Donner Company

Donner manufactured printed circuit boards to the specifications of a variety of manufacturers. It was
essentially being managed by engineers, which meant that its core competence was its technical
expertise. On reviewing the profit and loss statement for the company over the year 1987, we notice
that the total sales till August 1987 had already crossed the total sales in the previous year. Also we
notice that EBIT has continuously increased from -2.8% of net sales in 1985 to 10.29% of net sales in
August 1987. However the point of concern was triggered by the recent prominent slump in the sales
and profit of Donner in the month of September 1987.

1. Problem Analysis
Based on this trigger we try and analyze the problems which could have lead to fall in profit of the
company.

1.1. Varying production bottleneck: Depending on the type of circuit board to be manufactured; the
company faced bottlenecks at different points in the process flow. This was without any pattern and
hence no solution till now had been found of dealing with regular bottlenecks. Looking at some reasons
which led to the development of bottlenecks-

a. Rush orders – Promised time of delivery for rush orders was 4 days and hence these orders
were given priority and replaced existing orders which were in process; this lead to frequent bottlenecks
at different stages. The rush orders had a frequency of three a week.

b. Customer modifications – Many a times customers requested modifications after a board

design and manufacturing process had started. This stalled the production of the board as the
modification needed to be worked upon into the design and approved which resulted in almost two
weeks delay. The frequency of artwork modification requests ranged between 1-9 per week.

c. Cross training and constant shuffling of idle resources without proper forecast of when they
would be required back on their original task also resulted in bottlenecks.

1.2. Factors hampering productivity:

a. Wrongly estimated working time – It was found that the labor hours did not correctly denote
the additional time a resource spent on reworking on parts which failed inspection or were returned by
customer. Movement of boards between operations was also not accounted for and method
improvements lead to bottlenecks at subsequent operations.

b. Task interruption – Operators moved in between their task almost 6-12 times per day to seek
advice, ask for work from upstream sources and for delivering completed work; this primarily showcases
the lack of set process flow and communication between different operations and their workers.
1.3. Lack of quality standards:

a. Return rework - The quality standards ranged from client to client and only an informal check
was done at Donner manufacturing end this resulted in almost 9 out of 10 deliveries lacking in quality in
terms of missed parts or other quality constraints.

b. Pre-shipment rework – Out of the 7% reject rate at pre-shipment 6% were due to incomplete
operations.

Both these points highlight the need of specialized and organized quality check of boards after
production phase.

1.4. Delivery issues:

One of the major concerns may be because of procrastinating work till the end of the month where prior
work needs to be dispatched by month end. This affects utilization in the earlier part of the month and
also results in more overhead during the end of month.

2. Manufacturing process analysis

From the given manufacturing process there are some bottlenecks which require the modification

1) Breakeven point analysis to select CNC drill or manual drill.

2) Breakeven point analysis to select automated CNC router or manual punch press.
3) Identify bottleneck in DFPR process.

Breakeven points to determine which one to use between CNC drill and manual drill

CNC Drill Manual Drill

Set up time for 1 order 240 15
Run time for 1 circuit board 0.004*500 0.080*500
Order size X X
Total time 240+2X 15+40X

H ence by equating the total time taken(setup time +run time) for both CNC Drill and manual drill:

240+2X = 15+40X

38X = 225

X = 5.92, rounded off to 6

Thus,

 If order size is more than 6, CNC Drill should be used

  If order size is less than 6, manual drill should be used

Donner purchased the CNC drill for $80000 to drill the panels. Other available option is 7 modified drill
presses. So it is important to decide when to use manual drill and when to use CNC drill. The setup time
of both processes is fixed no matter what the specification of product is only the run time varies. The
breakeven analysis suggests for order less than 6 panels manual drill should be used. For orders of more
than 6 panels the CNC drill should be used. Company policy now is to use CNC drill only for orders of
more than 100 panels.

