Scenario for Assignment 3


As explained in the first scenario, we are not reflecting the products, processes and management styles of any particular company, so resist the temptation to recognise yourself and your company in our description. However, it is helpful to try and understand where the people within the organization are coming from, so that you can pitch your report appropriately. As always, our aim is not to have too much detail, but to give a ‘flavour’ of the company’s background. Information here builds on the earlier scenarios, and should be self-consistent – if it appears not to be, do ask! It is probably wise to re-read the scenarios for both Assignment 1, which describes the company background, products and customers, and Assignment 2, which describes the equipment and the general arrangement of the factory.

The people and organisation

In the brief descriptions that follow, the initials of the (totally fictitious) characters reflect their job title, to make it easier for you to refer to them if necessary in your report. The company structure is shown in Figure 1.


Figure 1: AMS reporting structure

AMS reporting structure


Mark Dawson, the Managing Director of AMS, founded the company during the 1980s and still maintains considerable personal control, with informal direct links to many of the older employees at all levels within the organization. He retains some involvement in selling to the older customers, although increasingly this task is being handed over to his deputy and the newly appointed Account Manager.

Douglas Dawson, son of the Managing Director, is designated as his deputy. Unlike Mark, who had a background in electronics manufacture, Douglas followed his marketing degree by an MBA. During his two years with the company, Douglas has concentrated on marketing and sales, and has a good eye to the figures. He sees opportunities for AMS in a wider marketplace, but the constraints of the present factory, and the relatively high manufacturing costs in the UK, are encouraging him to think in terms of making prototypes at AMS and then contracting volume manufacture overseas.

Dave Edwards, the Design/Engineering Manager was one of the founding team. His background was in building telephone exchanges, but he has successfully made the transition to board assembly and kept well up-to-date with modern techniques. Supported by two young product engineers who have been trained essentially in-house, Dave’s team provide the technical interface with customers.

Adrian Manning, the Account Manager, has recently been taken on by Douglas in order to increase the customer focus and the pair of them have been able to help the company grow despite the recent recession. Adrian comes from the electronics components industry, but has less experience with assembly.

The Operations Manager, Owen Matthews is the third of the original team. In the past, he has carried out many of the operations himself, working alongside his team, and maintains a very ‘hands-on’ approach. Good at fire-fighting, and always able to meet month-end targets, Owen is good on planning procurement (which he controls) but nothing gets in the way of the month-end push, however important a development task may be.

The production line is run by two production supervisors. Steve Maxwell, who runs the surface mount line, joined AMS from school but has taken an HND by part-time study and has a real feel for the surface mount process. His counterpart in box build and cable harnessing, Bill Carson, is at the opposite end of the spectrum – experienced, but a bit dyed-in-the-wool, and has seen every manufacturing problem there is, at least in his opinion.

Patricia (Pat) Maloney, the Purchasing Manager, is “an experienced fixer of problems”, with good connections with all AMS’s suppliers, and many industry links that enable her to locate elusive components even if she has to use the “grey market” to source parts. Working in a pressurized and fast-moving environment, and supported by only one purchasing assistant, Pat tends to go for the “quick fix”.

Quentin Coates, the Quality Manager, has a background in aerospace, and a correspondingly structured approach to his task. With many years of experience of ISO9000, he runs a very tight ship, but one that is heavily procedural and documented.

Also supporting production is Sandra Thomas, the soldering trainer, who came from the same background as Quentin, and has a lot of soldering experience. An IPC-accredited trainer, she takes a pride in her job, but as yet has no specific experience with lead-free.

Process engineering is the responsibility of Paul Edwards, supported by two technicians. Paul is the main mover over lead-free within the company, having realized from his attendance at a number of SMART Group meetings that the lead-free issue will “get up and bite” sooner rather than later. Because the processes are well under control, Paul’s two technicians have at least some time available, although they are occasionally heavily absorbed by the introduction of new products.

The final member of the AMS team is Fred Drummond, the Finance Director, who has a good feel for manufacturing problems and a pragmatic attitude – not quite “creative accounting”, but certainly a potential ally to Paul, although Fred is risk-averse.

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The four directors have a regular monthly meeting attended by the Operations Manager which reviews major projects as well as dealing with marketing issues and financial reports. This is the main focus for Fred Drummond’s month.

