Quality Parts Case Study

Keller Graduate School of Management

September 21, 2015

Quality Parts Case Study

Quality Parts Company manufactures three different types of gizmos for a local computer
manufacturer. The company produces two different models of gizmos and its production runs
average between 100 and 300 units. According to the quarterly report, monthly demand for the
companys gizmos is averaging between 125 and 175 units per month and inventory for these
components is increased early in the month to ensure that there is enough product to meet an
unanticipated surge in demand.

Currently, 40 percent of the manufacturing costs of each gizmo

can be attributed to raw materials and purchased parts for subassemblies. Scrap rates are at are
about 10 percent each operation, inventory turns twice yearly, employees are paid on a day rate,
employee turnover is 25 percent per year, and net profit from operation is steady at 5 percent per
year (Jacobs & Chase, 2013).
Proposed Changes
Currently, the manager of Quality Parts Company is considering making some changes at
the plant. Some of the changes being considering are:

installing an automated ordering system to help control inventory and keep the skids full;
placing two days worth of work in front of each workers workstation;
adding three inspectors to address the issues with product quality
setting up a new rework line to speed repairs;
Installing high-rise shelving to store the parts coming off machine 4.

By implementing these changes, the manager feels that it will increase production,
provide much needed help managing inventory and eliminate the issues the company has been
having with the quality of its gizmos.
Lean Production Philosophy
According to Jacobs and Chase (2013), lean production refers to integrated activities
designed to achieve high-volume, high-quality production using minimal inventories of raw
materials, work-in-process, and finished goods. When using lean production principles, the key
objectives are eliminating waste, unnecessary processing steps and excess inventory.

Quality Parts Case Study

The changes the manager of Quality Parts Company is proposing are not in-line with lean
production philosophies. Instead of stockpiling inventory and keeping the skids full as the
manager suggested, in a lean production environment, a JIT production strategy is used and the
company only produces the inventory they need and no more. Anything over the minimum
amount necessary is viewed as waste because effort and material expended for something not
needed cannot be utilized now (Jacobs & Chase, 2013).
Another change that the management of Quality Parts is considering is placing two days worth of
work in front of each workstation and hiring three additional inspectors. Lean requires the plant
layout to be designed to ensure balanced work flow with a minimum of work-in process
inventory (Jacobs & Chase, 2013). Since companies that operate using a lean production
philosophy do not produce inventory ahead of time, there is no point in placing the additional
work in front of each workstation. It would be more beneficial to introduce the Quality at the
Source concept that means doing it right first and when there is a problem, stop the assembly line
immediately. In addition, the manager should consider empowering her employees and
encourage them to buy into the process by making them accountable for the quality of their
work, the maintenance of their machine and housekeeping. By concentrating on one part of their
job at time, workers are able to take the time to focus better and problems are discovered much
earlier in the process. As a result, hiring the three inspectors would be a waste of money.
Pull System
The following is a diagram of the pull system currently running Quality Parts Companys
operation. A pull system is based on produces goals that allow Quality Parts to meet the demand
of its customers. This process is based on the critical path method. For model X and Y, please
note that the process begins at Lathe.

Quality Parts Case Study

Pull System Diagram for Quality Parts Company

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Introducing Lean at Quality Parts Company

To introduce lean at Quality Parts Company, some changes would need
to be made in the way the company operates. Some components of a lean
supply chain that would need to be integrated are as follows:

Partner with lean suppliers;

Automate sourcing, bidding, and auctions Use web-based apps;
Adopt lean manufacturing principles;
Reduce excess inventory and adopt lean warehousing;
Employ lean logistics methodology
Build relationships with lean customers

References
Jacobs, F., & Chase, R. (2013). Chapter 4: Strategic Capacity Management. In Operations and
supply chain management, the core (3rd ed.). New York: McGraw-Hill Irwin.

Quality Parts Case Study