Hilcrest Auto Case

TO: Professor Fan

FROM: Robert Schmidt

SUBJECT: Hilcrest Auto

DATE: February 18, 2015

QUALITY ISSUES

Quality, according to Frank Gryna, is succinctly defined as “customer satisfaction and loyalty,” and in today’s market, has become an expectation. Quality is achieved through two components, product features (performance, reliability, and reputation) and freedom from deficiencies. For North American parts manufacturer Hilcrest Auto, it has become increasingly difficult to meet the demands of its primary customer, Tier One, who expect each order to be “free, perfect and yesterday.” In a recent shipment, Hilcrest’s steel tubing units did not meet specifications requested and the contract between the two may be in jeopardy. If Hilcrest Auto keeps failing to meet quality standards, it will be hard for them to win a bid of another contract in an already the competitive automotive supply industry

PRODUCTION

Theoretical capacity is the amount of production possible under ideal conditions with no time for maintenance, breakdowns, or absenteeism. The amount was calculated assuming that each stage of production runs simultaneously, thus a bottleneck process determines the capacity. Out of all the stages of tube production, the bending machine process takes the longest, requiring 13 seconds per tube. Therefore, this process was the basis for computing the theoretical capacity. Hilcrest Auto operates five days per week, two shifts per day, and eight hours per shift, therefore its theoretical capacity under the current production process amounts to a total of 22,153 of heater core tubes per week, or 4.62 per minute, 276 per hour, 2,215 per shift, and 4,431 per day).

According to the case, a “good day” results in the firm producing 1,300 units per shift, which translates to 13,000 units per week, well below the theoretical capacity. Given that the weekly demand of the Tier One company for the part is 18,500 per week, and that the future forecasted demand is expected...