Final - Agile Electric - Quality Issues in a Global Supply Chain

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Case Study: Agile Electric: Quality Issues In a Global Supply Chain

Graduate School of Business Faculty of Business & Accountancy

CSGB6311: Total Quality Management

Case Study: AGILE ELECTRIC: QUALITY ISSUES IN A GLOBAL SUPPLY CHAIN

Prepared For: Dr. Kanagi Kanapathy

Prepared by Group 3 (Tuesday 6.30 p.m. class): Selvakumar Arumugham

CGA 130021

Ravi K.Kandasamy

CGA 120090

Vinoden Subramaniam

CGA 120012

Sharindran A/L Gopal

CGA 130009

Cheah Weng Yew

CGA 130062

Sathish Kumar Arunasalam

CGA 130005

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Table of Contents

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___________________ _____________________________ ____________________ ___________________ __________________ _________________ _________________ ___________________ ___________ _ 1.0

CASE STUDY SUMMARY ................................. ................ ................................... ................................... ................................... ................................... ............................. ............ 1

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QUESTION 1 ................................... .................. .................................. ................................... ................................... ................................... .................................... ............................. ........... 3

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QUESTION 2 ................................... .................. .................................. ................................... ................................... ................................... .................................... ............................. ........... 6

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QUESTION 3 ................................... .................. .................................. ................................... ................................... ................................... .................................... ............................. ........... 9

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QUESTION 4 ................................... .................. .................................. ................................... ................................... ................................... .................................... ........................... ......... 13

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QUESTION 5 ................................... .................. .................................. ................................... ................................... ................................... .................................... ........................... ......... 15

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REFERENCES ................................... .................. .................................. ................................... ................................... ................................... .................................... ........................... ......... 19

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1.0

CASE STUDY SUMMARY

This case analysis is related to product quality and pertaining issues arise in a global level supply chain system. The supply chain consist of one of the most prominent global automotive original equipment manufacturers (Ford), Tier 1 supplier (Automek), a US global corporate company, Tier 2 supplier (Agile), Tier 3 supplier, Electronics Components Private Limited (ECPL) and tier 4 supplier, Board India Private Limited (BIPL). Tier 2, 3 and 4 suppliers are based in India. Agile plant was set up in Chennai (formerly known as Madras), India in mid 1990’s. This plant is established to manufacture and supply electrical motors and parts both for

local market and also international automotive customers. Within short period of time, Agile has significant positive growth in global market and expanded their business venture into development and production of electrical, plastic components and part and sheet metal. In line of their massive success and growth, Agile also have ensured their organization to be certified with QS 9000 which later was replaced by TS 16949 standards. TS 16949 standards are a specific standard designed and applied for automotive industry in accordance with ISO 9000. As a result of their good track record and quality of their product, Agile has been one of the most trusted suppliers for Automek since 1998 in supplying electric motors for the automotive industry. Apart from Agile quality product and delivery efficiency, but also their reasonable and competitive pricing which comes with supreme product quality compared to other suppliers in the market, ensures the preference of Automek on Agile. Their engineering support also played a crucial role in Agile success in their product development and quality. This process has benefited both parties mutually. Based on this trust and their exceptional track record, Agile was given order by Automek to design and manufacture a new product, actuator assembly. Automek consider Agile as their main supplier even though Agile have no exposure in designing and development of this new product. Agile deeply concerned with their lack of knowledge about the suppliers of the assembly components, surface mount technology (SMT) and other critical requirements. In response, Automek assured Agile that they will locate global supplier for the electronic components, assessment and verification for critical suppliers which based locally on behalf of Agile. In return, Agile invested the assembly line to develop the new product. The major part

