Case Study Custom Molds Inc

1 Case Study: Custom Molds Inc. Homework for Class 2 1. What are the major issues facing Tom and Mason Miller? Major issues faced by Custom Molds Inc as well as Tom and Mason Miller include the following: Low Quality Efficacy: As with any other manufacturing company, quality has been of very high importance since Tom and Manson Miller began Custom Molds Inc. As the business has evolved, this once important aspect has now eluded them as evidence in receiving returned orders that customers have deemed as defective. If quality is not considered, they could experience quality failure that could incredibly affect the business. For example, J.P Morgan lost $6.2 billion in 2021 because of inadequate internal controls.1 Delays and Bottlenecks: This type of issue is a very common problem with job shops. Due to the nature of customizable orders that vary in quantity, operating in a job shop type production process leads to difficulty in organizing and scheduling. “Because items pass through different processes, it can be challenging to organize your production flow. Some orders can be relatively straightforward, whilst others can have a huge bill of materials (BOM) which will be costly for your resources.” 2 These delays and bottlenecks are now affecting the business. The firm is receiving complaints from customers that the promised three-week delivery is not being met and disrupting their production schedules. Tom and Mason are now required to reschedule jobs in an attempt to put things in order, costing more time and labor. Limited Capacity: As the business grew from just manufacturing molds to also include high-quality plastic parts, capacity has become more limited. For example, Custom Molds has the capacity to produce 5,000 parts per day in the injectionmolds department but historically the lead time for handing orders in this department has averaged one week. Because of this limited capacity the firm has concentrated its sales efforts on supplying limited quantity parts for research and development efforts and in preproduction pilot runs. If not made more efficient, having a limited capacity would weaken the ability for Custom Molds to stay competitive in delivery time. Lack of Raw Material Inventory: “…companies must be able to maintain the availability of raw materials inventory to ensure the good flow of production process with good quality, proper time, and effective cost.” 3 Custom Molds does not hold any raw materials in inventory which requires buyers to purchase raw materials every single time an order is submitted. This lack of not maintaining even a short supply of raw materials consistently used subjects the firm to the lead times of receiving their raw materials and fluctuating costs. This leads to potential extended delivery times to customers as well as higher production costs. 2 Poor Management of Labor/Talent: Currently Custom Molds operates with 13 skilled master machinists. These individual machinist works with a design team for each specific order and see the project through to completion. Meaning one machinist follows the order through every step. Because of this style of production, a machinist can only take on a handful of products at a time to ensure quality. As more orders come in of larger quantities, the small staff of machinist are not hitting targeted lead times and quality standards are not met. 2. What are the competitive priorities for Custom Mold’s processes and the changing nature of the industry? The competitive priorities for businesses like Custom Molds that fabricates and manufactures custom molds within a job-shop production process includes focuses on quality, flexibility, and delivery. These take the form of top tier quality that is consistent, delivery that is on-time and reliable, and the ability for customization. These priorities are built on producing a very strong customer relationship. “Over the life cycle, flexibility decreases due to high volume and standardization, but unit costs decrease.” 4 Custom Molds provides a bespoke service to their customers which results in cost, delivery speed, and volume flexibility becoming less important. This is because those aspects vary depending on the specifications and needs of each customer’s order. The other function of Custom Molds’ business, plastic part manufacturing, has some similar competitive priorities like consistent, high-quality, and on-time delivery. But also has some different completive priorities which includes quick delivery speed, volume flexibility, and offering a lower cost. Speed, cost, and flexibility are all easily achievable competitive priorities through automated batch processes which make it more of an importance for firms like Custom Molds who don’t have the volume of orders to automate their process. They are forced to focus on order fulfillment to stay ahead of competitors. With the changing nature of the industry and Custom Molds’ primary customers, electronic manufactures, making the shift from vertical integration of component parts to strategic partnerships with part suppliers, there is an increased need for faster development and delivery. As customers develop stronger strategic alliances with suppliers, they are becoming more reliant on the timeliness of delivery while still receiving consistent, high-quality products. Competitive priorities in mold fabrication need to shift to focus on quicker delivery and consistent quality. This change increases the need for businesses like Custom Mold to produce stronger supplier relationships to reduce lead times of materials. The changes in the industry have forced Custom Molds to strength their effects regarding plastic parts manufacturing. As the industry shifts to customers developing solid strategic alliances with their suppliers there is more dependency on suppliers’ cost, delivery speed, on time delivery, flexibility in volume quantity, and consistent quality. This increasing dependency on delivery has required Custom Molds to be more flexible with the dynamic state of the industry and focus on developing strong supplier and customer relationships. 3 This would ensure that Custom Molds can delivery top tier quality parts on a consistent timeline for their customers. 