The other plant, located in Cleveland, was purchased by investors and renamed Omega Electronics. The Omega investors hired a new president who had worked in research and development for a large computer manufacturer. Some new research engineers were hired and several Copernicus personnel remained with the company but in new positions. Acme and Omega often competed for contracts to supply components to several large electronics manufacturing firms in the US. Both companies prospered in the mid-sass and early sass as computerized electronics equipment boomed.
Acme had annual sales of over $170 million and employed 350 people. Omega was somewhat smaller with sales of $140 million and about 275 people. However, Acme was consistently more efficient and profitable than Omega. Acme - A close-up. Acme's president, Fred Taylor, attributed his company's success to the fact that he and his managers ran a "tight ship. " They retained the same basic structure that the division had when it was part of Copernicus because it was efficient for high volume production of electronics components such as switching devices and printed circuit boards.
Taylor noted that, "Acme regularly undercuts the competition cause of their focus on efficient production. We are regularly the profit leader in this business. " Acme's structure is shown in Figure 1 . Workers are generally satisfied at Acme, but a few managers recently left the company because of the lack of flexibility or variety in their jobs. One recently departed manager stated that Taylor "knows one way of doing things -? his way. " He went on to say, "Fried's a good manager, but he did not provide us with much information or much freedom to make decisions. He makes all of the critical decisions himself. Revised version based on J. F. Vega and J. N. Handouts, from The Dynamics of Organization Theory, 1979, 1 984, West Publishing Figure 1 Acme Electronics Organizational Chart President Taylor UP Marketing UP Operations UP Personnel UP Finance Controller Plant Manager Production Research & Development Design Purchasing Shipping Omega - An inside view. Simon Herbert, former head of research and development at Snell Computers, was chosen as president of Omega. Based on his research and development experience at Snell, he claimed that he did not believe in a formal organizational chart.
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Although he said that his people loud be fit into departments similar to those at Acme, he felt that such departments formed artificial barriers between deferent functional specialists. Herbert stated that, "we are small enough so that people can usually communicate face-to-face when necessary. " Instead, Omega used a team-based structure that was adapted to fit new projects. Most of Omega's contracts were small and customized. Production runs were generally short. One manager noted that much of his time was taken up trying to understand problems and communicate solutions.
The Head of the Production Design Team noted, "Simon spends too much time trying to understand problems and communicate with everyone. " Most important decisions get made by the top management team. Part II In 1 993, the electronics component business began to change dramatically. Many of the old circuit boards disappeared from product designs and were replaced by increasingly complex chips. Miniaturization swept the electronics industry. Many complex office machines included on-board processors - basically dedicated computers. Such was the case in the copier industry.
In July 1 993, Global Xerography, the company that spun off Acme and Omega, name to the two firms requesting component production for a new generation of copying machines. The component was essentially a specialized processor and memory Engineering unit that would power the copying machine. Once the copiers were in full production, the contract could be worth as much as ASS-$30 million per year. Both Acme and Omega bid on the contract for the initial 100 prototype processor memory components. Although Acme's bid was slightly lower than Omega's, XX decided to award both companies contracts for 100 units each.
Ex.'s project manager told both Taylor and Herbert that speed in placement and production of the prototypes was essential. XX had already promised delivery of the new generation copiers by January 1, 1994. Customers were counting on the new products and once word of the new design got out, it would only be a matter of time before competitors began imitating the new design. Not only that, but investors were counting on the new design to add to Ex.'s profits. These demands for speed meant that XX, Acme, and Omega would need to engage in simultaneous design. Design of the components would need to begin before the final copier design was complete.
Acme and Omega would have no more than two weeks to produce the first 1 00 prototype components or they would delay final production of the copiers. Part Ill As soon as F-red Taylor received the design specifications (July 6, 1993), he sent an email to Purchasing requesting that they determine the necessary parts to be purchased and initiate purchasing. At the same time, Taylor sent the specifications to the Design Department for design and production rendering. Engineering was then given the task to take the output from the Design Department and create the production system for the actual reduction of the prototypes.
Production was to take the system and create the actual production facility and schedule production of the prototypes. Taylor sent emails to all department heads stating that speed of production was essential and that all departments should work as efficiently as possible. On July 9, Purchasing discovered that a particular chip supplied by their authorized supplier was unavailable and could not be shipped for at least two weeks. As there were few suppliers for this particular chip, the Purchasing manager assumed that Omega would face the same problem and he did not Reese to find an alternative supplier.