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required to construct the actuator assembly is printed circuit board (PCB) and Injection-moulded plastic parts. As this a relatively new product developed by Agile with no previous experience, they decided to have sub-suppliers to supply these product to them. ECPL is an existing supplier to supply assembled PCB (previous parts did not go through surface mount technology (SMT) process) and this new development requires it. BIPL is to supply PCB boards. In short period of time, upon delivery of the actuator assembly, OEM reported two major quality problems issue at two separate stage of time. Automek request Agile to find the root cause for this major quality issues identified. They also urge them to solve the quality issue quickly before the OEM decides to pull the manufactured cars within the same batch from the market if more similar quality issue rose. Further reports conclude that it is due to faulty capacitor and the second issue is because of high resistance in the internal circuit of the actuator assembly. Initial investigation suggest the first issue is due to component faulty which Agile felt, Automek should take the responsibility as the supplier was chosen by Automek. Agile also insist that they have no knowledge of the product, and quality problems arising from supplier base should be under the responsibility of Automek. Upon detailed investigation by Automek and Agile technical expert, the components manufacturer conclude that the capacitor was in operating condition when it was send to ECPL. The real root cause of this quality issue is ECPL mounting process which leads to the crack in the capacitor. Automek send their technical expert to ECPL to solve the issue. Second quality issue was due to high resistance in the internal circuit of the actuator assembly. The OEM investigation concludes this failure occurs due to faulty PCB board which was supplied by BIPL. As a summary of this case study, the more reliance on supply chains means more risk but this can be overcome by proper risk and mitigation tactics by suppliers. Integrated supply chain can be managed through exceptional internal quality practices throughout all tiers. Majority of international companies with business worldwide uses several suppliers sourcing business strategy. This business strategy creates supply chain system which enhances the development of all the components in the system. This supply base can be developed through supplier evaluation system, supplier certification and integration if the supplier into the system.

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2.0

QUESTION 1

Should the complete recall/field failure and associated costs be charge to the tiered suppliers? Give reasons.

There were two different incidents identified during the entire case study. The first problem was related to capacitor and the second was problem was with PCB. These two problems just enough to make major disaster for Agile and Automek not mention OEM’s

customers expectation will be drowned. In both incidents, Agile as the main supplier to Automek should take the responsibility to solve the problem. Even in this entire supply chain process, Agile was to be blamed but not entire cost associated with recall/field failure to push to Agile. Our argument here is Agile to take two third (2/3) of the cost and the remaining to Automek. Before the manufacturing of product starts, there was a contract signed between Agile and Automek and it was clearly stated on the responsibility of each party. As such Automek should pass the costs to the tired suppliers as it clearly showed every single supplier fail to maintain the quality and not act according to the agreement. As per Contract agreement between Agile and Automek, i.

Agile should take the responsibility to monitor quality of parts produced and supplied by sub-supplier even if the parties recommended by Automek.

ii.

Agile as supplier to take charge and ensure those parts manufactured and delivered are zero defect.

iii.

Supplier should take the accountability in the even any risk identified due to subsuppliers.

iv.

Cost incurred by quality or delivery problem will be recovered by customer (OEM) from supplier.

Since the contact clearly stated that the product quality is supplier’s r esponsibility, Agile to be

blamed for the failure. Before this supply chain start to progress their work, Automek actually audited both supplier tier 3 and tier 4. From the audit, Automek found some issues in ECPL and requested

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Agile to work closely with ECPL to resolve the issues. Furthermore Agile was requested to provide regular update on the improvement plan that work with ECPL to Automek. This is to ensure the end product quality and manufacturing to run smoothly. Even though ECPL has obtained 5S and ISO 9000 certification, it never had a business deal with automotive customers who have different requirements compare to ECPL current customers who are electronic based manufacturers. Agile should notice this business background of ECPL as automotive parts required different ruggedness due to different operating conditions. Additionally, Automek dispatched its own engineers to BIPL to identify if there are any gaps that can affect the product quality. As expected there were few weakness identified and Automek engineers came up with action list and requested Agile to rectify it. Agile supposed to work together with BIPL to rectify the problems before they manufacturing of the PCB commence but it seems Agile was quite reluctant to commit to this task. During the first failure analysis it was confirmed that, there were too many problems identified at ECPL but the team unable to pin point the exact source of the problem for the part failure. Agile who supposed to manage its supplier, failed to monitor the manufacturing process at ECPL. Further analysis done by SMT process expert shows that the actual problem for the first failure was originated from operation at Agile itself. The pressure imparted during the shearing process caused the capacitors cracked. This failure clearly shows Agile to be blamed, as there was no final test to check the shearing force. For the second failure it was confirmed there many problems identified at ECPL and BIPL. The major defect on this time around was mainly due tier four suppliers (BIPL) which cause potential recall. Since Agile offer the tier three suppliers (ECPL) to produce PCB which is most critical part for the actuator and ECPL do not has required standard to produce such a part, Agile should take the responsibility for the damages. Based on the experience of tier there and four, it was confirmed both of them lack of experience doing business with North America automobile companies which required very high standard of quality; as such both of them has very minor responsibility. Some of the problem identified at ECP L and BIPL as below: i. Process parameters, such as vacuum pressure, not adhered to at drilling station ii. Chemical composition outside of defined specifications

