Longxi Machinery Works – Case Analysis

LongXi Machinery Works Problem Statement LongXi is geared to increase its market share for small multi-cylinder diesel engines but the growing quality concern over production of critical parts is jeopardizing LongXi’s growth in the agricultural sector market. Continued quality issues with our DGS, a critical part within LongXi’s Small Multi-Cylinder Diesel Engine has resulted in breakdown, engine failure and loss production at several customers. Customer complaints are increasing and we need to react to and eliminate our quality concerns. We must develop ways to improve quality in house. Our QC group is well established therefore we are recommending that we collect and analyze data relative to why the DGS is failing and from that data collection, make improvement to correct the recurring quality problems. Situation Analysis Customer Relationship Customer relations for LongXi Machinery Works are highlighted in the company’s background. We are one of several medium sized companies that share 55 per cent of the market share not occupied by larger single-cylinder engine manufacturers. Our primary market is the agricultural machinery sector of China. Since our inception, our competitive priority was in manufacturing various single and multi-cylinder diesel engines. These engines served four primary customers. Due to changes in China’s agricultural machinery sector that increased buying power, sales of diesel-powered agricultural machinery is seeing a ten percent continual growth over a five year period. Because of this growth, our sales estimate equate to 85 percent of the overall 10 percent growth over the same five year period. The attached table shows a comparison to one of our primary competitors – Changchou Diesel Engine Works (Changchai). As you can see from the comparison table, LongXi is a much smaller company to Changchai. Changchai is one of the four large manufacturers that account for 45 percent of the market and we are one of the several smaller companies that equate for the remaining 55 percent. Process Analysis Sawing Department The duo-gear shaft (DGS) is manufactured at LongXi using a batch manufacturing process in which small quantities of parts are process at a time. The process flow for the DGS starts in the warehouse where raw material is sawed to the desired length. Three of six machines are used to prepare the raw material for the DGS. Based on the initial step in the process flow, using the six available machines will allow more parts to flow through the process which would increase operating cost, but would significantly reduce process time. This process change could help in reducing the overall cost of the DGS unit. Machining Department The next operation in the manufacturing process is the machining process. This process consists of Grinding, Lathe and Drilling machines. Only the lathes and the drilling machines are used in this area of the machining department in the initial phase of the machining process. The lathe process is the first process in the machining department. After the lathe process, parts are stacked on each operator’s tool box until the material handler moves them to the drilling operation. After each machining process the parts are transported via carts by a material handler to the next process. Typically, in other machining operations, the lathe and drilling process could be combined into one operation where the parts would be cut to length and the holes would be drilled using the same machine. This would require significant capital investment by LongXi but it would reduce wait and transportation time between processes. This would also eliminate the need for operators to stack parts on their tool boxes. Thermal Treatment Department The thermal treatment process is the most important process in respect to the overall quality of the DGS part. As stated, thermal treatment is needed to develop the proper hardness of the DGS after the initial machining operations. With respect to the heat treatment process of the DGS, the DGS goes through a preheat process where the part is heated to approximately 200c – 300c for ten minutes. Workers were then expected to judge this process based on visual cues and overall time. Since this is the initial phase of the heat treatment process, it is important that the part is preheated to the correct temperature to maintain consistency throughout the remaining processes. Perhaps an automatic temperature sensor and timer can be added to the preheat furnace to indicate when the part is within the temperature range for the allotted time. This would eliminate the inconsistency of the workers judgment. Processing the DGS through the main furnace is set up to have the furnace monitor the heat cycle and times and then records them on a chart recorder. While this is good, the operator is once again asked to manually hold the parts until the cycle is complete. This again can introduce inconsistency into the process. The tempering process is a very important step in the overall heat treatment process. This step is automated and electrically controlled. There is a ten minute wait time for each basket of parts between the quenching process and the tempering process. The DGS is then returned to the machining department a second time for grinding. This operation is a two shift operation utilizing one operator per shift. The attached Fishbone chart outlines possible problems causes we are currently experiencing with the overall manufacturing process. In summary, the current process to manufacture the DGS is setup as a job shop where similar machines are grouped together. Although this process creates flexibility with the way product flow through each operation, the manufacturing process for the DGS at LongXi can be improved significantly. We need to create a separate process to manufacture the DGS. One way to do so is to start by combining processes to eliminate non-value-added activities such as part transfer between operations. The lathe and the drilling process can also be combined into one operation. Adding more automation for part transfer can also reduce NVA. As a result of combining processes, more floor space can be freed up for parts storage. Total Quality Management Quality Inspection Quality management is a major part of the DGS manufacturing process. Approximately 130 quality inspectors are responsible for quality throughout the organization. Three types of inspection are done throughout each operation. Initial Inspection, Patrol Inspection and Final Inspection. This is an area of quality that needs to be addressed. Typically in manufacturing operations this amount of inspection at each operation is excessive and can lead to problems instead of solutions. With the workers taking responsibility for quality and having a final inspection at the end of each process seem enough for the DGS process. Customer Satisfaction In terms of customer satisfaction most of our quality inspection is done to satisfy our internal customers or upstream processes. Quality is built into the product after each operation where the process is not complete until a final inspection. This done to ensure that the next process/customer receives a quality part with the belief that our external customer will ultimately receive a quality product. We are still working on satisfying our customer in the agricultural market sector in some areas. We are producing a product that meets our customer’s specification, our product has value and we provide adequate support when we have an engine