Case Study – Custom Molds, Inc. is a small fabricator

Case Study.
CASE : CUSTOM MOLDS, INC. *
A. Synopsis
Custom Molds, Inc. is a small fabricator of custom-designed molds that are used in injection molding machines to make plastic parts. Its major customers are in the electronics industry where large volumes of plastic connectors are used. The company has recently noticed a shift in its market as the total demand for molds has declined, but the requests for molded parts have increased. In response to this shift, Custom Molds, Inc. has expanded its operations to include the manufacture of plastic parts. The case provides students with the opportunity to analyze the different processes associated with mold fabrication and parts production and to discuss the interaction between process management decisions and competitive priorities.
B. Purpose
The purpose of this case is to focus the student on issues relating to process strategy and to discuss how decisions involving process structure, customer involvement, resource flexibility, and capital intensity interact with different competitive priorities. Students need to resolve what it will take to compete effectively in each of Custom Molds’ markets and how best to configure its processes. One needs to consider specific issues:
1. There are two distinctly different processes taking place in the same facility. The students should diagram each process (see flowcharts in Chapter 4) and compare/contrast the strengths and weaknesses of each.
2. The different processes serve different customer needs. Mold fabrication requires flexibility and quality where parts manufacturing competes on delivery and low cost. The margin for parts is much smaller.
3. Although the number of orders has remained relatively stable, the volume per order for parts has increased significantly over the last three years. This increase has caused bottlenecks in the shop and has led to late deliveries of parts.
4. The change in sales mix has created excess capacity in mold fabrication, and the owner has relegated one of the master machinists to the role of expediter.
C. Analysis
Students should begin their analysis by examining the market trend data in the two tables in the case. These data clearly show that although the number of orders received over the threeyear period for molds has remained constant, the total number of molds fabricated has shown a declining trend: 722 in 2006, 684 in 2007, and 591 in 2008. With 13 master machinists employed, mold fabrication capacity can be estimated at 13 machinists ? 250 days/year ? 5 days/mold or 650 molds fabricated/year Another way to look at the excess capacity question is that each master machinist working 250 days per year, averaging five days’ processing time per mold fabricated, can produce 50 molds per year. At a current demand rate of 591, only 12 master machinists are required. * This case was prepared by Dr. Brooke Saladin, Wake Forecast Univeristy, as a basis for classroom discussion. As an aside, note that the regular-time capacity of 650 molds per year was actually insufficient to handle the demand in 2006 and 2007. Presumably overtime was used in these earlier years to make up the shortfall, although not stated in the case. At this point the changing sales mix not only alleviated any earlier capacity shortage, but created enough excess capacity now that Tom Miller reassigned one of the master machinists to an expediting function. Parts manufacturing, however, shows the opposite trend. The number of orders has actually declined a bit but the total of parts processed has risen drastically over three years: 47,200 in 2006, 67,150 in 2007, and 114,850 in 2008. Although data are not provided on the processing times of individual parts, we can see that the order sizes are getting much larger. This trend has most likely caused bottlenecks at the injection molding operation, because the operations both before and after the injection machine take only one or two days to complete. Therefore, the late deliveries that customers are complaining about are probably due to molds being delayed or orders waiting for the injection machines. Delays and time pressures may also be contributing to quality problems as operators hurry to process orders. The analysis should then determine the process flow in diagrams of each step. This will enable students to see where time and resources are being consumed. These flows can be compared to the layout block plan in Figure 3.18 to get an idea of the material flows in the plant. In the final phase of the analysis, students should discuss the strengths and weaknesses of each process and relate these to the different competitive priorities needed to compete in each market. Mold Fabrication Parts Manufacturing Job process Line process High customer contact Less-skilled labor High-skilled labor More capital intensive Divergent processes Less-divergent process The mold fabrication market requires a great deal of flexibility in order to design and custommake molds to meet customer requirements. Quality is also very important in meeting demanding specifications. Short delivery times are less critical, as the design phase, working closely with the customer, can be lengthy. Costs are also a secondary consideration, as the cost of the mold is typically a minor component of the customer’s overall cost of manufacturing. Custom Molds, Inc. has expanded into the manufacturing of plastic parts. Parts manufacturing is a higher-volume, cost-sensitive market. Parts are needed in a timely manner to keep customer production processes running. Volume flexibility becomes more important than product flexibility. So students should be able to see that the company has exposed itself to a different set of competitive priorities.