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iii. Copper bath temperature in plating tank was higher than the required specifications iv. No tolerance limits were mentioned in many specifications, hence it was difficult to say whether or not the process was operating within the limits v. Plating thickness had a high amount of variation

Even for both incidents Agile was held for the responsibility, Automek should bear one third of the recall cost as it takes risk on Agile who has no experience in producing this actuator. Furthermore Automek has audited both tier 3 and 4 supplier and found some gaps but still given permission to Agile to proceed with the development. So Automek failed with their responsibility to audit capability of the actuator supplier and sub suppliers. Moreover the unwillingness of Automek’s tier 3 and tier 4 suppliers to implement any improvement or changes

to incorporate with their upper level supplier has made the situation a complex and difficult one to solve.

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3.0

QUESTION 2

Was Automek’s decision to source the business

to Agile a good one?

Based on the outcome of the case study, it is easy to say that Automek has made a wrong decision in giving its business to Agile. But than again we had the benefit of time in knowing how it will all turn out. Looking at Automek’s decision purely from a business point of view, it

was never a wrong one. Automek is larger auto component manufacturer in North America. Increasing manufacturing cost such labour, factory space, tax and etc in developed countries like America has forced many companies in variety of industries to outsource the production line to other countries in an effort to reduce cost and stay competitive in the global market. If Automek decide not to source its business, then it will lose its competitive edge in the industry. So we can say that Automek’s decision to outsource its business is a right one but its decision to source it to

Agile is one with room for a lot of argument. Although it may sound naïve, Automek made their decision to source their business to Agile solely based on its track record and past experience working together. Since Automek and Agile’s collaboration in 1998, Agile have manage to produce quality product and their delivery performance has been good. Agile has also managed to comply and fulfil Automek’s entire

requirement. In the space of 4 years, Agile have supplied products to Automek with zero defects or failures in the field and zero delivery defaults. Agile also have defect record of just 70 PPM (parts per million) which can be consider very good for auto part industry. Furthermore Agile’s asking price for this new product is US$7.20 per pieces which is 50% less compared to the asking price of Automek’s local supplier s. Agile’s low asking price combine with their excellent

past track record in the industry has prompted Automek to quote them as an example of a low cost high quality sourcing model. With these characteristics that Agile represent, Automek have every right to source their business to Agile. If Automek’s decision to give its business t o Agile a right one, then where did it all went

for them? Certainly the outcome of the case study will not agree with this decision. Our verdict on this question is that Automek did the right thing to source the business to Agile but how they did it is what caused the problem. As mentioned earlier, all the success that Agile had it the past was not achieved solely by themselves. Rather Automek has given full support to Agile in terms

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of knowledge and skilled personal during the setup, development and operation phases in the past four years of their collaboration with Agile. As quoted by Tom Smith, supplier quality manager at Automek, their engineers has been literally camping in Agile for more then three year. This was the kind of support that Automek was offering to Agile during the earlier projects which allowed them to operate smoothly manufacture products successfully. With new actuator project, Automek’s top management assumed that Agile’s man power would have developed

sufficient skill and knowledge to setup, develop and operate the new product and processes in house all by them self and decided to give very little support in terms of skilled personal. As such the first problem (capacitor problem) that occurred in early 2008 was caused by one of Agile’s process which their personnel failed to anticipate or detect after it has occurred. Did Agile make the right call in accepting the contract?

