experienced in specific areas of the firm’s operations in the pursuit of this strategy:

Materials

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Currently, raw materials are being “simmered” by those who are fulfilling expedited orders, namely by Arthur Dief. Such a practice may consistently lead to an order remaining as a Work in Progress (WIP) order, in the firm’s manufacturing stream for longer than necessary. WIP are further delayed as it awaits another shipment of raw materials that were originally acquired for its use but now consumed by the “rush” orders. Fulfilling only small-volume, quick turn-around orders would require the firm to either hold larger inventories of raw materials or to acquire materials in a more timely fashion, but would decrease the probability of this inefficient process from continuing to hamper the entire manufacturing process.

Labor utilization:

The “simmering” of materials also has the added disadvantage of increasing the amount of labor required to produce a board. When a WIP is interrupted by a rush order, it may incur additional set-up costs. In addition, workers then remain idle until the machine he/she was using is made available again (after the rush order has been completed). Therefore, small quantity orders should alleviate such a problem since all orders being filled by the firm will be of similar size and have similar delivery dates, thus eliminating the “special status” given to rush orders and reducing the idle time, which amplifies workers’ productivity.

Capacity:

The ability of the firm to increase its production capacity is being hampered by the “shifting bottleneck”, which appears throughout various stages of the manufacturing process without any particular pattern. This phenomenon mainly occurs due to the variation in the order sizes and the unremitting interruption of current work flow (work in progress) in favor of rush orders. Thus, by adapting a small order volume only policy, which will eliminate both the great difference in order size and the concept of the “rush” order, the firm’s manufacturing throughput will improve significantly.

Information Flow:

Flaherty, the shop supervisor, has the greatest number of informational in and out flows. A high proportion of information, both inter-departmental and inter-firm, has to pass through Flaherty. Allowing him to operate effectively and efficiently will have tremendous impact on Donner’s overall performance. By making the order-types as uniform as possible, Flaherty should find it easier to plan resources and share information. Furthermore, carrying inventory of necessary raw materials should alleviate the need for long lead time to plan for work.

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Effect of suggested strategy on performance criteria:

It goes without saying if there is enough TAM for small orders. The recommendation one will help Donner reduce the TAT significantly.

Donner’s management is concerned with the firm’s performance in the following areas:

Financial

Productivity

Quality

Deliveries

Since all these items are inter-linked, an improvement in one area will lead to an improvement in all. Should the firm decide to produce only small quantities of fast turn-around SMOBCs, it will be able to fix the flaws in all of these areas. Since new employees typically take only approximately 3 ½ months to become proficient in their assigned areas and if the order size is small, managing the orders would be easier. Staff could work either individually or in teams to ensure their orders are of high quality and free of errors, from the moment the order is received till the moment it is shipped to the customer. The productivity and morale of workers should also benefit from this as the floor staff are given more responsibility for assuring their orders efficiently move along the manufacturing process.

On-time delivery will improve as a result and will be more uniform throughput the month, rather than the current unorganized shipping strategy.

Also favourably affected will be the financial health of the firm since it will be able to bill its customers sooner and will have less rejections and defects as well as it will carry smaller inventory of work in progress.

Recommendation #2 - Concentrate on producing only large quantities of simple technology boards (order size >=200) only

Unlike the previous case there is a huge obvious market for larger orders as 90% of the orders in September of Donner were greater than 200 in size. Therefore TAM is not a problem and top line should not be a problem till Donner can meet the TAT below 3 weeks.

Currently, Donner holds a position in both the contract and captive manufacturing markets. The experience Donner has gained over the last three years would facilitate the firm to concentrate on the large quantities of Simple Technology boards(The current order size stands at 96.01 boards) This will enable Donner to utilize their current core competency

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and resources, and focus on gaining new strengths, yielding improved quality and on time delivery.

