Byers Electronics produces hand-held calculators. Three of the major electronic components are produced internally (components 2X334K, 5Y227M, and 8Z555L). There is a separate department in the plant for each component. The three manufactured 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 component 2X334K is the most frequent cause of calculator failure. One out of every 100 calculators fails because of a faulty 2X334K component.

Recently, Milton Lawson was hired to manage the 2X334K department. The plant manager told Milton that he needed to be more sensitive to the needs of the department’s customers. This charge puzzled Milton somewhat—after all, the component is not sold to anyone but is used in producing the plant’s calculators.

Required:

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

2. Discuss how Milton 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 Milton be more sensitive to his customers?