Breakeven points to determine which one to use between CNC router and manual punch press

CNC Router Punch Press

Set up time for 1 order 50 150
Run time for 1 circuit board 1 0.5
Order size X X
Total time 50+X 150+0.5X

Hence by equating the total time taken(setup time +run time) for both CNC Router and Punch Press:

50+X = 150+0.5X

0.5X = 100

X = 200

Thus,

 If order size is more than 200, CNC Router should be used

 If order size is less than 200, Punch Press should be used

There are 2 options available for profiling while fabrication. It is important to analyze and decide which
op tion should be used and when. Breakeven point analysis suggests that for orders of more than 200
panels CNC router should be used. CNC is less expensive per board as compared to manual punch press
router for orders of more than 200 panels. For orders less than 200 panels it is less expensive to use
manual punch press router than CNC.

Capacity of the dry Film Photo resist area is also a bottleneck. It is critical to realize the true capacity to
prevent bottlenecks and work-overload. If maximum boards DFPR area can handle is less than what
other processes then it becomes bottleneck. If the order sized is more than bottleneck capacity then the
order will pile up at DFPR. DFPR consists of 3 processes so understanding the capacity of all those
processes is important to determine the capacity of whole process.

Operation Setup Time Run Time Total time Total Time Total Time
(order size = (order size = 80) (order size = 800)
8)
Panel 5 0.2 (per 8 =5*1+0.2*1 =5*1+0.2*10 =5*1+0.2*100
 Preparation boards) =5.2 =7 =25
Laminate and 20 2.0 (per 8 =20*1+2*1 =20*1+2*10 =20*1+2*100
Expose boards) =22 =40 =220
De velop 20 0.2 (per 8 =20*1+0.2*1 =20*1+0.2*10 =20*1+0.2*100
boards) =20.2 =22 =40

Considering an 8-hour daily shift, the capacities for each stage of the DFPR area can be determined as
follows:

Order size
8 80 800
DFPR area
Panel Prep 738.4 5485.6 15360
Laminate & Expose 174.4 960 1744
Develop 190.08 1744.8 9600

Explanation of the table is that if the order size is 8 boards then to avoid bottleneck the order should be
of less than 174 boards per day. Same applies for the order size of 80 boards, the maximum daily
capacity of DFPR is 960 boards. Based on the analysis we found that laminate and expose of DFPR
process is the bottleneck.

3. Recommendations
3.1 Work on reducing average flow time of jobs:

The root cause of the problem was in longer flow time to complete different jobs and for immediate
recovery from the current late delivery problem this issue has to be resolved. The basis to look can be
the example that small orders being processed by just one senior employee had no scheduling
problems. This indicated that:

a. Cross training of workers and assigning those randomly to available processes has lead to
wastage of time by moving from one job task to another. Instead efficiency can be improved if workers
were trained for specific operations and worked only on processes that were as per their capabilities.
This would not only save time in job transfer but also result in comparatively lesser failure rates.

b. Improving the facility layout could also lead to substantial reduction in flow time. The
processes which were one after the other were not strategically placed to reduce the time in transfer of
the process; this lead in some cases to almost 15% of the work time going into transferring from one
process to another.

c. Improve the organization structure such that there were separate teams handling issues in
the process flow, assisting and instructing workers, product inspection and for customer change
modifications. All these tasks are instrumental in the process flow and lead to bottlenecks if not
addressed adequately.

d. One fourth of the jobs delayed were because of the customer change requests; Donner could
look at charging extra per modification required which would deter the consumers from making
constant changes after the design has been finalized. Also it would act as a cover for the process delay
loss due to these change requests.

3.2 Continue serving both large and small orders

Donner should continue taking both types of orders but should look at parallel production lines for large
and small volume production separately. Capacity is not being fully utilized currently as the process in
not optimized based on volume flow. Each process line can be optimized to its requirement as per the
volume and hence reduce bottlenecks. Inventory policy can be worked upon to take cognizance of the
lack of inventory in case of rush orders. Inventory warehouse consisting of primary inputs can be
maintained which would reduce the pressure on inventory in case of rush orders and rework.

https://www.slideshare.net/HarishB7/donner-case-operations-management