Richard Ivey School of Business The University of Western Ontario SPARTAN PLASTICS IVEY Narendar Sumukadas prepared this case under the supervision of Professor Chris Piper solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. 9A97D012 Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing. Ivey Management Services, c/o Richard Ivey School of Business. The University of Westem Ontario, London, Ontario, Canada, N6A 3K7: phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca Copyright 1997, Ivey Management Services Version: (A) 2010-02-03 COMPANY BACKGROUND Mr. David Angove pondered over a trade-off he was experiencing in his plant's pursuit of world class manufacturing. "We've reduced setup times, batch sizes, and throughput times, and made our customers happy by reducing order filling time," he said, "but our high scrap rate is killing us." Mr. David Angove was vice-president (Operations) of Spartan Plastics Canada Limited, a subsidiary of Spartan International, U.S.A. Spartan manufactured extruded plastic parts, largely for the automotive industry. Typical products manufactured by Spartan included striping, such as can often be found on the side panels of automobiles. Spartan's plant, located in London, Ontario, had been in operation since 1983. Currently, it had annual sales of $15 million, and employed about 50 employees (see Exhibit 1). About 33 per cent of the production volume was shipped to the parent company, while the rest was made up of several small orders. Spartan manufactured a relatively wide range of products, and currently produced about 400 different extrusion profiles, in an assortment of up to 13 colors per profile, and up to 20 different product lengths. Rather than compete with larger scale operations in the industry, Spartan preferred to focus on smaller orders; according to Mr. Angove, there was more room in this segment of the market. Spartan also offered a relatively full line of services, including design and fabrication of the dies required for manufacturing many of its products. Page 2 THE OLD BATCH MANUFACTURING PROCESS The extrusion process (see Exhibit 2) began with plastic raw material in the form of small pellets, called compound. This compound was fed into the hopper of an extrusion machine, where pellets of concentrated color dye were added, to obtain desired product colors. The mixture then flowed into the extruder barrel, 9A97D012 where it was heated to melt the plastic. The molten plastic was forced out through a die at the other end of the extruder barrel. It emerged as a continuous strip of plastic, with its profile determined by the die used. Soon after the plastic strip emerged from the extruder, a mylar strip was bonded to it, to give it a metallic chrome finish. The plastic and mylar strips were pressed together between two rollers, at what was called the "2-3-5" station. The bonding process utilized the heat in the plastic to attach the mylar. Depending on the product, up to four separate strips of mylar, of different widths, could be attached simultaneously at the 2-3-5 station. The plastic strip was then run through a long water tank, to cool the plastic to room temperature. The length of the tank, and the temperature of the water, depended on the product. The strip resurfaced at the other end of the tank, and was dried by a jet of air. At this stage, an adhesive tape backing was applied to the strip, and firmly attached by pressing between two rollers. The strip was then rolled onto spools, in lengths of 500 feet each, and stored for further processing. The spools were taken as required from the spool storage to a cutting station. Here, the 500-foot roll was cut to final size, and strips of the desired length were loaded onto a mobile "horse" with wheels. When a horse had been loaded with strips, it was wheeled over to a "tipping" station. At this station, the ends of the strips were given the desired finish, such as by cutting into a V-shape or by rounding out. After tipping, the strips were loaded back onto the horse, and wheeled over to a winding station. Here, the strips were wound onto cores, packed in cardboard boxes, and placed on skids. The skids were moved to the warehouse, and