Once again based on what happened after Agile accepted the contract from Automek gives us a good idea whether they should have accepted the contract at all. By the end of it all, Agile was in the hot, wondering if they should be held responsible for all the problems and hiccup that happened. From a financial point of view, Agile made the right call to accept the business. Founded in Chennai, India in the mid 1990s, Agile being a Japanese subsidiary company have seen a rapid growth over the years and since their business turnover has grown to a commendable US$56.2million by 2007. Their previous collaboration with Automek has been one of their key success factors for their rapid growth. Automek’s new business contract promises production of 50,000 units in the first year. By the second year Automek guaranties the production to increase to 100,000 units and further increase to 220,000 units by the third year. Accepting this contract will make Automek Agile’s top three customers and will increase their

revenue by US$ 1 million in the next three years. As such accepting this contract is right from the financial point of view. From an operational point of view, Agile top ranks have overestimated their ability in setting up, developing and operating a new product. When Automek first proposed this new business to Agile, concerns was raised by Agile’s top management members regarding the ability

of their project and operations teams to develop and manufacture this new product. This is because; accepting this new actuator business from Automek comes with few challenges for Agile. Firstly the new actuator assembly is a very critical part and Agile have no experience

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what so ever in manufacturing them. Secondly Automek decided not to deputize any of their engineers to support the setup of the new production line and force Agile to depend on their own self. Thirdly Agile is required to locate and develop sub-supplier to manufacture and assembly the actuator as it requires parts which Agile don’t produce in house. Concerns were also raised on the suppliers for the bought-out parts as they are critical component for the assembly. Although Automek promised to support Agile in locating and developing the sub-tier suppliers, it was not clear regarding who will be responsible to control the quality of the sub-tier supplier’s products. Agile assumed that since Automek was the one locating and developing the suppliers, they will be responsible for the supplier’s products.

With all the uncertainties with the sub-tier suppliers, lack of support for Automek for the setup of the production line and lack of experience in the ranks of Agile to setup, develop and manufacture a new product, we believe that Agile should not have accepted the contract and should have demanded proper support and clarification on the sub tier supplier issues before consider the contract. Making business decisions solely based on financial point of view is asking for trouble and that is exactly what Agile got in the end.

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4.0

QUESTION 3

Do you see internal quality practices as having a major role in the case, considering all the supply chain members?

Yes. Internal quality practices clearly influence and plays a major role in this case. The main purpose of supply chain management is to link all the activities within the supply chain management system. This will enhance the competitive advantage of the components in the supply chain system which involves four tier suppliers. This eventually ensures Ford, (OEM) gain the benefits and achieve high customer satisfaction. Supply chain integration is essential for key component in this case compromising tier 1 (Automek), tier 2 (Agile), tier 3 (ECPL) and tier 4 (BIPL). This can be developed through collaborative workflow in terms of internal quality practices among all the components. This will maximize the efficiencies and establish sustainability in supply chain system. Based on this, we have identified that there is several weaknesses in the supply chain integration in terms of their respective internal quality practices particularly on the lower-tier suppliers. The weaknesses are as follows; a) Effectiveness of process control system at ECPL not as per automotive industry standard. Previously ECPL’s customers were electronic product manufacturers and the quality

levels and requirement significantly different from automotive industry. b) Agile fails to monitor and follow up with ECPL on SMT process. ECPL is Agile existing supplier but their previous parts did not go through SMT process. c) Both ECPL and BIPL did not maintain traceability record for later reference. d) Standard Operating Procedures (SOP) is not complied fully by ECPL & BIPL. e) Agile fails to develop their suppliers to TS 16949 requirements and they over reliance only to ISO 9000 requirements as their most prerequisite requirement backfires. f) Agile compliance to Advanced Product Quality Planning (APQP) procedure at sub-tiers is poor. g) Automek and Agile as the higher-tier suppliers to the OEM, failed with their risk and mitigation tactics in terms of supplier quality compliance.

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The identified weaknesses as mentioned above indicates the risk in global supply chain management. The more reliance on supply chains means more risk but this can be overcome by proper risk and mitigation tactics by suppliers. Integrated supply chain can be managed through exceptional internal quality practices throughout all tiers.

Are ISO 9000 and TS 16949 necessary and sufficient conditions for adequate process knowledge and diffusion of internal quality practices?

