THE “O” COMPANY CASE STUDY The “O” Company manufactures large hydraulic units. One of the most difficult items to manufa

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THE “O” COMPANY CASE STUDY
The “O” Company manufactures large hydraulic units. One of the
most difficult items to manufacture is the hydraulic cylinder. The
cylinder housing is fabricated from a malleable iron casting. The
housing is machined to close tolerances, and the slightest
discrepancy in either material or machining means a total loss.
Machine cycle time on a typical housing is approximately sixteen
hours. For several years, castings had been purchased from the
Macon Foundries in Georgia (overseas). Macon had been a “O”
supplier for many years, and during that time it produced thousands
of castings at acceptable quality levels. Eight months ago,
however, when its founder and president, George Chapel, died, Macon
announced that it was discontinuing foundry operations.
The supply department at “O” undertook a search for new sources.
At first, few suppliers could be found who were either capable or
willing to meet the exacting specifications and tolerances
required. Ultimately, however, three foundries were selected and
invited to submit bids on 4,000 castings. The low bidder, at $76.17
a unit, was the Barry Foundry of Muncie, Indiana. Barry was a small
concern with a good reputation for doing quality work and
fulfilling every delivery promise. Barry was given a purchase order
for the full 4,000 units, with the stipulation that “O” approves
the first 100 units.
Within two weeks the first 100 castings were received. They were
subjected to initial inspection and then dispatched to the floor
for machining. In the words of the shop foreman, “They machined
like butter.” Barry was told to proceed with the entire order and a
four-month delivery schedule.
It was about this time that problems began to develop in the
shop. Some hard castings had damaged both grinding wheels and
cutting tools. Also, cracks from casting porosity appeared on newly
machined surfaces and slots. Although these conditions were not
present in all castings, they occurred in a sufficient number to
warrant action. It was determined that quality standards tighter
than those of the existing supply management standard would be
required. All suppliers were to be notified immediately.
Accordingly, the supply manager contacted Barry and told the
supplier to stop production of castings to the old standard,
advising that new specifications were now being developed and would
be issued within the next two days. To the supply manager’s shock,
he learned that Barry had completed all 4,000 castings. Having had
approval on the first 100 units, Barry established production on a
continuous-line basis and turned-out castings at a fast, steady
rate. Because the order called for deliveries to extend over the
next four months, Barry was holding the castings and shipping them
in accordance with the schedule. To meet the new supply management
standard, it was obvious that Barry would have to either scrap all
the old castings and produce new ones or undergo an expensive
process of re-annealing.
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