D. Recommendations
At this stage, early in an operations management course, specific recommendations will be difficult for students and should not be the primary focus. The instructor should look for general recommendations concerning: (1) capacity decisions and the allocation of production resources; (2) the possible orientation toward either molds fabrication or parts manufacturing; and (3) the physical separation and focusing of each distinct process. A sample student response to the discussion questions that follow will give (Exhibit TN.1) some idea of what to expect from a student in an introductory course in operations and supply chain management course.
E. Teaching Strategy This case is designed to be used early in the course. A primary focus is to expose the students to the concept of flowcharting processes (covered more fully in Chapter 4) and using the flowcharts to analyze the strengths and weaknesses of the processes. A second focus is to show the students the impact that process choice decisions have on the ability of the company to compete on different competitive priorities. For best results the instructor should assign this case as a homework assignment. Students should come to class prepared to share their process flow diagrams. The discussion then can pretty much follow the discussion questions at the end of the case. First make sure the students realize the company faces capacity issues brought about by the expansion into parts manufacturing. Then move to the analysis of the flowcharts. As students begin to see the strengths and limitations of each process, you can then move on to a discussion of the interaction between market-required competitive priorities and differing process characteristics. This case can easily take a full 50- or 75-five-minute class if students share their flowcharts and the instructor has the class as a group develop the two flowcharts on the board. This, however, is a good exercise for students to be involved in, as they learn that flowcharts for even seemingly simple processes may be more difficult to develop than they thought.
EXHIBIT TN.
1 Custom Molds, Inc. Student Responses Question 1 The Millers face a changing market environment for their two product lines—molds and plastic parts—a problem that they must address. The mold market is in the mature phase. Though the number of mold orders is constant, the average number of molds per orders is decreasing. This information may imply that customers are letting Custom Molds prototype the mold design, but they are then fabricating the molds in-house once they validate the design. The plastic parts market is in a growth phase, at least from the Millers’ perspective. The plastic parts market shows a sizable increase in average order size. This market shift is causing the Millers’ problems on the shop floor as the company shifts from mold production to plastic parts production.
Question 2 The market shift from molds to plastic parts impacts Custom Molds because of the different production process required for each product. Mold production is a job process environment with only a limited number of molds manufactured per order. This process requires highly trained and skilled workers to manufacture the molds. Plastic parts production is primarily a batch process, with characteristics of a line process, which produces small runs of similar products. Unlike mold production, the skill level of the labor is not as high. However, both products are made to order, so there are similarities between the two, especially in terms of production scheduling. Quality, product design, and flexibility are important competitive priorities for the molds. Price and delivery are competitive factors but only as order qualifiers, not order winners. For the plastic parts, delivery and price are more important; quality and flexibility become order qualifiers. The importance of maintaining the delivery schedule has caused many of the problems with Custom Molds production. Both production processes at Custom Molds have a great deal of slack time. For example, the company schedules two to four weeks for fabrication of molds although it takes only three to five days to make the mold. For molds, these delays are not a major factor. For plastic parts, production time for 500 parts is four days’ mixing, molding, trimming, inspecting, packing, and shipping. With assembly, the parts require an additional three days. Generally the company waits one week for the compounds to arrive and one week lead time before producing the molds. This provides a tight schedule for the company to meet the three-week lead time for plastic parts order promising.
Question 3 Alternatives for the Millers are as follows:
1. They can shift their focus to plastic parts production. This will require increasing the space dedicated to plastic parts production or adding additional space. This will also require a move away from the expediting mentality. The use of skilled machinists to expedite parts is a waste of resources. It is likely that the delays are due to a combination of expedited orders that slow regular orders and limited capacity. This choice will require commitment to expand resources and maintain delivery reliability. In addition, the company will need to recognize the increased importance of price competition.
2. They can move back to the focus on molds. However, this requires moving against the apparent trend in the industry. This strategy will require Custom Molds to take business away from competitors in order to grow the business. Price competition may become the primary factor in industry competition. However, it is unlikely they can profitably increase their business if they follow this strategy.

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