Agile Electric was set up as subsidiary of Agile Japan in the mid-1990s in India. Their manufactured parts are supplied to domestic and overseas automotive customers. Initially, it was certified to QS 9000 as the automotive quality standards and eventually this standard was replaced with TS 16949. Most OEM requires their suppliers to adhere these automotive technical specification 16949 standards. Apart from Agile who is the tier 2 supplier for the OEM, ECPL and BIPL, the tier 3 and tier 4 suppliers is an ISO 9000 certified organization. Agile started to supply its product to Automek since 1998 and there was no major quality issue identified until 2007. Due to their past quality product, delivery standard record and their attractive price, Automek awarded Agile to develop their new product, actuator assembly in 2004 although Agile have no experience in this product. To develop this product, with the advice and screening test by Automek, Agile appointed ECPL and BIPL as their sub suppliers. In 2008, Agile comp leted the development of the actuator assembly and delivered to Automek. Eventually, this part was supplied by Automek to the OEM, Ford which is a car manufacturing company. However, two quality issues were identified and raised by OEM to Automek at two different stage of time upon installation of the actuator assembly. Based on the analysis outcome, first quality issue was due to faulty capacitor. The root cause of this problem was due to the shearing force on the PCB and this causes the crack on the capacitor. ECPL production process is identified as the root cause for this failure. Second quality issue was concluded due to high resistance in the internal circuit of the actuator assembly. The OEM investigation concludes this failure occurs due to faulty PCB board which was supplied by BIPL. In the case of the two quality issues, both ECPL and BIPL as

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an organization is only equipped with ISO 9000 certification and with no assessment and development conducted by Agile for ECPL and BIPL in terms of TS 16949 requirements. ISO 9000 basically a standard compose of the company’s policy, procedures, resources,

responsibility and processes aimed at achieving quality product consistently with high customer satisfaction in line with the company’s mission and vision. This collective collaboration defines

how the companies work towards the vision and mission and how the quality is managed in order achieve the target and goal set by the organization management. ISO 9000 consist of eight major principles which is; 1) Leadership 2) Involvement of people 3) The process approach 4) Mutually beneficial supplier relationship 5) Factual Approach to Decision Making 6) Customer Focus 7) A systems approach to management 8) Continual Improvement

ISO 9000 certification is essential in order for organizations to deliver better service to their customers and be more competitive within their industry. This can be achieved through compliance to eight major principles of the standard as mentioned above. TS 16949 is defines as the quality management system requirements which was standardized specifically for the design and development, production and, when relevant, installation and service of automotive-related products. TS 16949 shall be applied throughout the supply chain in the automotive industry. The prime objective of TS 16949 is to continually ensure improvement to the production of automobile parts and related services. This will eventually strengthen the international competition for the automotive industry and its suppliers. As an investigation conclusion for both quality failures occurred, we conclude that ISO 9000 certification is an essential requirement for a manufacturing company development but not sufficient as the only prerequisite requirement in order to be a product supplier in an automotive

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industry. ISO 9000 is standard which covers the general aspect of quality standard and for automotive industry, TS 16949 standard should compliment ISO 9000 standard as detailed out by Automek APQP procedure. TS 16949 standard was developed to harmonize all the different specifications and requirements of automotive industry. This standard ensures all the automotive suppliers adhere to the specific details of the standard and emphasize continuous improvement in the automotive industry supply chain management system. It is recommended the tier 3 supplier (ECPL) and tier 4 suppliers (BIPL) to apply and certified by TS 16949 in order to promote continual business improvement focusing in defect prevention and reduction of variation. By applying both ISO 9000 and TS 16949 quality standard, automotive manufacturers could deliver better products and good services to their respective customers without jeopardizing the quality of the product. Thus, it can close or eliminate the gap of quality failure in the supply chain integration. Besides that, Automek shall revise their quality system requirements contract with their suppliers. They shall include requirement that all suppliers should be certified with ISO 9000 and TS 16949 instead of having the clause certified ‘preferably’ to TS 16949. All four key suppliers in this supply chain shall comply with due diligence to both ISO 9000 and TS 16949 standard. This will ensure adequate process knowledge and diffusion of internal quality practices is continuously improved and quality failure issues can be controlled and reduce tremendously.

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5.0

QUESTION 4

Would Agile receive any benefits if it invested resources in developing its suppliers?

Yes. Agile would be able to receive the benefits from multiple areas if they can invest some resources in developing its suppliers.

Firstly, Agile might able to avoid the failure on actuator assembly supplied by them and also keep a better reputation with the customers. The lacking of awareness and also experience is one of the reason why the suppliers not able to produce fail-free products. Moreover both Electronic Components Private Limited (ECPL) and Boards India Private Limited (BIPL) are local suppliers who don’t have much experience on the automotive industry.

Next, Agile would be able to increase their sales and revenue without much constrain from the production because by developing the suppliers, they can assure that components delivered are par with Agile’s requirement and specification.

By developing the local suppliers, Agile would have the fixed and preferred vendors and this indirectly will ensure consistent supply of parts whenever needed and improve the lead time. Agile can avoid the late deliveries and transportation issues which most of the manufacturer faced with their suppliers who located out of town.

Other than that, Agile can quickly resolve any issues including the quality part which may rose from the customer. For example, when Automek initiated discussions with ECPL to close some of the issues, the process was very slow since ECPL staffs were not so exposed to the automotive requirements. This might occur in other way if Agile has provided some developments to the supplier where ECPL engineers will be also in the same frequency with Automek.

Besides that, Agile’s initiate developing the suppliers also can help the supplier to improve the

product functionality and performance. It also can gear up the supplier to invent on a new product which may benefit both Agile and Automek in overall.


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Who is responsible for accelerating the implementation of quality practices in lower-tier suppliers?

From the context of the case study, Automek who engaging directly with OEM should be the best party to accelerate the implementation of quality practices in sub-tier suppliers which includes Agile, Boards India Private Limited (BIPL) and Electronic Components Private Limited (ECPL) . Automek will have a better understanding on the requirement and also specifications compare to other parties involve in the supply chain. With Automek’s involvement, it also will

be easier to rectify if there is any quality gap, for example the gap that been identified by Automek team when they audited ECPL. Automek can ensure the quality measurement on the suppliers is aligned across the supply chain because if the measurement is not consistent, then objective set will not be achieved.

On the other hand, Automek as the first tier will have more awareness and concern on any quality issues rose from the customer compare to the other lower tier in the chain. Involvement of Automek will ensure the issues are identified, rectified and improved in a more appropriate and efficient method. For example, parties like ECPL are not interested in resolving the quality issues incurred and clearly shown when they didn’t participate on the conference call that scheduled by the Automek’s Supply Quality Manager.

Besides that, by accelerating the step, Automek also can gain some ownership on the supplier’s quality management. Automek can have some control and easily influence the team on

the supplier site for any quality management part.

By implementing the quality practice in lower-tier, Automek also can ensure delivery time and requirements are met as needed. It also can reduce the risk of any failure across the supply chain and encourage the management to work each other collaboratively.

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6.0

QUESTION 5

Why were ECPL and BIPL not interested in improving their processes and manufacturing practices?

ECPL and BIPL are two companies that involved in the PCB assembly supply and manufacturing for Automek. The ECPL was proposed by Agile to Automek as supplier of the PCB assembly. For Agile to produce the actuator assembly for Automek, one of the main inputs is PCB on which various electronics parts such as resistors, capacitors and integrated circuits (ICs or chip) were mounted. When Agile received the consignment from ECPL, PCB assembly will be deliberately inspected visually for any defects before mounted into individual boards. ECPL has the quality management system with relevant requirement to manufacture the electrical components such as 5S and ISO 9000 certification. With all the requirement needed is in place then Automek gave green light to Agile to appoint ECPL as supplier for the PCB assembly. Meanwhile ECPL do not manufacture the PCBs but they only assemble it with other electronics parts. So BIPL was introduced and suggested by ECPL to provide or produce PCBs to Automek and they have agreed.

BIPL

ECPL

AGILE

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I.

Current Manufacturing Quality Standard

The quality standard requirement is very vital for manufacturers to ensure that the customers or consumers buy the product that safe and in usable conditions. So developed and emerging economy countries have been consistently require the manufactures in any sectors of production to have proper quality management system. One of the famous and renowned quality standard that internationally recognized and been practiced is the International Standard Organization (ISO). This international standard requirement has been met by both ECPL and BIPL in their respective manufacturing practices. Most of the ECPL’s clients were product

manufacturers that they knew what is the quality standard level that been practice in the organization. ECPL has all necessary quality requirements standard to produce a product like ISO and 5S. Unfortunately those ISO standard that been practiced by ECPL was different for the automotive customers’ requirements in terms of production and

operations requirements for the PCB assembly. Practically to fulfill the need of the customer, Agile who will to supply PCB assembly to Automek, they may need to upgrade the current production quality standard to the level required to manufacture the quality assured PCB assembly for the automotive manufacturers. Even in BIPL, the production manager found that the PCB board that required by Automek was smaller compared to the current product range. In the line of business operations for ECPL and BIPL, it can be very tedious and risk for both to go ahead and expand the current manufacturing process that could meet the requirement needed to produce the PCB product based on requirement needed for automotive sector. They may require for expansion of current plant and buy new machinery for the purpose. Also for the human resource development, both organizations will be required to have training and learning program to upgrade the knowledge and skills of latest quality standard. So for ECPL and BIPL, one the reason for the hesitation to expand the manufacturing practice could be financial risk that may be require new budget for the production of the PCB. The new budget will involve new investment in human capital

