EIIC & Donner Company Hand- In

Abstract
EIIC founded in 1952 was property insurance or precisely an equipment breakdown
insurance company. It was a B2B oriented company which was mostly operated like a service
operations firm. Donner company on the other hand, founded in 1985, which produced
regular and customized printed circuit boards (PCBs) was a production line company. Donner
company too was B2B company which served clients such as IBM, Digital equipment, etc.
Since Donner company also acquired clients requiring customized PCBs, sometimes the
production line was converted to a job shop.
EIIC being an insurance company was in the service sector since they served
customers with insurance and accidental protection for their products. Both the companies
were not in a good financial standing as compared to the beginning. Both the companies were
facing a few problems related to operations, profits, deliveries, quality and production.
EIIC began its journey in 1985, its initial success was observed in 1991 when the
sales revenue reached 65 million. After this initial success, in mid-1991 EIIC started facing a
few problems within its firm. Problems such as the increasing employee turnover rate among
the crop engineers and the underwriters. The crop engineers showed a turnover rate of 17% in
the year 1990. The possible grounds of such a problem could have been that the underwriters
felt that they did not posses any decision making power, average compensation packages with
no future growth in the company. Among the other problems within EIIC were the increasing
disagreements between the branch managers and the chief inspectors. The branch managers
believed that they should hold the authority of insuring certain risks in an equipment since the
chief inspectors went by the book which sometimes lead taking the issue to the main branch.
Whereas the higher officials believed that since the chief inspectors were responsible for
these decisions there was a very little room for faults left. Besides this the branch managers
believed that they should be the ones supervising their staff of inspectors and not the chief
inspectors. Due to this hierarchical environment a lot of misunderstandings were arising
between the branch managers and the chief inspectors. Another issue in the company was the
late deliveries of the policies. The time set for delivery of an insurance policy by the
company was 14 days which was feasible only for the small policies. The long policies on an
average took around 43 days for the delivery which included= 26days for first inspection
order + 10 days for the approval from the supervisory director + 5days for underwriting +
2 days to accomplish all the other miscellaneous tasks. The clients also expected a faster
completion time, which if not offered was undertaken by the clients themselves, which posed
a risk to the profits of EIIC. Another external risk, was from the competitors which offered
insurance for varied items whereas EIIC offered it for industrial equipment. This fact allowed
the competitors to offer discounts in comparison with EIIC.
EIIC took great pride in their inspection services, which was strength of their
company. They also offered loss prevention services, which took effect when accidents
occurred. The efficiency of these services came from the hierarchical system of EIIC which
allowed them to avoid mistakes in the inspection. The field inspectors who where responsible
for on-site inspection, reported to a supervisor inspector, who then reported to the branch
manager. The information collected from the branch manager was then evaluated by the chief
inspectors who took the decision about the insured items. EIIC mostly hired experienced
navy engineers like the founder Warren Rodman himself. EIIC also believed in their
efficiency of quickly responding to accidental issues at the insurers premises.
The problems faced by EIIC can be resolved by a few short and long term solutions
such as:
Long term Solutions:
The first issue to be resolved by EIIC should be awarding the branch managers with a
little more power to control the operations under them. This would reflect the
confidence the company holds in them and also motivate them to do a better job than
to create disputes. It would also help them respect the chief inspectors more and
reduce the misunderstandings created among them. Also, the branch manager should
be allowed to report back to the home office directly so as to avoid any duplicity.
EIIC also needs the higher officials to loosen the grip on the people working under
them to create an informal and friendly environment which would lead to better
communications among people. This would solidify the companys main principle of
delivering efficient inspection services with minimum errors.
The underwriters in EIIC too need to be given a little more authority over taking
decisions without being bound by unnecessary regulations laid on them by home
office. Higher incentives and packages should be offered to all the employees to
ensure satisfied and happy nature among them.
Short term Solutions:
The operation of the company is harmed by the organizational structure. The
company does not require so many people reporting the same thing to each other. In
the structure there is no requirement of the supervisor inspector, the responsibility can
be directly handled by either branch manager or the chief inspector.
The process of inspection needs to be speeded up since it might lead to loss of a few
clients. This can be done by the removal of supervisor inspectors role or also by
strategising the inspection in a different way. EIIC can cut down on a few inspections
conducted on smaller policies and concentrate more on larger policies for faster
deliveries. In EIIC, 67% of the total insurances were for smaller policies, which
makes it clear that by reducing inspections on the smaller policies the time remaining
could be utilised for large policies.
Since it was noticed that dealing with the special agents was like dealing with the
clients, an increase in special agents will bring in more jobs than before. Also to lure
more business from them, incentives with relation to the clients they bring in should
be offered to help motivate them.

