It was August 20, 2018, and Alice Jones, the supply manager of tooling and subco

Question

It was August 20, 2018, and Alice Jones, the supply manager of tooling and subcontract material for Alex Precision Manufacturing Company, received a routine rejection notice from the inspection department. This notified her that thirty-two spider gears, which had recently been received from the Speedy Tool Company, had been rejected. There were two reasons for the rejection. First, the 1 1/8-inch-diameter holes had a rough finish on the bore. Second, the magnaflux mark was not clearly legible on all the pieces. Before Jones had a chance to go to the receiving department to examine the pieces she received a telephone call from the production superintendent demanding immediate replacement of the parts because they were holding up the shipment of a substantial spare parts order. The parts were needed for a foreign shipment. As soon as she got a chance, Jones went to the receiving department and examined the spider gears. She called to the attention of the chief inspector the fact that there was no notation on the drawing calling for any finish on the bore of the three holes. This dimension called for an extremely tight tolerance of 0.0004 inch. All the parts met this requirement when measured with an inside micrometer. However, she could see that the inside surface of these holes was slightly rough from the boring operation. Jones did not feel that this roughness was adequate grounds for rejection; however, she suggested that the inspector call the engineer responsible for the part to see if it would be possible to use the part. A meeting was quickly arranged with the engineer, who took one look at the spiders and said that they were absolutely unsuitable for use. The dimension she objected to was a bearing seat. The engineer said that she could not afford to take a chance on a fit that could become loose in service. She felt that any respectable supplier would produce a smooth surface on this type of hole without any notification on the drawing. She felt that the rough surface showed inferior workmanship. The engineer refused to accept the parts as they were and suggested that the supplier prepare new ones with a ground finish on the bores. Jones asked the engineer to add a suitable finish indication on the drawing, so the supplier would know exactly what finish was required. This indication would give the inspection department a definite standard for inspection. The request was refused because the engineer felt that any good subcontractor would immediately identify the holes as bearing seats and would produce a 64-micro-inch finish without any special note. Moreover, these parts had been in production for several years and she had never experienced this trouble before; the engineer felt that a new supplier was causing the trouble. Alice Jones put a telephone call to Mr. Speed of the Speedy Tool Company and described the situation to him. Mr. Speed objected strenuously to the rejection based on the rough finish. He said that he had been furnished a plug gauge to check this dimension and that the parts had all been checked satisfactorily with this gauge before they had been shipped. Nothing had ever been said to Mr. Speed about the necessity for a ground finish on the bores. Since the holes were already at the proper dimension, it would be impossible to grind them further to salvage the 32 units without an expensive chrome plating operation. Mr. Speed agreed to change his procedure in the future, so that these holes would have a ground finish. The fixture for this operation would cost at least $4,000, and Speed felt that he would probably have to spend about $50 a unit for additional labor in the grinding operations. In regard to the magnaflux marking, Mr. Speed pointed out that the marking stamp had been furnished by the Alex Company and that the drawing called for it to be applied to a curved surface. Mr. Speed agreed that it was not very legible, but said that it was the best they could do under the circumstances without damaging the stamp. Mr. Speed said that he was able to make the new grinding operation effective on 100 pieces that were in process and thought that he could deliver these within a week. The Speedy Tool Company was a major supplier of production tooling, particularly dies, jigs, and fixtures. The two companies had had a very favorable relationship starting in 2005. Mr. Speed called on Ms. Jones about once a week in regard to the many items of tooling which were on order, and the two had come to know each other very well. Speedy Tool had done very little production work for Jones, but its precision work on tooling had always been well done and it had a very good delivery and quality record. The spider had become active at the time of the introduction of the Alex offset press. It had been necessary to subcontract this item because no facilities were available internally. At that time, the drawings, specifications, and gauges were furnished to the original subcontractor, the Wilson Automatic Machine Company. Wilson had built the original tooling. When Alex had dropped this press from the product line, the part had become inactive. A demand had only recently occurred for spare parts. Jones had found that Wilson had virtually gone out of business on subcontract precision work. In fact, she had had considerable difficulty in getting the original gauges and tooling back from the Wilson Company. Speedy had quoted based on tooling to be furnished, but when the tools had been received from Wilson, they were found to be in very poor condition. In fact, some of the tooling had not been modified to bring it up to the marked revision of the drawing. It had been necessary for Mr. Speed to spend over $50,000 in repairing the tooling before he could use it. Alice Jones was puzzled as to the action she should take. She did not think it would be completely fair to Speedy to reject the thirty-two units, because she felt that Alex Precision Manufacturing Company had some responsibility for the loss. She also knew that Mr. Speed had spent considerably more than he had anticipated on being adequately tooled for the job. She was debating in her own mind the advisability of permitting Mr. Speed to raise the price to compensate him for this change in circumstances.

4. What do you think would be an equitable solution to the problem?

Explanation / Answer

The problem for Alice Jones is the increase in price per unit for every part produced in future for the change in circumstances. The variable costs incurred will raise the cost of the part in future. On the other hand if she rejects the quality check suggestions the reputation of her company is at stake. The problem requires immediate attention as a shipment of parts is being delayed because of the changes.

First of all Alice Jones must establish a standard for the finishing operations. Earlier the supplier company has been manufacturing parts from drawings with no specifications for the finishing work. The finishing operation for the parts was being done by judgement and not some standard specifications and requirements. It is apparent that the finishing operations require specific directions about the type of finish for the parts. The question of poor quality workmanship will also not arise if there are written instructions as there is no ambiguity about the operations required.

Secondly the engineer does not agree on written specifications but suggests that human expertise and judgement would deliver better results. He accuses the supplier of poor quality parts on the other hand the supplier agrees that the magnaflux mark is not very legible and agrees to improve the operations and meet the quality standards.

The problem is because of recent demand for spare parts which were not produced earlier. Alex Manufacturing Company is not manufacturing the parts internally but obtaining them from the supplier. The tooling for this parts was obtained by Speedy Tooling Company from another company and was in poor condition when obtained. Speedy Tool Company had to invest a substantial amount in updating the tooling to the requirements. The Supplier Company has not compromised on quality in the past.

Further two companies share a good relationship and should invest in strengthening that partnership. Speedy Tool Company has also already invested substantial amount of money in fixtures, and is also ready to imrove its operations in future. The supplier company is showing its readiness to make the new grinding operations on its parts in work in progress and supply them in one week.

For now Alice Jones must permit Mr Speed to raise the price to compensate for the change but can negotiate it to reduce the financial cost for her company. With the new quality standards set up the rate of rejections would reduce compensating in part the increased prices. Since Alex Manufacturing is deciding to increase the price of the parts it can also return the rejected parts to Speedy Company and salvage the parts.

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