Focusing on the captive market will mean that Donner will be in a position to further support its larger customers (i.e. IBM, AT&T, etc) with orders larger than 200 boards (90% of total orders received in September)

Process & Strategic Implications

Labor Utilization:

From the exhibit 3 we can see, significant time is saved per board when using the CNC Drill and Router (for orders over 200 boards); hence no requirements for manual drill or punch press. Employment could be reduced or workers could be re-deployed to work in other areas in the firm (Workers are well cross-trained and able to perform different functions throughout the manufacturing process).

Drilling Holes

Let's calculate the board size for which the time taken by manual labor for drilling holes equals the time taken by CNC machine

Equating, 240 + 0.004*500*y = 15+ 0.08*500*y

Therefore, y=5.92

So for board size greater than equal to 6, using CNC machine would result in reduction of production time

Profiling (Size and shape)

Either CNC router can be used or Punch press, Let's determine the board size when production time using punch press equals the time taken by CNC Router

Equating, 150 + .5*z = 50 + 1*z

Therefore, z = 200

So the following operations strategy should be used depending on board size to be manufactured.

Operation Strategy

Process Board Size<6 6<=Board Size<200 Board Size>200

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DrillingManual Drill Y N N

CNC Machine N Y Y

ProfilingPunch Press Y Y NCNC Router N N Y

The increase in batch size will reduce the time per average board for manufacture and subsequently reduce labor time. Also for the fact that the larger the order size, the less time the process flow looked using the CNC machine, as opposed to manual processes. Company can consider purchasing a second CNC machine to accommodate this new strategy (advantageous for large-volume orders).

Capacity:

Capacity mainly depends on the order size, product mix and technology choices. By choosing to manufacture just the large quantity simple technology boards, product mix is no longer an issue, the technology is set and order size will always be high, hence producing at a lower average time per board (and low cost by utilizing economies of scale). The bottlenecks inherent in the current process would be easier to identify and solve, without further reoccurrences.

Materials:

The need to source raw material on a regular urgent basis should decrease in number substantially. A new strategic policy should be applied with relation to the stocking levels of raw materials to satisfy large orders (i.e. carry certain percentage of inventory as previously explained).

Information :

Analyzing all processes within the company, by far the most complex and confusing is the information flow. At present, until an order is shipped, Flaherty keeps the factory order and blueprint at all times throughout the process. This indicates that possibly, vital information is not being disseminated throughout the production line. September 1987’s pre-shipment rejection rate amounted to 7%, causing a large amount of rework. This information flow policy must change from being centered on Flaherty. In addition, the current process of expediting rush orders through the manufacturing process is adversely affecting the rest of the production process and increasing the information over load. Focusing on only large volume boards should allow for enhancements within information flow.

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Quality improvements:

A new Quality strategy should be adopted. Arthur Dief (senior worker) could be used in this role due to his knowledge of the entire manufacturing process and the fact that he had a zero return rate. There are various quality control strategies that could be implemented throughout the entire manufacturing process to detect (early) and prevent product defects, and to monitor the entire manufacturing process (i.e. six sigma, SPC or TQM). Workers should be trained to utilize such methods and to utilize new technologies.

Effect of suggested strategy on performance criteria:

Productivity should be increased due to the decrease in bottlenecks throughout the manufacturing process. Regarding the financial performance of Donner, if the sales manager can generate the desired sales and focus on the large quantity simple technology boards, there should be a marked improvement in Donner’s financial health. The on-time delivery should be enhanced significantly due to the company’s new strategic policy of concentrating on the large quantity boards, as well as the reduction in product returns and re-works.

In summary, by adopting this strategy and focusing on this segment of the market, Donner should be able to compete with those current producers in the “Captive Market”. It is critical that consistent sales numbers can be achieved. If Donner lost one or two large customers in this specialized and highly competitive market, revenue will seriously be compromised. Furthermore, Donner must be prepared to turn down a significant number of small orders. These small orders represent a large portion of the established customer base (90% 54 orders out of 60 orders in Sept); and those customers have been the backbone of Donner’s business. Management will need to adjust their mentality to focus on larger orders and be willing to avoid those smaller orders.

