Assignment :
Case
Study #2: Federated
Screw Company
This is an individual
assignment. You will need to review the Federated Screw Company case study
below, perform the activities and answer the question at the end of the case
study:
The Federated Screw
Company manufactures a wide variety of made-to-order screws for industrial
companies. The designs are usually supplied
by customers. Total manufacturing payroll is 260 people with sales of about $28
million. Operations are relatively simple but geared towards high volume
production. Wire in rolls is fed at high speeds to heading machines, where the
contour of the screw is formed. Pointers and slotters perform secondary
operations. The thread-rolling operation completes the screw configuration.
Heat treatment, plating, and sometimes baking are the final steps and are
performed by an outside contractor located nearby.
The following notes have been made available
from Federated Screw Company:
The Quality Control Department is primarily a
Final Inspection Department (eight inspectors), which also inspects the
incoming wire. One additional patrol inspector in the Heading Room checks for
the first and last pieces of each run. The QC department also handles the
checking and setting of all ring, snap, and plus gages used by themselves and
production personnel. An inspector’s salary is approximately $34,000 per year.
Quality during manufacture
is the responsibility of the operator setup teams assigned to batteries of
about four machines each. It is difficult to estimate how much of their time is
spent checking setups or checking the running of the machines, so you have not
tried to do this as yet. Production has
two sorting inspectors, each earning $28,000, who sort lots rejected by Final Inspection.
The Engineering
Department prepares quotations, designs tools, plans the routing of jobs,
and establishes
quality requirements working from customers’ prints. They also do trouble shooting
(firefighting), at a cost of about $40,000 a year. Another $26,000 is spent in
previewing customers’ prints to identify critical dimensions, trying to get
such items changed by the customer, and interpreting customers’ quality
requirements into specifications for use by Federated inspectors and
manufacturing personnel.
Records of scrap, rework, and
customer returns are meager, but they have been able to piece together a certain amount of information from records and
estimates:
Scrap from Final Inspection rejections and
customer returns amounted to 438,000 and 667,000 pieces, respectively, for the
last two months.
Customer returns requiring rework average
about 1 million pieces per month.
Scrap generated during production is believed
to be about half of the total floor scrap (the rest not being quality related)
of 30,000 lb per month.
Final inspection rejects an average of 400,000
re-workable pieces per month. These are items that can be flat-rolled or re-rolled.
Rough cost figures
have been obtained from the accountants, who say that scrap items can be
figured at $12.00 per thousand pieces, floor scrap at $800 per thousand pounds,
reworking of customer returns at $4.00 per thousand pieces, and flat rolling or
rerolling at $1.20 per thousand pieces. All of these figures are supposed to
include factory overhead.
The assignment requires
you complete items 1, 2 and 3 below with a brief explanation supporting your
response to item 3.
- Prepare an annual cost of quality summary
statement. The summary should
highlight the different Quality cost categories as applicable (Appraisal,
Prevention, Internal Failure and External Failure Costs). It should also tally up the costs and
give the Quality cost as a percentage of sales. - Complete graph(s) that would be useful
in summarizing your results. - Does Federated appear to have the
“right” breakdown of quality costs?