General Electric – Thermocouple Manufacturing (A) Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

General Electric – Thermocouple Manufacturing (A) Case Study Solution

Resolving the Issues:

To address the following issue and to introduce a new system of production control, William P Draper, manufacturing manager of General electric called upon the meeting with all the concerned departments and executives. He also invited Roger Hayyat in the meeting. Roger was the president and founder of Production Systems, a professional consultancy firm that specialized in controlling and operations planning. He also had lead the GE’s program conducted in Japan. The issue related to thermocouple that gathered the eye of management was the huge pile of inventory causing disruption in smooth processes. GE was concerned with the increased costs of keeping all the inventory for the time being till it get delivered to the concerned company. Another issue GE was facing was the non-alignment of work force. Most of the blue collar workers were paid on incentive based system. And those prices were not revised from a long time. Then there was another big issue in standards of quality for these parts and other parts were different. (Gebreamlak, 1988)

Foul Practices:

Also the task was not provided by some supervisor rather it was the worker’s choice to choose whichever part they wanted to assemble. As a result a difficult situation was raised for GE that some parts made were in abundance and the rest of the parts that were demanded were in shortage. Thus the balance in the inventory section of the company was upside down. This was primarily due to the multiple standards of the products that were accepted officially, and the autonomy that was given to workers to choose any part they wanted to make. As the workers were autonomous in making their decisions they usually preferred the parts of low standard which were not high enough to meet the requirement of the product resulting in mis balance of demand and supply of the parts. Welders were also using the incentive system to their undue advantage. The practice identified was that welders were intentionally welding the parts defectively in the first place, because the wage rate of reworking on the defective parts was higher than the rate of welding the parts. Defect rate at that very time even reached to 22%. (Gebreamlak, 1988)

Customers:

For this product orders were received from three groups, the military, GE’s (AEG), and other commercial customers. Only the commercial customers gave 50 % sales to GE but yet there was the problem that how much of the inventory GE should carry. Major part of the remaining sales were from the military. The issue there was the unwillingness of the commercial customers to accept the delivery before or after the delivery time. They just wanted the goods to be delivered on the time and they did pay for the goods after the delivery, whereas on the other hand military was carrying the business in positive manner because they were accepting the delivery until the delivery date and were also paying for the product in advance, making GE financially capable to negotiate more with its commercial customers. (Gebreamlak, 1988)

Final Impact:

Inventory management had also been not good either, company used ICP inventory control package to manage the inventory. The MRP system had not been fully implemented neither the workers using the system were fully trained. Thus the issue raised to an extent that it was very difficult for the company to track its inventory and raw material available. Things begun to change and within no time situation arose that the value of inventory physically present on hand was far less than the value of inventory in the books. Around 15 to 20 % vanished in the process that it was present on the book of company yet the inventory was not physically present at all. To address such issues meeting was called of senior management and the consultancy firm. (Gebreamlak, 1988)

Conclusion:

General Electric faced severe issues due to some negligence specifically with the inventory management and human resource management. Ultimately the effect reflected on the sales and the number of sales declined leading the firm towards the losses. Many of these problems and issues could have been avoided by taking simple steps to counter the issues at the very time of beginning. Workers productivity was diminishing with the time, a matter of concern which got neglected from the sight of management and the problem raised to the level where demand supply relation was mis balanced and the absence of tracking of inventory leaded to the loss of 15 % of total available inventory. Moreover the employees using the MRP system installed were not properly trained at all which caused the issues resulting in multiple process consuming much time than it should have taken which ultimately caused an over extension of time period............

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