Recommendation# 3: Use two separate production lines, one each for producing large and small quantities of simple technology boards

Currently, Donner caters to the needs of both segments of the market, small and large volume orders. However, such a situation has adverse implications on its production lines which are evident from the decrease in the quality of its deliverables as well as the delays in delivery. The company initially started as a contract manufacturer thus focusing primarily on small size production. Thus, the company is finding it difficult to cope with the operating problems arising from its diversification in production lines which has resulted in a significant decrease productivity and quality. The company is confronting problems in assessing its production capacity because of the regular shift in the production bottleneck. These variations can be attributed not only to the differences in order size but also to the four-day rush orders. Serby’s prediction too suggests that the company needs a separate line of production to handle low volume orders in order to increase the sales and decrease the delivery time. The 1800 square foot addition available next year would provide an ideal

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opportunity to develop two separate production lines, one each for handling large and small size orders. The new space can be devoted for small scale production while the current production line can be used for handling large orders. The CNC machine available will be used only for the large scale production.

Such a set-up would help the company assess its capacity, increase its productivity and quality and at the same time reduce the delivery time.

Operational & Strategic Implications

Labor Utilization:

Exihibit 4 shows that the company’s labor utilization factor is 43.8%. Such low labor utilization can be primarily attributed to the following factors:

6-12 interrupts every day in the manufacturing process resulting in a considerable wastage of time.

Current operating problems; fluctuations because of rush orders, re-work and delay in the customer’s delivery of artwork modifications or a design change

To increase the labor utilization, Flaherty and Arthur Deif can be assigned for the supervision of large and small volume production lines respectively. Having two separate production lines under two different supervisors would not only ensure that the interrupts because of different size orders are avoided but would also help get rid of the existing operating problems thus increasing the productivity and quality of both divisions.

Capacity:

The company has not able to assess its production capacity accurately because of the regular shift in its production bottleneck. Anticipating where work would pile up in the shop on a given day had proven difficult because individual orders imposed varying workloads on each operation resulting from different size orders. Two different production lines would help avoid such a situation. It would also help the company achieve the sales of $3 million in the small order category in addition to the production for the large volume orders.

Materials:

Besides the re-work and rush orders, the company’s inventory policy has adversely affected its performance. A significant amount of time is lost because of the delay in Flaherty’s scheduling decision until the raw materials arrive from the vendor. The two different production lines combined with the availability of some raw materials would help the

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supervisors schedule the steps more efficiently. It would also reduce the company’s vulnerability to its suppliers.

Information Flow:

Inefficiency in the production line exists also because of the inadequate information flow within the company. It takes as many as 4 days before Flaherty is informed about the orders. This further affects his scheduling decisions. Two different production lines would ensure a proper communication about the orders to the two supervisors thus contributing to the decrease in delivery time.

Quality and on-time delivery:

Two fully dedicated production lines, each optimized for their respective production processes, can help the company increase the quality of its deliverables, thus decreasing the customer returns. Improve in labor utilization, increase in capacity and adequate information flow would further improve its productivity. The on-time delivery would also increase significantly due to the company’s new strategic policy.

Conclusion

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The market provides ample opportunity to the company to expand its market and customer

base in both market segments. However, the company can achieve this only by increasing its

productivity, quality, labour utilization and reducing the time of delivery. All these factors

will lead to increased customer satisfaction, thus helping in its sales growth. It can therefore

be concluded that recommendation# 3 would provide the most appropriate solution to all

problems of Donner.