Donner Company on the other hand which is production line company except for the
customized orders which required a job shop environment. It possessed a competitive edge
due to the employees expertise in design engineering. Although, due to this competitive edge
Donner company had a rush of orders which lead to late and poorly engineered PCBs to the
clients. The bottleneck in the operation was due to the distances between the equipments to
avoid damages which lead to leaving machinery idle for a few minutes after a cycle of every
process. Few problems faced by Donner company were:
Poor quality and productivity of the PCBs
Frequent changes in the order of the production due to sudden orders or replacements.
Inaccuracy reflected for the actual labour time in each process.
Absence of break even analysis on the utility of the CNC milling machine since the
manual cutting still took place on a few orders.
Failure in meeting deadlines due to disorganized and unpredictable issues.
These problems contributed to the declining fame and quality of products by Donner
Company. These problems resulted in financial problems for the company.
The SMBOC process, a major process used for production of PCBs constituted of
three steps:
Preparation
Image transfer
Fabrication
This process was divided into two kinds of operations: manual and automatic. Due to this
change in automated and manual application, each step of SMBOC consisted of
bottlenecks. The only solution to reducing the cycle time was by making a reasonable
choice of divided process in manual or CNC drilling machine.
Drilling:
Time for drilling depends on manual or CNC drilling
Time taken by CNC drilling= 240+x*0.004*500, where x=number of boards
Time taken by manual drilling= 15+ x * 0.08* 500
For CNC drill to be used,
15+ x * 0.08* 500 > 240+x*0.004*500
X > 5.92
Therefore for boards more than or equal to 6, CNC drill should be used.
Profilling:
Time for profiling depends on: Punch press or CNC Router
Time for CNC Router= 150 + x*0.5, where x= number of boards
Time for Punch Press= 50 + x
So, for CNC to be used
50 + x > 150 + x*0.5
X>200,
Therefore for boards more than or equal to 200, CNC Router should be used.
From the above calculations we can determine that only for boards more than or equal
to 6 & 200, CNC drilling and profiling will be used respectively. It is also evident from the
given information that Arthur Dief is capable to complete rush orders in an efficient manner.
The reason for this efficiency was that he had fewer units since he accomplished those orders
with manual work.
Bottlenecks within Donners standard process, particularly surrounding the capacity
of the dry Film Photoresist area can be observed. It is critical to realize the true capacity to
prevent bottlenecks and work-overload. If, for example, the maximum number of boards that
the DFPR area can handle (due to the set up and run time involved in the process) is 100, then
Donner should realize that order size that passes through the drilling process should not
exceed 100 units (to match the DFPR capacity). If the order sized is more than 100 (hence,
more than the maximum capacity that the DFPR area can handle), a bottleneck is created and
possibly shifted throughout the entire manufacturing process. In addition, since the DFPR
area consists of several functions, it is important to be aware of the maximum capacity (as per
order size) to prevent bottlenecks within the DFPR area. Exceeding maximum capacity will
have a direct negative impact on quality and on-time delivery (two problems that Donner was
already suffering from in September). Of course, the bottleneck will change from one area of
the DFPR to the other, depending on the order size and the time involved in each process.
In September 1987, there was a total of 3696 hours worked however the standard process
flow for September shows total actual hours worked of 1531 hours. This means that there
was a total of 2165 hours that were considered either as down time or idle (non-revenue
producing), hence: unproductive (59% of idle time), yet paid for by Donner. This also means
the following:
2165 hrs / 21 days in September = 103 total hours wasted every working day
103 hours / 22 employee = 5 hours that are wasted by each employee every day, which is
of the working day. This simply means that each employee worked an actual 3 hours on a
normal 8 hours working day. Not only does this affect productivity, but Donner paid $8.73
per employee for 8 hours a day (each employee cost Donner $69.84 / day), yet they only
worked for 3 hours (revenue generating production). This amounts to a loss of $43.65 per
day, per employee ($69.84 - $26.19). Calculate this loss by 22 employees, and it is clear that
Donner wasted money on wages for hours either not worked or worked without generating
revenue, that amounted to $960.3 every working day, and $20,166.3 a month!
Recommendations:
Change strategy from current position to one which concentrates on producing either
one of small or large quantities of fast turn-around SMOBCs.

By concentrating on one type of quantity focus will help Donner Company strategize
in a particular way. All the inter related problems in the quality, productivity, delivery
and financing will be resolved by following a disciplined operation process.

Integrated Analysis:
Integrated analysis exhibits the importance of the following aspects of a company:
Following a specific strategy: If too many varieties are handled in a company the
setup time increases so it is necessary to stick to one type of process and follow its
strategy.
Maintaining organizational structure to avoid employee disputes
Process flow should be followed and prepared before actual work starts
Bottlenecks should be identified and removed using the best possible process to save
cycle time.