From the production standpoint, control is exercised by weekly planning meetings, held on Tuesdays, which set the scene for the following week’s production. This meeting is the mechanism by which new products are introduced, and many of the actions land on the shoulders of Patricia Maloney and her assistant.

Detailed daily supervision is carried out by Steve Maxwell and Bill Carson; Steve has a daily “heads down” meeting for his staff just before the beginning of each shift, but Bill Carson has a larger and more mature workforce and is somewhat reluctant to adopt this means of communication.

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Manufacturing control procedures

AMS has a commercial MRP system that is capable of capacity planning, but in practice is used mostly for stock control and the issuing of components. Bills of Materials are generated by Design/Engineering, who also hold the part number register. The company uses its own part numbers, which are purely numeric and allocated in sequence. Since the register was started, around 18,000 unique part numbers have been allocated to electronic components, of which 11,000 are still current. Most of these parts are standard commercial off-the-shelf (COTS) items, but 500 are ‘specials’ in some way, this group containing components with special specifications or selections, pre-programmed integrated circuits, modules such as filters, and sub-assemblies.

The labels affixed by Goods Inwards to each package containing parts show the number of parts, the AMS part number and the Goods Receipt Note (GRN) number; the GRN paper record is traceable to the AMS order, the vendor part number, and to any batch information and certification of conformity supplied by the vendor. To maintain traceability, manufacturing batches of assemblies record the GRNs of the parts used in their construction.

To avoid the need to note stock locations on the part record, parts are stocked in AMS part number order. To make this feasible, whilst part numbers contain no information on the type of part as such, they have been grouped according to the space and type of bin required. For example, taped-and-reeled surface mount parts are in one number sequence, and large transformers in another, although components of different type but similar size and packaging might be anywhere in the area of the store holding bins of appropriate size.

Whilst this method of operation puts an emphasis on having the correct part numbers, there are difficulties in physically locating near-equivalents to out-of-stock components, although the full parts list can be interrogated and sorted by type as well as part number.

Within the Purchasing Department section of the part record, each company part number is referenced to distributors/manufacturer part numbers and to corresponding entries on the list of approved vendors. Although the MRP system allows a number of vendor part numbers to be associated with each part record, each Bill of Materials is an indented list of unique company part numbers and the quantities associated with each. Where an alternative part is to be used, either it must be allocated the original company part number, or the BoM must be amended. There is however some scope for recording the existence of alternatives in a notes field within the part record.

Whilst the knowledge is fragmented, between them the Purchasing and Design/Engineering departments have a reasonable understanding of the MRP system, and are able to generate custom reports and make modifications to the system. As this is built around a database, adding additional custom fields (for example, to indicate lead-free status) is possible, but might need some assistance from the software supplier.

AMS run an effective first-in/first-out procedure in stores, and their intention is that parts should be allocated against specific customer requirements within the MRP system. In practice, in order to protect the interests of key customers, there are informal arrangements whereby security stocks of key components are “spirited away” by the production supervisors.

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Financial procedures

Fred Drummond takes the view that stock held for more than two years should be written off, but this does not mean that older parts disappear from the system; instead they are held at nil value, and no longer physically counted during stock checks. Particularly when products have ceased production with insufficient warning, there may be substantial numbers of parts held in this way, and from time to time these stocks are ‘raided’ to meet production needs.

Whilst Douglas Dawson would like a more comprehensive view taken of the company’s return on investment in both stock and equipment, current practice is to look for a ×6 stock-turn on materials, that is the average value of stock held should be one-sixth of the materials content of annual invoiced sales. This multiplier used to be lower, and it was only the writing-off of the value of older stock that allowed this to be achieved. As always with companies making small batches, it is difficult to strike a balance between availability and cost of stock-holding.

For capital investment, AMS would normally expect a pay-back of one year on jigs and fixtures and two years (exceptionally three) on major items of equipment. This procedure sometimes makes it relatively difficult to justify expenditure without making simplifying assumptions. For example, whilst a faster placement machine can be justified in terms of the number of components placed and the cost per component placed, the benefits of wave soldering and reflow soldering equipment are not so easy to quantify.

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