KoalaTech, Ltd., of Sydney, Australia, produces office equipment for small businesses and home offices. Several months ago it launched its PFS 1000, a single unit that functions as a color printer, color scanner, color copier, and fax machine. The PFS 1000 won rave reviews for its functionality, affordable price, and innovative design. This, coupled with KoalaTech’s reputation for producing highly reliable products, quickly led to a severe backlog. KoalaTech’s plant simply could not keep up with demand.

Initially, KoalaTech’s president, Nancy Samuelson, was extremely concerned about the backlog and put a great deal of pressure on the plant manager, George Johnson, to increase production. However, Nancy abruptly shifted gears when a new report indicated that returns and complaints for the PFS 1000 were running four times higher than the usual industry rate. Because KoalaTech’s reputation was on the line, Nancy decided that the problem required immediate attention. She also decided that the quickest way to diagnose the problem and to avoid the usual mentality of “blaming it on the other department” would be to bring in an outside consultant with expertise in these matters.

Nancy hired Ken Cathey to investigate the problem. Nancy and Ken agreed that Ken should spend his first week interviewing key personnel in an effort to learn as much about the problem as possible. Because of the urgency of the problem, Nancy promised Ken that he would have complete access to—and the cooperation of—all employees. Nancy would send out a memo immediately informing all employees that they were expected to cooperate and assist Ken in any way they could.

The next morning, Ken decided to begin his investigation by discussing the quality problem with several of the production supervisors. He began with the supervisor of the final assembly area, Todd Allision. Todd commented: I received Nancy’s memo yesterday and, frankly, the problem with the PFS 1000 does not surprise me. One of the problems we’ve had in final assembly is with the casing. Basically, the case is composed of a top and a bottom. The problem we are having is that these pieces rarely fit together, so we typically have to force them together. I’m sure this is adding a lot of extra stress on the cases. I haven’t seen a breakdown on what the problems with quality are, but it wouldn’t surprise me if one of the problems was cracked cases or cases that are coming apart. I should also mention that we never had this problem with our old supplier. However, when purchasing determined that we could save over $A1 per unit, we switched to a new supplier for the cases.

The meeting with Todd lasted for about an hour and a half, and Ken decided that rather than meet with someone else, he would be better off reviewing the notes he had taken and filling in any gaps while the conversation was still fresh in his mind. Then he would break for lunch and meet with one or two additional people in the afternoon.

After returning from lunch, Ken stopped by to talk with Steve Morgan, the production supervisor for the printed circuit boards. Ken found Steve and an equipment operator staring at one of the auto-insertion machines used to place components such as integrated circuits, capacitors, and resistors on the printed circuit board before wave soldering. Upon arriving, Ken introduced himself to Steve and asked, “What’s up?” Steve responded: We are having an extremely difficult time making the printed circuit boards for the PFS 1000. The designers placed the components closer together than this generation of equipment was designed to handle. As a result, the leads of the components are constantly being bent. I doubt that more than 25 percent of the boards have all their components installed properly. As a result, we are spending a great deal of time inspecting all the boards and reworking the ones with problems. Also, because of the huge backlog for these boards and the large number that must be reworked, we have been trying to operate the equipment 20 percent faster than its normal operating rate. This has caused the machine to break down much more frequently. I estimate that on a given eight-hour shift, the machine is down one to two hours. In terms of your job—to determine the cause of the problems with quality—faulty circuit boards are very likely a key contributor. We are doing our best to find and correct all the defects, but inspecting and reworking the boards is a very tedious process, and the employees are putting in a lot of extra hours. In addition, we are under enormous pressure to get the boards to final assembly. My biggest regret is that I didn’t have more input when they were building the prototypes of the PFS 1000. The prototypes are all built by highly trained technicians using primarily a manual process. Unfortunately, the prototypes are built only to give the engineers feedback on their designs. Had they shown some people in production the prototypes, we could have made suggestions on changes that would have made the design easier to produce.

Ken decided to end the day by talking to the plant manager, Harvey Michaels. Harvey was in complete agreement with Todd and Steve and discussed at length the enormous pressure he was under to get product out the door: “The bottom line is that no one cooperates. Purchasing changes suppliers to save a few bucks, and we end up with components that can’t be used. Then our own engineers design products that we can’t produce. We need to work together.”

On his second day, Ken decided to follow up on the information he had gathered the day before. He first visited the director of purchasing, Marilyn Reagan. When asked about the problem of the cases that did not fit together, Marilyn responded: The fact of the matter is that switching suppliers for the cases saved $A1.04 per unit. That may not sound like a lot, but multiply that by the 125,000 units we are expecting to sell this year, and it turns out to be pretty significant. Those guys in production think the world revolves around them. I am, however, sympathetic to their problems, and I plan on discussing the problem with the supplier the next time we meet. That should be some time next month.

After wrapping up the meeting with Marilyn, Ken decided he would next talk to the director of engineering. On the way, he recognized a person at a vending machine as the worker who had been standing next to Steve at the auto-insertion machine. Ken introduced himself and decided to talk with the worker for a few minutes. The worker introduced himself as Jim and mentioned that he had been working in the shipping department until just two weeks ago. The operator before Jim had quit because of the pressure. Jim hadn’t received any formal training in operating the new equipment, but he said that Steve tried to check on him a couple of times a day to see how things were going. Jim appreciated Steve’s efforts, but the quality inspectors made him nervous and he felt that they were always looking over his shoulder.

Ken thanked Jim for his input and then headed off to meet with the director of engineering, Jack Carel. After introducing himself, Ken took a seat in front of Jack’s desk. Jack began: So you are here to investigate our little quality snafu. The pressure that we are under here in engineering is the need to shrink things down. Two years ago fax machines, printers, scanners, and copiers were all separate pieces of equipment. Now, with the introduction of the PFS 1000, all this functionality is included in one piece of equipment not much larger than the original printer. That means design tolerances are going to be a lot tighter and the product is going to be more difficult to manufacture. But the fact of the matter is that manufacturing is going to have to get its act together if we are going to survive. The engineering department did its job. We designed a state-of-the-art piece of office equipment, and the prototypes we built proved that the design works. It’s now up to the manufacturing guys to figure out how to produce it. We have done all that we can and should be expected to do.

To end his second day, Ken decided to meet with the director of quality assurance, Debbie Lynn. Debbie commented: My biggest challenge as director of quality assurance is trying to convince the rest of the organization of the importance quality plays. Sure, everyone gives lip service to the importance of quality, but as the end of the month approaches, getting the product out the door is always the highest priority. Also, while I am officially held accountable for quality, I have no formal authority over the production workers. The quality inspectors that report to me do little more than inspect product and tag it if it doesn’t meet the specifications so that it is sent to the rework area. In all honesty, I am quite optimistic about Nancy’s current concern for quality and very much welcome the opportunity to work closely with you to improve KoalaTech’s quality initiatives.

Required:

1. Define the problem:

2. Give an analysis of the situation:

3. What are their alternatives?

4. Give a recommendation: