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Contents

Introduction................................................................1
Problems and Causes...................................................2
Data Analysis..............................................................3
Process flow chart...............................................................................................5

Recommendations.......................................................7
Generic recommendations .................................................................................7

Recommendations involving major changes......................................................7

Recommendation 1: Concentrate only on producing small orders of SMOBCs. . 8

Conclusion.................................................................16

Introduction

Donner Company, started in 1985, manufactures printed circuit boards,


technically called as “soldermask overbare copper” boards, according to
specifications of electronic manufacturers. It faces a competition from
Donner Company – Case Analysis

around 750 manufacturers in United States. With the increase in use of


electronic appliances, the printed circuit board industry has witnessed
growth. The firm has developed new processes and application and holds
patents for these.

The president of the company, Edward Plummer is reviewing the company


position in October 1987, before deciding on plans for 1988. During the
review he does in-depth study of how various process and operations are
carried out and challenges

The basic work process can be divided into three important stages –
preparation, image transfer and fabrication. The detailed process flow
chart is given in exhibit 1.

The firm has three persons, Diane Schnabs, Bruce Altmeyer & David
Flaherty who occupy supervisory roles in the company. Schnabs kept
track of delays in the manufacturing process and made sure that clients
were informed about possible delays. She also coordinated the serving of
rush orders. Altmeyer was involved with the design of computer control
and analyzing the customer requirements. He was responsible for locating
the errors in customer artwork. David was responsible for overall
manufacturing process until the final product was shipped to the client.

Whenever an order was received, price was quoted based on estimations


of labour and material costs. Based on acceptance by the client, delivery
time of 3 weeks was quoted for orders below 1000 boards and 5 weeks for
rest. Meanwhile some rush orders were accepted which needed to be
served in four days.

Problems and Causes

Plummer during the review realized that the there were problems related
to productivity, quality and delivery systems.

The major difficulty faced in production process design was frequently


changing bottleneck process in the manufacturing system. There were
both external and internal factors responsible for the perplexing situation.
Clients often found the necessity to change the product specifications
because of some error and this required worked to be stopped on that
product. This created imbalances in the workloads at various
workstations. Internal factors like improper management and
procurement policies for raw material requirements also introduced delays
in the manufacturing process. All this caused difficulty in predicting the
amount of workload at various stages of production and hence this led to

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Donner Company – Case Analysis

insufficient utilization of available capacity. The situation was aggravated


by the rush orders that interfered with the process flows and hence
caused imbalances.

Idle machines and incorrectly defined labour hours were a major concern
for Plummer. Further the time estimates used by the company were way
higher than those of the competition. Besides, Plummer noticed that job
methods needed improvements but the major hindrances in bringing
about the changes was the pressure of output and frequent shifting of
labour.

Lloyd Searby, the sales manager also brought to notice that the company
was not meeting the quality standards and even defaulting on delivery
deadlines. Enforcement of rigorous formal quality inspection standards
could not be applied because of variations in these standards from order
to order. Also there were some problems faced because of the policy of
despatching shipments for delivery of outputs to clients. The problem is
majorly because most of the shipments are despatched towards the end
of the month. This can be seen in the figure below:

Searby has expressed serious concerns regarding present problems of the


company and says these may cause a decrease in sales. He forecasts that
present system may restrict sales to $2 million which can be increased to
$3 million if the processes are improved

Data Analysis

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Donner Company – Case Analysis

Data analysis gave us deep insight into the some of the problems
plaguing Donner Company. Some of the observations are mentioned
below.

 Drilling Process is the bottleneck capacity in general

 The company’s shop floor policy of not using CNC machine for
drilling if orders are less than 100 boards is flawed

 Different Operations strategy needs to be used depending on the


number of boards being manufactured

Please refer to the exhibits at the end of the report. Detailed calculations
can be found in the excel worksheet object that has been included.
Standard production times with order size of 1, 8 and 200 boards
have been worked out in these exhibits.

