Silko-Scalese Machining Corporation

Abstract

Alan Silko must decide whether to invest in seven statistical-process-control (SPC) stations in order to increase his chances of becoming a select supplier for a large computer company. The student must do a discounted-cash-flow/decision-tree analysis of the option. The student is also given the opportunity to construct x-bar and range charts and to do an SPC analysis. Excerpt UVA-OM-0661 SILKO-SCALESE MACHINING CORPORATION Alan Silko was perplexed. For over an hour, he had been pleading his case with Harris Computer's purchasing managers to no avail. The discussion revolved around a rejection of 440 parts that were produced by Silko's company, Silko-Scalese Machining Corporation. According to Harris Computer's incoming inspection report, the entire lot of parts had been rejected because one dimension had been out of tolerance on 13 of the 440 parts. The basis of Silko's argument was that he knew the particular application for this part, and the out-of-tolerance condition had no bearing on the functionality of the part. Furthermore, Silko claimed that Harris Computer's engineers had clearly overtoleranced the parts, and there was no way traditional manufacturing processes could consistently yield a part that would meet this unreasonable criterion. Throughout the discussion, Harris Computer managers stressed that it was Silko-Scalese's responsibility to meet the requirements of the drawing, and those requirements were clearly not met. Therefore, there was no reason to discuss the problem any further. As for Silko's claim of the dimension being overtoleranced, Harris Computer managers said that, without some type of data to support this claim, their hands were tied. Their engineers believed that meeting the requirement was feasible, and a supplier's complaint without supporting data did not warrant a change of this requirement. When Silko inquired what kind of information would be required to prove his claim was correct, and what the repercussion of the rejection would be on his company, Harris Computer managers referred to a copy of a letter they had sent to Silko-Scalese Machining and the rest of their major suppliers requesting that each firm implement a statistical process control (SPC) system at its facilities. . . .