Donner Company Case Solution
1. The process flow diagram of the production system at Donner. Preparation Stage
2. What size orders would you schedule on the CNC drill? On the CNC router? Time taken to process the orders depends on the selected drilling method either a) Manual drilling or CNC OR b) Using CNC Drill
Assumption 1: Manual Drilling is not done on all the available Manual Drill Presses in parallel. Calculating time taken for Manual drilling and CNC Drilling: = Setup Time + Run Time (Per Hole) * No. of Holes drilled on each circuit board * No. of boards Time taken for Manual drilling =15 + 0.08*500*xwhere x= number of circuit boards Time taken for CNC drilling = 240 + 0.004*500*x where x= number of circuit boards To figure out whether CNC drill to be used,
15 + 0.08*500*x ? 240 + 0.004*500*x
Hence x ? 5.92. This indicates that whenever 6 or more boards are needed to be drilled, manual drilling will take more time than CNC Drilling Assumption 2: Manual Drilling is done on all the available Manual Drill Presses in parallel. Total no. of available manual drill presses = 7 (1 Panel per Manual Drill Press) Total no. of Circuit Boards on
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Hence total No. of Circuit Boards can be operated in parallel = 7*8=56 Circuit Boards Time taken for Manual drilling on 1 Drill Press = Time taken for Manual drilling on All Drill Press = 15 + 0.08*500*8 =335 min. Time taken for CNC drilling for 56 Circuit Boards = 240 + 0.004*500*56=352 min 335 Mins < 352 Mins, so let’s try adding one more Unit of Board and calculate time taken Time for Manual drilling = Existing time for 56 Boards + Time taken for 1 new Board
= 335 + 0.08*500*1= 375 min for 57 Boards
Time taken with CNC drilling for 57 Circuit Boards = 240+ 57*500*0.004=354 min. Hence when total no. of Boards exceeds 56, the time taken for manual drilling is more than that of CNC Drilling. Therefore, up to an order size of 56 circuit boards, manual drilling should be chosen and beyond 56 boards CNC drill should be opted. Conclusion for CNC Drill: n < 6 Use Manual Drilling Total no. of Boards (n) Parallel Process allowed Manual Drill 6 < n ? 56 No Parallel Processing CNC Drill n > 56 CNC Drill
What Size orders can be scheduled on CNC Router?
Using the steps used in previous part, calculating the time taken by each method Time taken for Punch Press =50 + x Time taken for CNC Router = 150+ 0.5x To figure out whether CNC Router to be used,
50 + x ? 150+ 0.5x Hence x ? 200. [x= number of circuit boards] Conclusion for CNC Router: n < 200 Use Punch Press Total no. of Boards (n) n > 200 For Use CNC Router 3. Would you recommend adding another CNC drill? Perform a net-present value calculation to help make the decision.
Price of the CNC machine is $80,000. The additional assumption we need to add to assumption already given is that: Arthur Dief will run all the small orders (8 circuit boards or less) and other boards will be done on a CNC machine despite of the shop floor policy which states that only orders for more than 100 boards be drilled on a CNC machine. The company is currently using a CNC machine for orders for equal or greater than 140 boards due to capacity of a CNC machine; however, they would be able to process all orders with CNC machines if they add one more machine. In this case, if we calculate the current cost in drilling process:
If we buy an additional CNC machine, the cost would be:
So that we can reduce the cost by $6,330.5 (= 12,683.75 – 6,353.25) by adding one more machine. Cost of capital here is 16% annually which is about % monthly. When we calculate NPV of this purchase with discounting monthly:
-80,000 + + + + … + = $180,320.96
Therefore, I would recommend adding another CNC Drill since NPV is positive.
4. Comment on the value of Dief to the organization.
Arthur Dief is very valuable employee in Donna company in terms of utilizing all resources to meet every size of demands. He dealt with low volume of orders by himself. Without delaying or hurting the quality of products, his work contributed to minimize the waste of resources such as time and labors. The other employees could concentrate on larger orders so the productivity was enhanced. 5. Recommend actions that Plummer can take to improve the situation at Donner.
First, Donner should utilize the existing CNC drill to the maximum capacity. According to the answer of no.3, it can reduce the cost as $391.5 ($3132.5-2741) by maximizing operation of CNC drill. We also would like to recommend the strategy to separate production lines regarding to the volume scale to deal with both demands. It is not easy for Donner to give up small quantity of orders because it already had the settled customer segment and facilities of small-sized and customized products. If it gave up this market, it would lose market share dramatically because of weaker competitiveness compared to big competitors such as IBM, AT&T, and so on.
This strategy can make work process focus on each task without interruption. Labors and raw materials could be allocated efficiently. To enhance this efficiency, forecasting demand is important to allocate resources and to make right scheduling. If Donner had manual about the allocation for each demand, Flaherty, the shop supervisor, could decide scheduling in advance so reduce the delay time. Donner can utilize Dief, the senior manager for small orders, as a trainer of new employees. He knew every steps in production and was dealing with small amount of productions with sophisticated requirements, so it is perfect for new employees to learn the skills and process.