Milton Electronics produces MP3 players. One of the four major electronic components is produced internally. The other three components are purchased from external suppliers.

The electronic components and other parts are assembled (by the Assembly Department)

and then tested (by the Testing Department). Any units that fail the test are sent to the Rework Department where the unit is taken apart and the failed component is replaced. Data from the Testing Department reveal that the internally produced component

(made by the Component Department) is the most frequent cause of calculator failure.

One out of every 50 players fails because of a faulty internally produced component.

Recently, John Golding was hired to manage the Component Department. The plant manager told John that he needed to be more sensitive to the needs of the department’s customers. This charge puzzled John somewhat—after all, the component is not sold to anyone but is used in producing the plant’s MP3 players.

Required:

1. Explain to John who his “customers” are.

2. Discuss how John can be sensitive to his customers. Explain also how this increased sensitivity could improve the company’s time-based competitive ability.

3. What role would cost management play in helping John be more sensitive to his customers?

LO1