Donner Company Case Study

Medaille College

MBA-621

Operations Management

Case Study #2

Donner Company

3/8/2006

Amr Abbas

Problem Definition

The three-year old Donner Company has positioned itself well within both the small volume, customized (contract) printed circuit boards market as well as the large volume, generic (captive) printed circuit boards market. Large electronic firms (AT&T, IBM) produced their components in captive shops, while smaller sized companies, or when large and small quantities of simple technology or fast turn-around prototype boards were required, these requests usually are fulfilled by contract shops.

With 750 competitors in the US alone, and a market that is volatile, Donner's ability to anticipate and resolve design problems and prototype techniques enabled it to maintain its competitive edge. However, this competitive edge has been compromised by poor on-time delivery and high rate of product return, in addition to planning and manufacturing problems that caused bottlenecks, shifting bottlenecks and improper utilization of labor. These problems began to hamper the overall performance of the firm, and management started evaluating the company's position and different strategic policies.

Following is detailed analysis and recommendations by evaluating the current conditions of the company, particularly the following areas:

* Operational and strategic implications of company direction

* Labor utilization

* Materials

* Capacity

* Information flow

* Evaluating the following performance criteria: Quality, Productivity and Delivery.

Following detailed analysis of data, process flow and inventory strategies, my recommendations will be focused on the following opportunities:

1. Changing strategy from current position to one which concentrates on producing only small quantities of fast turn-around SMOBCs.

2. Changing strategy from current position to one which concentrates on producing only large quantities of simple technology boards.

3. Changing strategy from current position to one which concentrates on producing large & small quantities of simple technology boards, through the use of two separate production lines.

Company Objectives and Overview of Problems:

With a company that is managed primarily by engineers, Donner's core competency was, obviously, its engineering expertise, and it produced specialized circuit boards known as "soldermask over bare copper" (SMOBC) boards. Donner positioned itself to manufacture these boards to small and large electronic firms and management envisioned it as one of the industry leaders. However, in order to achieve this objective, perhaps Donner needed a management that is more business oriented rather than being managed by engineers who don't necessarily possess the "business sense" to run a firm.

Donner employed 22 production employees, managed by 4 senior executives. Please refer to exhibit 1 for Donner's organizational chart. Operators were cross-trained and able to perform different functions in different departments. This is considered to be a major advantage for a company to have; the ability to deploy employees to perform different functions in different areas (as needed). However, it seemed that there was a lack of effective communication strategy within the organization, as information did not flow properly within the different departments and workers often interrupted their work to discuss issues with the supervisor, deliver completed panels or secure more work from other work stations (low hanging fruits).

David Flaherty, shop supervisor, is responsible for all aspects of the manufacturing processes from the time he received the order and blueprint until the order has been completed and shipped. Flaherty is in charge of preparing work schedules, which occurred several days after the raw material has arrived from the vendor (most orders reached him 4 days after customers' bids had been accepted, which included the time needed by purchasing to locate the raw material at a low price - 1 - 2 days on average). Flaherty spent much of his time planning and determining how to move jobs ahead of others and how to shift workers from one operation to another (to meet unexpected customers' changes to specifications and to meet the deadlines for rush orders). Please refer to the information flow chart (exhibit 2) and the order process flow chart (exhibit 3).

Donner promised its customers 3 weeks delivery on orders of 1000 boards or less, and 5 weeks on orders larger than 1000 boards. Rush orders (orders of 8 boards or less) were delivered after 4 days.

Donner operated at a plant that was carefully chosen by management to minimize installation costs, preserved the life of expensive machinery and isolated the operation's diverse environment. After being in the same location for a year and a half, neither the machines nor the graphic equipment exhibited any signs of corrosion. In fact, by October 1986, Donner began to expand their current location, which was fully utilized, by installing an 1800 sq ft addition. This addition was due to be completed by November, 1987.

Donner's management had to implement policies that, in addition to manufacturing, had to be cost effective, as Donner was not able to attract outside capital (cited earlier: managed primarily by engineers, not necessarily business oriented).

Analyzing Donner's current situations, it is evident that the company is suffering from several problems relating to its manufacturing, labor, quality and delivery. Following is a highlight and a brief analysis of each of Donner's problems:

1. Operating problems:

Management could not manage the production bottlenecks effectively. Each order was different, as per each customer's specifications. Since there is no set quality policy in place, some raw material may be defective. When operators are working on a specific project, they may require additional raw material (which takes about 1 - 2 days to locate, then additional days to be delivered to