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Donner Company – Case Analysis

Process flow chart

Donner Company Production Process

Preparation Stage

Master artwork (received from customer)

Purchase of 2 sided copper clad epoxy sheet (36” X 48” sheet; 0.059” thick)

Inspection of sheet for visual defects

Sheets sheared into 12” X 18” panels

Punching of location holes

Aligning of panels for drilling, imaging, and routing

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Donner Company – Case Analysis

Image Transfer Stage

Operator pins a panel to drill

Drilling
of 500
holes

CNC (Automatic) Manual Drilling

Metallization (Copper immersion bath)

DFPR (panels are washed, scrubbed, and coated with


dry film photo resist)

Placement of customer artwork on panels

Passed through DFPR developing machine

Electroplatation of bare panels

Flash plantation of Tin over copper plating

The DFPR that is not exposed to UV light is chemically exposed


(At the end of the step, the circuit pattern would be created on
both sides of board)

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Donner Company – Case Analysis

Fabrication Stage

Each panel is dipped into molten solder bath and


exposed copper plates are covered with solder

Circuit boards are separated from the panel and reduced to its required “profile”
and shipped
customers’ artwork
tested, packaged
prepared for the
electrically
the CNC router is
inspected,
is necessary for
visually
Computer control
Boards are

Recommendations

Generic recommendations
Hold an inventory of raw material to reduce the time an orders spends
waiting for the purchase to happen.

Change the policy of using CNCs for drilling for order greater than 6
boards

Change the policy of using CNCs for drilling for order size greater than 200
boards unless the machine is idle.

Change the policy of shipping more in second fortnight of the month,


make it more equally distributed.

Recommendations involving major changes


Having looked in to situation and problems faced by Donner, we suggest
following recommendations.

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Donner Company – Case Analysis

Currently, Donner is fulfilling low-volume (<100), high-volume (>100) and


rush (<8) SMOBC orders, with more focus on larger orders. The average
order size is 96.01 (See exhibit 4). Diversification may be a desirable
option many at times but there are several compelling reasons for Donner
to concentrate on fulfilling one type of order, namely those that are low-
volume and fast turn-around , high volume and decent turn around. We
therefore first present two options which are centred on focused order
size either doing only larger orders or doing only smaller orders.
Subsequently we also discuss rendering both the services with separate
production lines.

Recommendation 1: Concentrate only on producing small


orders of SMOBCs.
(Use CNCs for drilling and manual labor for profiling

The important factor to note is the TAM for smaller orders. Rush orders
and small size might not be able to give the volumes. With the
assumption that there is enough market for short orders below we present
implications of focusing on smaller order size.

The following reasons call for a smaller order size -

First, Donner has highly skilled employees which alone can complete all
steps of an order, therefore focus on a small order size will help drastically
reduce the idle time of labour.

Second is that small orders rarely involve design changes as compared to


the larger or bulk orders, this will not only reduce the WIP but also will
create a more smother shop floor operation. Another advantage is less
rejection ratio for smaller orders as compared to for larger orders.

The firm is relatively stronger in anticipating and resolving problems


encountered during the design and production of small volumes of boards
when compared to the competition. Coupled with management’s desire to
continue fulfilling low-volume orders (where they experienced no
problems with rejects or on-time delivery), the firm should look into
serving this market segment since it possesses both the experience and
confidence to assure a high degree of success.

Implications with recommendation 1 -

Processes and Strategy related

If the firm decides to pursue a policy of producing only small volumes of


quick turn-around boards, it will enjoy productivity gains, better labor

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Donner Company – Case Analysis

utilization and improved quality assurance, with slightly inefficient usage


of available machinery and more importantly will have to be satisfied with
low revenues. Below are the impacts of, positive and negative, which will
be experienced in specific areas of the firm’s operations in the pursuit of
this strategy:

• Materials

Currently, raw materials are being “simmered” by those who are fulfilling
expedited orders, namely by Arthur Dief. Such a practice may
consistently lead to an order remaining as a Work in Progress (WIP) order,
in the firm’s manufacturing stream for longer than necessary. WIP are
further delayed as it awaits another shipment of raw materials that were
originally acquired for its use but now consumed by the “rush” orders.
Fulfilling only small-volume, quick turn-around orders would require the
firm to either hold larger inventories of raw materials or to acquire
materials in a more timely fashion, but would decrease the probability of
this inefficient process from continuing to hamper the entire
manufacturing process.

