WRITTEN ANALYSIS OF CASE

Title of Case: Fabritek Corporation

Submitted by Ahmad
ERP-ID: 01234
EXECUTIVE SUMMARY

The focus of this case is on Fabritek Corporation, an organization which was established in 1938 and
over the years developed a reputation for rapid, on time delivery of high-quality machined parts at a
very competitive price. In 1968, Fabritek Corporation recorded a sale of around USD 15 million to USD
130 million. The company had a total of 200 employees for maintenance and production work whose
wage were over and above what market was offering.

In 1969, Fabritek Corporation obtained their first automotive parts contract from a company known as
Pilgrim Corporation. The contract was to deliver 17,000 units of engine part over a period of six months.
Fabritek was required to deliver 650 unit of engine parts every Friday and for this purpose the
corporation was trying to design specific processes o that they could fulfill their commitments. However,
after two weeks of successful deliveries, the operations suffered an unforeseen incident as one of the
milling machine operators got injured in an automobile incident. That specific operator was out for
several months due to which he had to be replaced. Arthur Moreno was chosen as his replacement, but
he was not happy with his new position. The reason for that less renumeration as compared to his
previous assignment and to offset that he started manufacturing sub-standard parts to increase his
productivity as compared to the standards set in order to earn a hefty premium. As a result, the
rejection rate increased causing the delays in the shipment. Frank Deere, milling department foreman
and Stewart Baker, Fabritek’s automotive part manager were both in a flux because of this situation and
wanted to resolve this issue as soon as possible as Pilgrim Corporation was a major auto part
manufacturer hence losing this contract was something that Fabritek Corporation couldn’t afford.

CAUSES FOR HIGH REJECT RATE

There were several reasons which were resulting in a higher rejection rate. Some of those are
mentioned below:

1. Arthur Moreno’s Role

Arthur Moreno, a skilled operator who was assigned a milling job after the previous operator
was injured in an accident, was not happy with his new assignment at Fabritek Corporation. He
even complained about this to his supervisor Deere as he was earning a substantial premium in
his previous job. To earn a hefty premium at his current assignment, Moreno started
manufacturing 167 milled castings per day. This was 67% above the standard expected of 100
 castings per day. Now, Fabritek Corporation had a policy under which they gave an incentive
piece rate over a base rate to any worker who produced more than the standard output rate.
However, in this specific case, in the race of producing more to earn premium, Moreno started
producing sub-standard milled castings which led to higher rejection rate.

2. Frank Deere’s Role

Frank Deere’s role in this whole issue is extremely important because as the foreman of the
milling department and Moreno’s supervisor, it was his responsibility to negotiate with Moreno
regarding the renumeration before hiring him for operations. Moreover, when Moreno
complained to him regarding his bonus, Frank encouraged him to produce faster and not to
worry about the piling inventory ahead of the next operation.

3. Faulty Incentive Policy

Now, Fabritek Corporation had a compensation policy of giving incentive piece rate over a base
rate to any worker who produced more than the standard output rate. This policy was one of
the prime reasons that led to such a situation being created. As a result of this policy, the
rejection rate went higher as workers were paid on the total output and not on total good
output basis. This was because it was difficult to ascertain the one responsible for quality
problems or rejected pieces, hence Moreno was willing to compromise on quality for producing
more and more milled castings.

4. Lack of Advance Machinery

Fabritek Corporation could assign only four machines for this pilgrim assignment as milling
machine capacity was in high demand. Furthermore, obsolete general-purpose milling machines
were being used for production rather than a high-speed specialized milling machine which may
have caused substandard production.

5. Lack of Workers
Fabritek Corporation had only assigned one operator for the drilling and grinding operations
which played its part in the overall high rejection rates. Had there been two grinding machines
with operators, the rejection rate could have been reduced even after slowing down the grinder
feed to get a decent finish.
THE IDEAL CYCLE TIME

As per the Exhibit 2 given in the case the total cycle time for all the mining cuts combined was 11.584. It
was calculated by adding the total machine time and the total external time spent by operator for all
four mining cuts. The equation form can be written as:

Total Cycle Time = Total Machine Time + Total External Time

11.584 = 8.358 + 3.226

However, as Fabritek Corporation expected its workers to produce 33% more than the standards set at
100 units per day, therefore the cycle time can be calculated as:

Cycle Time = 11.584 / 1.33 = 8.71

The reason for this was that a high skilled labor with experience could reduce the external time spent on
the process and achieve this cycle time. Moreno, on the other hand however was producing 167 milled
castings per day i.e. 67% above the standard set which meant his cycle time would be something like the
one mentioned below:

Moreno’s Cycle time = 11.584/1.67 = 6.937

It was impossible to achieve this cycle time as even after reducing all the external time, the Total
machine time alone would be 8.358 which can only to lowered if new technology can be introduced in
the process. As a result of this, Moreno achieved this cycle time by skipping one or two steps in the
milling cut process which led to a compromise in the overall quality of the milled castings resulting in
higher rejection rate.
RECOMMENDED SOLUTIONS

To fulfill the Pilgrim Corporation orders on time and to avoid these circumstances in future, Fabritek
Corporation needs to follow the following recommendations.

 Let Arthur Moreno continue his work on the milling machine as it would be difficult to find a
suitable replacement as he is one of the most experienced milling operators in the company.
Furthermore, any new employee who would be posted would require extensive training and
time to settle in this job which will increase the cost. Fabritek has a weekly deadline to meet as
well and in such a situation, meeting the deadline would become a major problem for the
company. The most feasible solution would be negotiated with Moreno on a certain payment
terms so that Pilgrim’s contract is completed without compromising on quality.

 Paul Clarke can be assignment to the milling machine duties and Arthur Moreno with drilling
and grinding duties. This would be one way of ensuring that Moreno’s productivity be curtailed,
and quality parts will be ensured as he will be dependent on number of pieces Paul Clarke
supplies him with after milling.

 Fabritek Corporation also needs to revise its incentives policy. The premiums should be tied to
the number of good outputs that are produced instead of Total output as this encouraged the
employees to produce sub-standard milled castings.

 In case of rejection, the whole team should be held responsible for the product instead of any
individual. This would ensure that both the grinder and milling operator will have to work
overtime to regrind and re-mill the rejected pieces.

 Furthermore, team building activities should be conducted by Fabritek Corporation so that the
overall coherence between employees can be increased and they work as a team as this is
essential for growth of any organization.

 Fabritek Corporation should adopt latest technology and replace general purpose milling
machines with specialized milling machines so that timely production milled castings can be
ensured without compromising on quality.