3. What alternatives might the Millers pursue? What key factors should they consider as they evaluate these alternatives? An easy and quick alternative that could resolve the current delays in the production process would be to reconsider the way they are making use of the current labor, specifically the 13 professionally trained machinists. Tom and Mason could remove the stipulation that the machinist must be the same throughout the entire process from design to fabrication. While this may cause very slight difficulties as the machinist fabricating the mold wouldn’t necessarily be the same one helping with the design of it, professionally trained machinist should be skilled enough to look at and understand a design rather quickly. This could improve the number of available resources, i.e. labor, from just 1 to 13. Another quick alternative would be to create a more elaborate production schedule. By producing a defined production schedule this could help with demand planning, supply, and become flexible with the changing needs of customers.5 If different machinists are being utilized at all different parts of the production process, then creating a dedicated schedule will allow everyone to know who is contributing where and ensuring they are leveraging a high capacity. If scheduling were improved upon then bottlenecks could be more preventable thus greatly reducing lead times at a minimal cost to the firm. A more medium-term alternative could be positioning high-quality as a business strategy for the firm. This includes ensuring all steps throughout the production process are done with quality in mind as well as removing any non-necessary steps in the current quality control phase. If Custom Molds instills a high-quality culture in the firm through things like job enrichment and ensuring quality employees are hired, then unnecessary steps in the production process could be removed. They could also work to roll out of a new quality check process that is integrated throughout the production process instead of being its own step at the end. If the time, effort, and support from everyone in the organization were to continuously improve process and quality was embedded in the core of the organization then processes would be more streamlined. Another alternative that may take a little longer to attain would be supporting the growth of a supplier relationship. Currently the way the business operations is strongly linked to the lead times associated with acquiring raw materials. Custom Molds would be able to better manage the supply chain and enhance their time-based competitive priority if they partnered with a supplier. Ensuring this strong alliance with their suppliers would allow Custom Molds to build a better framework for raw materials delivery and set expectations with their suppliers. Thus, allowing the business to deliver on quality and delivery to their customers. This would also create a way to measure performance of their suppliers. Alternatively, the Millers should also consider holding some type of raw materials inventory even if it is only a handful of resources. This would eliminate some purchasing lead times. 4 Considering some longer-term alternatives Custom Molds must work to develop a strategic plan for the business. From a strategic perspective there are three possible alternatives. They could refocus the business on custom mold fabrication only, focus the organization on the growing parts manufacturing market or recognize that the two sides of the business have different requirements and separate the two processes and establish two entirely separate lines. Each of these alternatives require different costs but each benefit the organization and their customers. By choosing to refocus the business and return to only mold fabrication, Custom Molds would be leveraging their core competency and become a highly specialized business again. If Tom and Mason choose to proceed with this plan, they could most definitely stay profitable by retaining a high margin but there are also significant risks as they would be choosing to stay in a shrinking market segment. Another option would be to divest the fabrication component of the business so that they could focus solely on harvesting the plastic part manufacturing segment. By choosing this option they would be operating in the more promising and growing market segment but arguably this option would be the hardest for Tom and Mason to pursue. This is because there would need to be a considerable number of changes in the business strategy and core values. Because Custom Molds began as a very successful mold fabrication business, it’s a core competency for the firm. The business originally was set up to operate in this way and the manufacturing segment was added later which would require some strategic development and changes. However, given the noticeable changes in the industry and continued growth in the manufacturing sector, this may be the best choice for the business. The final option would be for Custom Molds to establish separate lines for each process. The firm already operates by separating the two, but this alternative would be to include moving one of the processes out to a separate location. This alternative would ensure the that both streams of revenue for the organization is retained but also would have a very considerable cost impact. Looking at the declining fabrication market, dedicating specific resources to just that side of the business would be a large commitment of resources and could lower capacity in the long run. Making this a not ideal alternative for the Millers. Consider all these different alternatives, both short term and longer term, there are several different factors that Tom and Mason must consider when choosing which alternatives to move forward with. One factor would be technical resources. Would the business be able to operate with the number of technical resources, like machinery, they already possess or would more need to be purchased? Which leads into the next factor, capital resources. Does the business have the available amount of capital resources to facilitate the operational alternatives they hope to pursue? No matter the alternative they move forward with there will be some type of increase in capital necessary to aid the increased activity for the business. Finally, there’s the factor of labor. Leadership must consider whether they have the appropriate amount of personnel or labor to coordinate the changes they wish to seek. This may include bringing on any additional machinists or developing a more skilled quality team.