• Labor utilization:

The “simmering” of materials also has the added disadvantage of


increasing the amount of labor required to produce a board. When a WIP
is interrupted by a rush order, it may incur additional set-up costs. In
addition, workers then remain idle until the machine he/she was using is
made available again (after the rush order has been completed).
Therefore, small quantity orders should alleviate such a problem since all
orders being filled by the firm will be of similar size and have similar
delivery dates, thus eliminating the “special status” given to rush orders
and reducing the idle time, which amplifies workers’ productivity.

• Capacity:

The ability of the firm to increase its production capacity is being


hampered by the “shifting bottleneck”, which appears throughout various
stages of the manufacturing process without any particular pattern. This
phenomenon mainly occurs due to the variation in the order sizes and the
unremitting interruption of current work flow (work in progress) in favor of
rush orders. Thus, by adapting a small order volume only policy, which
will eliminate both the great difference in order size and the concept of

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Donner Company – Case Analysis

the “rush” order, the firm’s manufacturing throughput will improve


significantly.

• Information Flow:

Flaherty, the shop supervisor, has the greatest number of informational in


and out flows. A high proportion of information, both inter-departmental
and inter-firm, has to pass through Flaherty. Allowing him to operate
effectively and efficiently will have tremendous impact on Donner’s
overall performance. By making the order-types as uniform as possible,
Flaherty should find it easier to plan resources and share information.
Furthermore, carrying inventory of necessary raw materials should
alleviate the need for long lead time to plan for work.

Effect of suggested strategy on performance criteria:

It goes without saying if there is enough TAM for small orders. The
recommendation one will help Donner reduce the TAT significantly.

Donner’s management is concerned with the firm’s performance in the


following areas:

• Financial

• Productivity

• Quality

• Deliveries

Since all these items are inter-linked, an improvement in one area will
lead to an improvement in all. Should the firm decide to produce only
small quantities of fast turn-around SMOBCs, it will be able to fix the flaws
in all of these areas. Since new employees typically take only
approximately 3 ½ months to become proficient in their assigned areas
and if the order size is small, managing the orders would be easier. Staff
could work either individually or in teams to ensure their orders are of
high quality and free of errors, from the moment the order is received till
the moment it is shipped to the customer. The productivity and morale of
workers should also benefit from this as the floor staff are given more
responsibility for assuring their orders efficiently move along the
manufacturing process.

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Donner Company – Case Analysis

On-time delivery will improve as a result and will be more uniform


throughput the month, rather than the current unorganized shipping
strategy.

Also favourably affected will be the financial health of the firm since it will
be able to bill its customers sooner and will have less rejections and
defects as well as it will carry smaller inventory of work in progress.

Recommendation #2 - Concentrate on producing only large


quantities of simple technology boards (order size >=200)
only

Unlike the previous case there is a huge obvious market for larger orders
as 90% of the orders in September of Donner were greater than 200 in
size. Therefore TAM is not a problem and top line should not be a problem
till Donner can meet the TAT below 3 weeks.

Currently, Donner holds a position in both the contract and captive


manufacturing markets. The experience Donner has gained over the last
three years would facilitate the firm to concentrate on the large quantities
of Simple Technology boards(The current order size stands at 96.01
boards) This will enable Donner to utilize their current core competency
and resources, and focus on gaining new strengths, yielding improved
quality and on time delivery.

Focusing on the captive market will mean that Donner will be in a position
to further support its larger customers (i.e. IBM, AT&T, etc) with orders
larger than 200 boards (90% of total orders received in September)

Process & Strategic Implications

• Labor Utilization:

From the exhibit 3 we can see, significant time is saved per board when
using the CNC Drill and Router (for orders over 200 boards); hence no
requirements for manual drill or punch press. Employment could be
reduced or workers could be re-deployed to work in other areas in the firm
(Workers are well cross-trained and able to perform different functions
throughout the manufacturing process).