failure. However, in the areas of consistent quality and on-time delivery, we are lacking and must improve. Employee Involvement Along with the other inspection processes within the departments, workers were also responsible for ensuring high quality production. A process called Self Inspection is used by workers to verify their own quality. Workers were also encouraged to use Mutual Inspection which meant that the quality of upstream operations was verified. Workers were also responsible for notifying quality inspectors to conduct other necessary inspections. Employee involvement is also active at LongXi through the formation of our QC Group. This group is made up of Line Workers, Managers, and Engineers. The main focus of the QC Group was to focus on the metallurgical issues that might be causing the quality problems with the DGS. The QC Group’s activities were guided by a manual called the â€Å"Method†. This manual gave direction on working routines, rules for quality improvement targets, and brainstorming techniques. Instructions for encouraging employee enthusiasm and customer suggestions were also included in the â€Å"Method†. We rely heavily on employee involvement as tools necessary to improve our overall product quality. We rely heavily on employee involvement in several ways. We have teams setup that establishes goals for marketing, production, profits and employee benefits. These goals are later translated into quotas which are distributed throughout the company and are analyzed monthly. To further implement and build upon the concept of employee involvement to improve overall product quality, each department within the company is viewed as a customer and efforts are being made to correct and eliminated product defects before it is passed on to the next customer. However, we must continue our efforts to improve overall quality. One immediate recommendation would be to continue the developing the Quality Group and the motivation/reward system that rewards employee involvement in quality improvements. There are significant gaps in training between the Quality Group members and the production line workers. Improving the reward system is also a significant improvement that needs to be addressed. Most of our re-accruing quality problems are being generated from lack of motivation of production and technical personnel. A better or improved reward/motivation system will help that problem. Continuous Improvement Most of LongXi’s continuous improvement efforts were driven by the overall goals of the SOE and the government of China, and demand for external customers. Most of the continuous improvement efforts were directed through the fulfillment of the â€Å"Market, Management, Quality, Profit† credo. The management team developed action plans in areas such as technological improvements, quality improvements, and new product introduction. The goals from the development of the action plans were then distributed throughout the company and each month, each department analyzed the actual versus what was planned. Continuous improvement is also being applied at LongXi such as: †¢ Adding new assembly lines. †¢ New group processing centers. †¢ Implementing action plans for technological improvements, quality improvements and new product introduction. In Summary, we have made significant steps to satisfy our customers, involve our employees and improve our product line but our overall product quality remains a major concern and the implementation of an overall quality system will be necessary to overcome this concern. Getting and keeping management involvement in the Quality Group is also a significant step forward in improving the current quality problem. Our management team will have to be more involved in driving and monitoring quality improvement goals especially at the production line worker level. This would ensure that overall production and quality issues are addressed and supported. Technical support continued to be inadequate at the production line worker level which is where the work is done to produce the DGS. Alternatives New Thermal Treatment Department |   |   | |Pro |   |Con | |Focus on efficiency to improve quality |   |Current production is hurting quality | |Capacity limited |   |May not have space needed unless major improvements are made | |Complete automated process |   |Significant investment | |New machines |   |Older equipment relied on human Judgment | | | | | |Outsource the production of the DGS |   |   | |Pro |   |Con | |Focus on efficiency to imp rove quality |   |Part is inexpensive | |   |   |Continued quality problems impacting future business | |   |   |Company location | | | | | |Eliminate Products Using the DGS |   |   | |Pro |   |Con |Focus on efficiency to improve quality |   |Product is key to future sales | | | | | |Develop New Quality Process |   |   | |Pro |   |Con | |Focus on efficiency to improve cost |   |Different way of operating business | |Focus on improving quality |   |Time | |Better customer satisfaction |   |Re-training all employees | Decision and Action Plan We do not recommend eliminating the production of the DGS. This part is a critical part used in all of the multi-cylinder engines that we produce. Eliminating this product would significantly hurt our overall business of producing and selling multi-cylinder engines. We do not recommend outsourcing production of the DGS. The part is relatively inexpensive and outsourcing the part would add significant cost the engine. Also, it is unclear that this would eliminate the quality problems. We recommend that we consider improvements to the Thermal Treatment department. The best solution would be to make the process 100% automated to eliminate any judgment or inconsistency on the part of the production workers. Although buying new machines would be an acceptable implementation for this decision, it would require less capital investment and provide consistency throughout the thermal treatment process. We recommend that improvements to the initial phase of the thermal treatment process be implemented first since that is the critical first step in establishing verall consistency throughout the process. Although we have made significant improvement and received several quality awards, we recommend that improvement be implemented to provide more technical support at the production line worker level. This would r equire more management involvement to make sure the right individuals were placed on teams and included in workshops that could train and take information back to the production line. As far as long-range quality management, we recommend that in order to maintain our quality improvement efforts that we become ISO 9000 certified. This certification will validate our efforts and move us closer toward becoming a world class company. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Appendices | | | | | |COMPETITOR COMPARISON | | |   | | | |Changchai | | | |LongXi | | | | | | | |Production Volume | | | |1. mil | | | |86,900 | | | | | | | |Revenues | | | |3 bil | | | |176 mil | | | | | | | |% of export sales | | | |8% | | | |   | | | | | | |% domestic sales | | | |92% | | | |85% | | | | | | | |profit | | | |208 mil | | | |6. 5 mil | | | | | | | |gross margin/unit | | | |2. 6 bil | | | |   | | | | | | | |verti cal integration | | | |   | | | |yes | | | | | | | |external partnership | | | |yes | | | |yes | | | | | | | |ISO 9000 | | |yes | | | |no | | | | | | | |Technology investment | | | |yes | | | |yes | | | | | | | |Better Quality | | | |yes | | | |no | | | | | | | [pic]