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and equipment that can be costly. At present investment in the technical and professional training can be expensive and can be long process to ensure the employees understand the real standard that need to produce the PCB assembly needed by Automek. II.

Audit and Inspection by Automek

The main input to produce the actuator assembly by Agile will be the PCB assembly. Meanwhile the PCB assembly supplier will need to follow the requirements standard in production of the input that required by Agile because PCB assembly will be critical part in the major assembly of the actuator in the Agile’s production line. In tur n

Agile will have challenge to meet the requirement set by his customer, Automek on production of the actuator assembly. Automek being as a international auto components manufacturer, required to follow the development process set by the Automotive Industry Action Group that known as Advanced Product Quality Planning (APQP) process More over since the PCB assembly production requirements so crucial and vital to manufacture actuator, Agile needs Automek to inspect its existing PCB assembly supplier that is ECPL. On ensuring the business continues to stay, Agile proposed ECPL to Automek as supplier of the PCB assembly. Agile knew that ECPL will not fit the requirement needed to produce the assembly because their part did not go through the surface mounted technology (SMT) process. However Automek went through the manufacturing process layout plan of the ECPL and found some gaps in their quality systems. So since ECPL has been certified internationally on quality standard then Automek itself gave green light to Agile to go ahead with appointment of ECPL as supplier of the PCB assembly and close the quality system’s gap.

On BIPL manufacturing process standard, Automek agreed to allow ECPL appoints BIPL to be their PCB board manufacturer. Automek agreed on the basis that BIPL has that quality standard requirement which was International Standard Organization (ISO) certification. Stringent requirements were not in place and BIPL observed the current procedures to manufacture the boards similar to other product that been manufactured in their plant.

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All the procedures to come up with PCB assembly were made based on Automek approval to use the current operation and manufacturing facilities of ECPL and BIPL. Despite Automek found that there may be issue on gap but it believes that the gap can resolve by Agile and its suppliers. Based on this understanding created by Automek, there was no need arises to expand the current manufacturing process for ECPL and BIPL.

III.

Non-Strategic Business Operations

For BIPL and ECPL, the main business operation as be defined well in terms of their organization’s mission and objectives. They have set up plants based on their

business focus which they believe that more strategic and sound for investment. The current production on PCB and other electronic component parts were produced based on current and established customer network which they have budget and well organized production planning. On Agile offer to produce the PCB assembly, ECPL found that they may need to follow stringent global automotive requirement in terms of quality standard which may require high discipline been practiced to ensure the product that been manufactured will not be end up as a scrap. For ECPL they agreed to participate in this line of PCB assembly manufacturing due to their relationship with Agile. The management will did not directly involved in the development process and Agile can managed the production with assistance of the line personnel. So ECPL's management has not take any initiative or seriousness in this new business from Agile as they may know the business could be non-feasible for long term investment from ECPL. For BIPL the type of board which is small could require them to have different technical support or equipment. Based on the low margin due to the higher overhead manufacturing cost, BIPL may have conducted this business as a non-strategic. Similar to ECPL, BIPL maintained to be supportive for this manufacturing process of PCB board as to keep good business relationship with new customers and to create good clientele network by having Automek and OEM in their business prospect list.

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7.0

REFERENCES

1. Heizer, J. H., Griffin, P., & Render, B. (2014). Operations Management. Supply-chain management , 434(436), 465-494.

2. Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. Pearson, 245-265.

3. Fish, L. A. (2011). Supply Chain Quality Management .

4. Foster, S. T. (2013). Managing Quality: Integrating The Supply Chain, 5th ed.,Pearson

5. Evans, J.R and Lindsay, W.M. (2011). The Management and Control of Quality, 8th ed.,Southwestern, Cengage Learning.

Final - Agile Electric - Quality Issues in a Global Supply Chain

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