KaShawna Davis
4/2/15
PROC 5850
Case Study 1- H. C. Starks

H.C. Starck Business Case
1. Why are the lead times so long?
There are several rationalities to explicate why the lead times at H.C. Starck, Inc. are indeed long. A diverseness of accounts can be established, in which all were noted by respective members of the H.C. Starck, Inc. team or via illations established by management.
To start out, H.C. Starck, Inc. underwent lead times that were longer than anticipated because there was an impression that the manufacturing time was excessively long, although there wasn’t any arduous data rendered to confirm such. As well, Lee Sallade, who was the Director of Operations for H.C. Starck, Inc., conceived that concentrating on lead times was very crucial; concentrating on it exclusively would be a substantial error in all views. Lee Sallade sensed that in addition to ascertaining lead time; the overall cycle time should be calculated for, which may have caused the lead times enduring for such an extensive period of time. Lee Sallade stressed that cycle time and inventory were hugely significant to the company, but both were enormously unmanageable to “keep in line” subsequently H.C. Starck, Inc. deemed such a substantial amount of tantalum inventory. Finally, Lee Sallade sensed that overseeing data was essential to success, and Lee Sallade was worried that many of the operational decisiveness of the company were based on myths or “hear say” and that, “rigorous data collection and analysis could help to break out of this mode of operation.”
Another account as to why lead times may have been so long for H.C. Starck, Inc. stem from the information that the company had Ta decrease and powder manufacturing operations in Japan, Thailand and Germany. Nevertheless, the Newton, MA location in the United States was the only plant that owned the melting and mill capabilities required to satisfy customer orders. This implied that any orders that required melting or passing through the mills should be sent from the overseas facilities to the Newton, MA facility, which in turn, would produce bottlenecks for production and extended lead times for the customer.
The metallurgical products (MP) division of HCST was made up of two introductory functional areas, which included rolling and fabrication. Lead times could have been reduced in this particular area of the firm if the rolling and fabrication processes could happen in one area of the plant, contradictory to them be executed as two separate entities. As well, Arthur Bronstein remarked, the Director of Metallurgical Products for HCST, “The average piece of tantalum going through the large rolling mill for breakdown rolling is 570 lbs., and it takes 55 minutes to process it. For finish rolling, the average piece is 450 lbs., and it takes two hours to complete. The changeover between breakdown and finish takes a full eight-hour shift.” Lead times could be significantly trimmed down if HCST was able to cut its breakdown rolling pieces in half, as well as the finish rolling pieces, this would allow less time for changeover and more production to occur.
In conclusion, lead times took so long at HCST on account of production variability, and the realness that the SAP scheduling utility was seldom, if ever used. The level of customization that HCST required to deal with when they handled customer orders changed from extremely customizable to extremely generic. Successively, the time that would need to be exhausted on the highly customizable products would ensue in longer lead times for the customers to address. In addition to that, as Jim McMahon, Supervisor of Production Control brought up in the case, majority of the schedule misses and errors were due to equipment failures. In addition to raw material ordering, Jim wanted to manually execute shop floor scheduling. Jim was positive in his production orders and sensed that his experience would furnish adequate concluding for omitting the usage of the SAP scheduling utility. In review, the formulas that were being generated manually constituted a prominent problem; merely Jim could not admit that the usage of the SAP system may be more exact than his manual expertness. Standard costs were calculated wrong, and for some products, these costs were lower than the raw material used to make them (which is logistically inaccurate and impossible). In order to battle this, the engineering department was asked to approach this, but was doing so at an exceedingly slow rate. Due to this, the engineering department was ineffective in concentrating on their main task at hand, which was to produce the tubing needed for customer orders, which would then result in lengthened lead times.
2. How might Starck reduce or affect the lead times?
There are various ways that Starck could reduce or affect the lead times they were faced with. To start out, Starck would need to forcefully diminish the degree of customization they had antecedently permitted when customers were placing orders. Indeed, some customization is required in order to fulfill the needs of the customer, but there were no cases in point set which would disclose the degree to which customization could happen before it was viewed as too costly or timely. As well, the inclusion of the SAP scheduling system is a must in order for HCST to successfully reduce or affect their lead times. The manual raw material ordering, shop floor scheduling, and calculations of standard costs either acquired too much time or were incorrect as a result of human error. Computer systems are a fallible science and will always incorporate small glitches, but are much more dependable and exact as equated to human calculations.
As well, Starck would need to discover a way to accurately forecast their sales variance, as well as production variableness. Such would result in extra problems and more tenacious lead times that Starck did not want, and could have been well battled if the inclusion of the ERP system (R/3) was enforced in the first place.
Finally, Starck could reduce or affect their lead times if they were able to trim down their inventory holding costs they obtained as a result of the anneal ovens. HCST detected that parts take roughly eight hours to anneal, but many parts can be in the oven at the same time, as counterbalanced to one at a time. This resulted in errors for both allocations of overhead and product costs, as well as in the scheduling system. From a rigorously financial view, these errors led to prominent cost allocation variations that could not be adapted until the end of the fiscal year, formulating expectant overhead costs that predominated over HCST for the following year.
3(A). What are the costs from reducing the lead times?
There are multiple costs or retreats that can result from HCST reducing the lead times they antecedently ran into. Relative to employee opposition, Total Quality Management (TQM) techniques, for example reducing lead times, call for a modification in mindset, attitude, and methods for performing responsibilities on the job. When management does not efficaciously communicate the team approach of TQM, employees may become dreadful or doubting, which results to employee resistance. When employees protest the program, it has the potential to lower employee morale and productivity for the business. TQM utilizes minor incremental betterments to move the business ahead. It can take years for a company to relish the benefits of the program, but it will at last lead the company in the right direction.
Deficiency of employee engagement is another cost than can take place from trying to keep down lead times. When workers realize their involvement and participation in Total Quality Management and how it is essential to its success, morale and productivity will improve. Nevertheless, this takes time, effort, training and an acute dedication to the task at hand; all of which may discourage an employee from desiring to participate in such a program. TQM altogether is a very efficacious and beneficial strategy for a company to enforce, but the results will not be prompt.
Finally, initial introduction costs, such as training employees and interrupting current production processes can ensue when attempting to reduce lead times. Although the overall reduction of lead times can improve a company, the productions that may become disrupted or stopped, as well as the valuable training that may be needed are all costs that a company may see.
(B).What are the benefits from reducing the lead times?
There are many benefits that HCST can come across from reducing lead times. Reducing lead times will allow HCST to not only improve on-time delivery (OTD), but they will also be able to gain customer satisfaction and customer retention. In addition, H.C. Starck, Inc. will be able to warrant charging premium prices for their rolling and fabrication-based products. Reducing lead time permits H.C. Starck, Inc. to reduce their finished goods inventory (hence resulting in lower inventory holding costs) and increases their flexibleness, so HCST can change their schedules or jobs/projects relatively quickly. Finally, reducing lead time will allow HCST to reduce their work in process (WIP) inventory, discover bottlenecks more easily and greatly reduce their re-work costs. Reducing lead times goes hand-in-hand with each of the complying benefits, which would allow HCST to not only improve itself as a company, but its business relationship with its customers.