• Drilling Holes

Let's calculate the board size for which the time taken by manual labor for
drilling holes equals the time taken by CNC machine

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Donner Company – Case Analysis

Equating, 240 + 0.004*500*y = 15+ 0.08*500*y

Therefore, y=5.92

So for board size greater than equal to 6, using CNC machine would result
in reduction of production time

• Profiling (Size and shape)

Either CNC router can be used or Punch press, Let's determine the board
size when production time using punch press equals the time taken by
CNC Router

Equating, 150 + .5*z = 50 + 1*z

Therefore, z = 200

So the following operations strategy should be used depending on board


size to be manufactured.

Operation
Strategy
Board 6<=Board Board
Process Size<6 Size<200 Size>200
Manual Drill Y N N
Drillin CNC
g Machine N Y Y

Profili Punch Press Y Y N


ng CNC Router N N Y

The increase in batch size will reduce the time per average board for
manufacture and subsequently reduce labor time. Also for the fact that
the larger the order size, the less time the process flow looked using the
CNC machine, as opposed to manual processes. Company can consider
purchasing a second CNC machine to accommodate this new strategy
(advantageous for large-volume orders).

• Capacity:

Capacity mainly depends on the order size, product mix and technology
choices. By choosing to manufacture just the large quantity simple
technology boards, product mix is no longer an issue, the technology is

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Donner Company – Case Analysis

set and order size will always be high, hence producing at a lower average
time per board (and low cost by utilizing economies of scale). The
bottlenecks inherent in the current process would be easier to identify and
solve, without further reoccurrences.

• Materials:

The need to source raw material on a regular urgent basis should


decrease in number substantially. A new strategic policy should be
applied with relation to the stocking levels of raw materials to satisfy large
orders (i.e. carry certain percentage of inventory as previously explained).

• Information :

Analyzing all processes within the company, by far the most complex and
confusing is the information flow. At present, until an order is shipped,
Flaherty keeps the factory order and blueprint at all times throughout the
process. This indicates that possibly, vital information is not being
disseminated throughout the production line. September 1987’s pre-
shipment rejection rate amounted to 7%, causing a large amount of
rework. This information flow policy must change from being centered on
Flaherty. In addition, the current process of expediting rush orders
through the manufacturing process is adversely affecting the rest of the
production process and increasing the information over load. Focusing on
only large volume boards should allow for enhancements within
information flow.

Quality improvements:

A new Quality strategy should be adopted. Arthur Dief (senior worker)


could be used in this role due to his knowledge of the entire
manufacturing process and the fact that he had a zero return rate. There
are various quality control strategies that could be implemented
throughout the entire manufacturing process to detect (early) and prevent
product defects, and to monitor the entire manufacturing process (i.e. six
sigma, SPC or TQM). Workers should be trained to utilize such methods
and to utilize new technologies.

Effect of suggested strategy on performance criteria:

Productivity should be increased due to the decrease in bottlenecks


throughout the manufacturing process. Regarding the financial
performance of Donner, if the sales manager can generate the desired

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Donner Company – Case Analysis

sales and focus on the large quantity simple technology boards, there
should be a marked improvement in Donner’s financial health. The on-
time delivery should be enhanced significantly due to the company’s new
strategic policy of concentrating on the large quantity boards, as well as
the reduction in product returns and re-works.

In summary, by adopting this strategy and focusing on this segment of the


market, Donner should be able to compete with those current producers
in the “Captive Market”. It is critical that consistent sales numbers can be
achieved. If Donner lost one or two large customers in this specialized
and highly competitive market, revenue will seriously be compromised.
Furthermore, Donner must be prepared to turn down a significant number
of small orders. These small orders represent a large portion of the
established customer base (90% 54 orders out of 60 orders in Sept); and
those customers have been the backbone of Donner’s business.
Management will need to adjust their mentality to focus on larger orders
and be willing to avoid those smaller orders.