Exhibit 1

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Case I No of Boards = 1 Standard Production Time

Times (in minutes)

Operation Type Setup Run Total Run Time

Operating Time (Using Manual

Drilling)

Operating Time (Using CNC machine)

PREPARATION Artwork

Generation 29 0 29 29Inspect & Shear 20 0.5/panel 0.5 20.5 20.5Punch Tooling

Holes 10 0.5/panel 0.5 10.5 10.5

IMAGE TRANSFER Drill Holes Manual 15 0.08/hole 40 55

CNC Drill 240 0.004/hole 2 242Metallization 10 0.75/panel 0.75 10.75 10.75

Dry Film Photoresist

1. Panel Prep 5 0.20/panel 0.2 5.2 5.2 2. Laminate &

Expose 20 2/panel 2 22 22 3. Develop 20 0.2/panel 0.2 20.2 20.2Electroplate 25 8.5/panel 8.5 33.5 33.5Strip DFPR 5 0.2/panel 0.2 5.2 5.2

Etch & Tin Strip 10 0.2/panel 0.2 10.2 10.2

FABRICATION Soldermask 45 1.5/panel 1.5 46.5 46.5Solder Dip 30 0.5/panel 0.5 30.5 30.5

Profile Punch Press 50 1.0/board 1 51 CNC Router* 150 0.5/board 0.5 150.5

Inspect and pack 45 1.5/board 1.5 46.5 46.5 Total 396.55 683.05

Exhibit 2

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Case II No of Boards = 8Standard Production Time

Times (in minutes)



Drilling)


PREPARATION Artwork

Generation 29 0 29 29Inspect & Shear 20 0.5 0.5 20.5 20.5Punch Tooling

Holes 10 0.5 0.5 10.5 10.5

IMAGE TRANSFER Drill Holes Manual 15 0.08 320 335

CNC Drill 240 0.004 16 256Metallization 10 0.75 0.75 10.75 10.75


1. Panel Prep 5 0.2 0.2 5.2 5.2 2. Laminate &

Expose 20 2 2 22 22 3. Develop 20 0.2 0.2 20.2 20.2Electroplate 25 8.5 8.5 33.5 33.5Strip DFPR 5 0.2 0.2 5.2 5.2

Etch & Tin Strip 10 0.2 0.2 10.2 10.2

FABRICATION Soldermask 45 1.5 1.5 46.5 46.5Solder Dip 30 0.5 0.5 30.5 30.5

Profile 0 Punch Press 50 1 8 58 CNC Router* 150 0.5 4 154

Inspect and pack 45 1.5 12 57 57 Total 694.05 711.05

Exhibit 3

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Case II No of Boards = 200Standard Production Time

Times (in minutes)



Drilling)


PREPARATION Artwork

Generation 29 0 29 29Inspect & Shear 20 0.5 12.5 32.5 32.5Punch Tooling

Holes 10 0.5 12.5 22.5 22.5

IMAGE TRANSFER Drill Holes Manual 15 0.08 8000 8015

CNC Drill 240 0.004 400 640Metallization 10 0.75 18.75 28.75 28.75


1. Panel Prep 5 0.2 5 10 10 2. Laminate &

Expose 20 2 50 70 70 3. Develop 20 0.2 5 25 25Electroplate 25 8.5 212.5 237.5 237.5Strip DFPR 5 0.2 5 10 10

Etch & Tin Strip 10 0.2 5 15 15 0

FABRICATION 0Soldermask 45 1.5 37.5 82.5 82.5Solder Dip 30 0.5 12.5 42.5 42.5

Profile Punch Press 50 1 200 250 CNC Router* 150 0.5 100 250

Inspect and pack 45 1.5 300 345 345 Total 9215.25 1840.25

Exhibit 4

Total number of production employee = 22

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Total number of working days in September = 20

Total number of working hours in September (8 hours/day)=22*20*8=3520 hours

Time spent in instructing people = 10% of 4 employees’ time = 64 hours

Time available for production = 3456 hours

Time spent in production in September = 1531.7 hours

Average working hour per employee per day = 1531.7hours / (22*20) = 3.48 hours

Labor utilization factor = 3.48/8 = 43.5%

The excel sheet with detailed calculations is attached herewith.

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Donner Company Group7

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