Abc Steel

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ABC STEEL COMPANY

Robert Cruz, newly appointed Shop Manager of ABC Steel Company, was making his way through the plant back to his office. He had just reviewed the company’s most recent operating statistics with his boss, Rudyard de los Santos, Operations Manager. The statistics were shocking: ABC Company’s production backlog had reached such proportions that top management decided not to accept any further business. The company was paying penalties of P50, 000.00 a day due to non-fulfillment of contract delivery dates.

ABC Company was one of the country’s largest producers of fabricated steel products. The company fabricated and installed storage tanks, mine and cane car bodies, dump bodies, boats and many types of structural steel. As shown in the organization chart (Exhibit 1), fabrication and installation activities were organized as independent activities.

Robert Cruz had recently been promoted from Quality Control Supervisor to Shop Manager (see Exhibit 1). Twenty-nine years old, Robert had worked for ABC Company for the past 2 years. He had previously worked as a sheet metal worker and as an instructor at a United States naval base in Subic. Robert held an engineering degree from a local university.

Plagued by an ever-increasing production backlog, ABC Company had placed Robert in charge of all shop operations. There were 200 workers in the shop reporting directly to leadmen who, in turn, reported to Bay supervisors.1There were five Bay supervisors reporting to Robert. Before Robert’s appointment, Jim Fuentes, 45, was in charge of the shop. It was decided to transfer him to the position of Field Manager. (This position had formerly been a part of Rudyard’s responsibility.)

Before, he and Mr. de los Santos had reviewed the ABC Company’s performance. Robert had isolated a number of critical problem areas in the fabrication shop. Production control was a constant problem. Schedules were drawn up improperly and they were seldom met. For example, a local construction firm had recently contracted ABC Company to build 2 dump trucks. The contract price agreed upon was P150,000 each, and the trucks were to be delivered in 8 weeks. ABC Company had failed to meet the delivery date. The first dump truck was delivered after 10 week’s time, and the production statistics revealed that “out of pocket” costs for the first truck exceeded P170, 000. The second truck had yet to be delivered, and Robert estimated that fabrication costs for the two would total nearly P400,000. It was discovered that labor and material estimates had been inaccurate. More importantly, Robert listed four reasons why target dates were not met: (1) the targets were unrealistic, (2) shifts in manpower requirements were not anticipated,

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1All fabrication activities were carried on in separate sections of the plant called “bays”. Most work orders were started and completed in one bay; less than 20% of the production work flowed from one bay to another.

(3 there were no consistent “follow-up” policies and (4) machine scheduling was so poor that during one week, a huge cutting machine lay idle, while during the next week it had to be run 22 hours a day.2

As shown in Exhibit 1, Rudyard de los Santos was acting Production Control Manager. He and Gabby Alcantara, (Shop Production Control Supervisor), were working on a more effective system of production control. But Robert believed it would be at least six months before any new system would be ready for implementation. As the General Manager admitted, production and control was a “hit and miss” affair.

Another problem Robert Cruz inherited when he took over the fabrication shop was a shortage of skilled manpower. ABC Company had long prided itself on being a producer of top quality steel products. The use of skilled welders, cutters, and steel workers was ABC Company’s only assurance that this quality could be maintained, and in recent years such skilled workers had become...
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