Recommendation# 3: Use two separate production lines, one


each for producing large and small quantities of simple
technology boards

Currently, Donner caters to the needs of both segments of the market,


small and large volume orders. However, such a situation has adverse
implications on its production lines which are evident from the decrease in
the quality of its deliverables as well as the delays in delivery. The
company initially started as a contract manufacturer thus focusing
primarily on small size production. Thus, the company is finding it difficult
to cope with the operating problems arising from its diversification in
production lines which has resulted in a significant decrease productivity
and quality. The company is confronting problems in assessing its
production capacity because of the regular shift in the production
bottleneck. These variations can be attributed not only to the differences
in order size but also to the four-day rush orders. Serby’s prediction too
suggests that the company needs a separate line of production to handle
low volume orders in order to increase the sales and decrease the delivery
time. The 1800 square foot addition available next year would provide an
ideal opportunity to develop two separate production lines, one each for
handling large and small size orders. The new space can be devoted for
small scale production while the current production line can be used for
handling large orders. The CNC machine available will be used only for the
large scale production.

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Donner Company – Case Analysis

Such a set-up would help the company assess its capacity, increase its
productivity and quality and at the same time reduce the delivery time.

Operational & Strategic Implications

• Labor Utilization:

Exihibit 4 shows that the company’s labor utilization factor is 43.8%. Such
low labor utilization can be primarily attributed to the following factors:

• 6-12 interrupts every day in the manufacturing process resulting in


a considerable wastage of time.

• Current operating problems; fluctuations because of rush orders, re-


work and delay in the customer’s delivery of artwork modifications
or a design change

To increase the labor utilization, Flaherty and Arthur Deif can be assigned
for the supervision of large and small volume production lines
respectively. Having two separate production lines under two different
supervisors would not only ensure that the interrupts because of different
size orders are avoided but would also help get rid of the existing
operating problems thus increasing the productivity and quality of both
divisions.

• Capacity:

The company has not able to assess its production capacity accurately
because of the regular shift in its production bottleneck. Anticipating
where work would pile up in the shop on a given day had proven difficult
because individual orders imposed varying workloads on each operation
resulting from different size orders. Two different production lines would
help avoid such a situation. It would also help the company achieve the
sales of $3 million in the small order category in addition to the production
for the large volume orders.

• Materials:

Besides the re-work and rush orders, the company’s inventory policy has
adversely affected its performance. A significant amount of time is lost
because of the delay in Flaherty’s scheduling decision until the raw
materials arrive from the vendor. The two different production lines
combined with the availability of some raw materials would help the

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Donner Company – Case Analysis

supervisors schedule the steps more efficiently. It would also reduce the
company’s vulnerability to its suppliers.

• Information Flow:

Inefficiency in the production line exists also because of the inadequate


information flow within the company. It takes as many as 4 days before
Flaherty is informed about the orders. This further affects his scheduling
decisions. Two different production lines would ensure a proper
communication about the orders to the two supervisors thus contributing
to the decrease in delivery time.

• Quality and on-time delivery:

Two fully dedicated production lines, each optimized for their respective
production processes, can help the company increase the quality of its
deliverables, thus decreasing the customer returns. Improve in labor
utilization, increase in capacity and adequate information flow would
further improve its productivity. The on-time delivery would also increase
significantly due to the company’s new strategic policy.

Conclusion

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Donner Company – Case Analysis

The market provides ample opportunity to the company to expand its


market and customer base in both market segments. However, the
company can achieve this only by increasing its productivity, quality,
labour utilization and reducing the time of delivery. All these factors will
lead to increased customer satisfaction, thus helping in its sales growth. It
can therefore be concluded that recommendation# 3 would provide the
most appropriate solution to all problems of Donner.

Exhibit 1

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Donner Company – Case Analysis

Case I No of Boards = 1
Standard Production Time
Times (in
minutes)
Operating
Time Operating
(Using Time
Operation Set Total Run Manual (Using CNC
Type up Run Time Drilling) machine)
PREPARATI
ON
Artwork
Generation 29 0 29 29
Inspect & 0.5/pane
Shear 20 l 0.5 20.5 20.5
Punch Tooling 0.5/pane
Holes 10 l 0.5 10.5 10.5