He also informed Taylor of the problem who in turn decided that the company should go forward with production without the missing chip. The chip could be inserted once the other production processes had been completed. The Design Department was instructed to design the component in such a way that the missing chip could be inserted later. On July 1 1, Design informed Taylor that the missing chip and would substantially increase the time necessary to assemble the completed components. Taylor saw no alternative and gave approval to go forward with the design and production.
The Design Department then gave purchasing specification for the chassis that would hold the memory and processor unit. Since this was a small prototype production, the company's standard procedure was to find an outside source for the metal work. On July 14 Taylor asked for a progress report and was dismayed to learn that Purchasing was still waiting for the chips and for bids on the chassis. Taylor was shocked by the lack of progress and demanded that Engineering begin fabricating the chassis internally. By July 17, all of the necessary parts (except the chip) were available and Engineering had begun producing the hashish.
Production had already designed the manufacturing process, so once the parts began flowing production of prototypes began. In their haste to begin production, the Production Department and the process engineers had not consulted extensively with the Design Department or Engineering (who produced the chassis that held the memory and processor unit). The result was a production system that was rather awkward and inefficient. However, there was not sufficient time to stop now and rework the manufacturing process.
Taylor and the manufacturing foreman both agreed that the kinks in he system could be worked out after the production of the prototypes. One concern voiced by the Design team was whether the missing chip could easily be inserted at the end of the production run. That was not clear. On July 18, at about the same time that the first batch of prototypes was coming off the production line, the missing chips arrived. The designers were correct to raise concerns about inserting those chips. The process required technicians to partially disassemble the units and insert the chips. The process was messy and time-consuming.
As the last of the 100 units was assembled on July 20, Taylor received a call from the project manager at XX informing him of a design error that the engineers at Omega had discovered on the previous day. Apparently, the original specifications from XX had reversed the installation of a voltage transformer. The XX engineers checked the information from Omega and found that a mistake had been made in the original design. Taylor said that the Acme units were completed and ready to ship. The designer explained that the error had to be corrected first. The prototypes that Acme had produced would not work.
The new design pacifications would be emailed later in the day. When the new specifications arrived, Taylor met with the Production manager to determine what needed to be done. It was determined that the units would once again need to be partially disassembled. The transformers would need to be removed and reinserted. This required substantial labor and re-soldering of the transformers. All of the disassembly and reassembly of the units caused damage to the chassis and some components. The finally reassembly, packaging and shipping of the first 50 units was completed on July 29.
However, none of the units were inspected or tested. The final 50 units were shipped on August 2. At Omega, Simon Herbert called a meeting department heads on July 6 after receiving the email of specifications from XX earlier in the day. He told the department heads that they should look over the design specifications so they could begin production as soon as possible. The next day the department heads met to discuss the project and form a project team. At the end of the morning meeting the department heads had designated engineers, designers, production people and a purchasing agent to the new component design-production team.
The team began to work closely to determine the necessary components, identify suppliers, and create a production system. Purchasing determined that one particular chip would not be available locally for two weeks. One engineer suggested that they search for alternative suppliers. At the same time, the engineers also determined that it would be faster to produce the chassis internally rather than sending specifications out for bids from contractors. The team also determined that they could modify the design for installing the missing chip at the end of the production process if they were unable to find an alternative source.
On July 9 purchasing reported that they found an alternative source for chip in Thailand. The chips would be shipped by express mail on July ID and would arrive at Omega on July 13. Although the chips from Thailand were somewhat less expensive, the cost of shipping resulted in the final cost being about 15% higher. The purchasing agent made the decision to purchase the Thai chips without consulting with other team members or with Herbert. By July 17 the production team assembled five sample units to determine if the assembly process would work correctly.
The manufacturing process irked flawlessly, however when the units were tested on the bench, they did not work. When the engineers and designers inspected the five sample units, it was obvious to them that the transformers were installed incorrectly. The units were disassembled; the transformers were removed and re- installed; and the units were reassembled. The resulting sample units performed up to specifications. Herbert called the project manager at XX to discuss the problem. On the morning of July 1 8, the project manager confirmed that the original design specifications were in error and that the Omega team was correct.
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