IMAGE
TRANSFER
Drill Holes
0.08/hol
Manual 15 e 40 55
0.004/ho
CNC Drill 240 le 2 242
0.75/pan
Metallization 10 el 0.75 10.75 10.75
Dry Film
Photoresist
1. Panel 0.20/pan
Prep 5 el 0.2 5.2 5.2
2. Laminate
& Expose 20 2/panel 2 22 22
0.2/pane
3. Develop 20 l 0.2 20.2 20.2
8.5/pane
Electroplate 25 l 8.5 33.5 33.5
0.2/pane
Strip DFPR 5 l 0.2 5.2 5.2
Etch & Tin 0.2/pane
Strip 10 l 0.2 10.2 10.2

FABRICATION
1.5/pane
Soldermask 45 l 1.5 46.5 46.5
0.5/pane
Solder Dip 30 l 0.5 30.5 30.5
Profile
Punch 1.0/boar
Press 50 d 1 51
CNC 150 0.5/boar 0.5 150.5

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Donner Company – Case Analysis

Router* d
Inspect and 1.5/boar
pack 45 d 1.5 46.5 46.5
Total 396.55 683.05

Exhibit 2

Case II No of Boards = 8
Standard Production Time
Times (in
minutes)
Operating Operating
Time Time
Operation Set Ru Total Run (Using Manual (Using CNC
Type up n Time Drilling) machine)
PREPARATI
ON
Artwork
Generation 29 0 29 29
Inspect &
Shear 20 0.5 0.5 20.5 20.5
Punch Tooling
Holes 10 0.5 0.5 10.5 10.5

IMAGE
TRANSFER
Drill Holes
Manual 15 0.08 320 335
0.00
CNC Drill 240 4 16 256
Metallization 10 0.75 0.75 10.75 10.75
Dry Film
Photoresist
1. Panel
Prep 5 0.2 0.2 5.2 5.2
2. Laminate
& Expose 20 2 2 22 22
3. Develop 20 0.2 0.2 20.2 20.2
Electroplate 25 8.5 8.5 33.5 33.5
Strip DFPR 5 0.2 0.2 5.2 5.2
Etch & Tin 10 0.2 0.2 10.2 10.2

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Donner Company – Case Analysis

Strip

FABRICATIO
N
Soldermask 45 1.5 1.5 46.5 46.5
Solder Dip 30 0.5 0.5 30.5 30.5
Profile 0
Punch Press 50 1 8 58
CNC
Router* 150 0.5 4 154
Inspect and
pack 45 1.5 12 57 57
Total 694.05 711.05

Exhibit 3

Case II No of Boards = 200


Standard Production Time
Times (in
minutes)
Operating Operating
Time (Using Time
Operation Set Ru Total Run Manual (Using CNC
Type up n Time Drilling) machine)
PREPARATI
ON
Artwork
Generation 29 0 29 29
Inspect &
Shear 20 0.5 12.5 32.5 32.5
Punch Tooling
Holes 10 0.5 12.5 22.5 22.5

IMAGE
TRANSFER
Drill Holes
Manual 15 0.08 8000 8015
0.00
CNC Drill 240 4 400 640
Metallization 10 0.75 18.75 28.75 28.75
Dry Film
Photoresist
1. Panel 5 0.2 5 10 10

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Donner Company – Case Analysis

Prep
2. Laminate
& Expose 20 2 50 70 70
3. Develop 20 0.2 5 25 25
Electroplate 25 8.5 212.5 237.5 237.5
Strip DFPR 5 0.2 5 10 10
Etch & Tin
Strip 10 0.2 5 15 15
0
FABRICATIO
N 0
Soldermask 45 1.5 37.5 82.5 82.5
Solder Dip 30 0.5 12.5 42.5 42.5
Profile
Punch Press 50 1 200 250
CNC
Router* 150 0.5 100 250
Inspect and
pack 45 1.5 300 345 345
Total 9215.25 1840.25

Exhibit 4

Total number of production employee = 22

Total number of working days in September = 20


Total number of working hours in September (8 hours/day)=22*20*8=3520 hours
Time spent in instructing people = 10% of 4 employees’ time = 64 hours
Time available for production = 3456 hours
Time spent in production in September = 1531.7 hours
Average working hour per employee per day = 1531.7hours / (22*20) = 3.48 hours
Labor utilization factor = 3.48/8 = 43.5%

The excel sheet with detailed calculations is attached herewith.

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