Precision Instruments Case Study
What are the different sources of Precision Instruments’ problems? After much success and high profits in their former location, Precision Instruments decided to move into a new, more luxurious location. Harold, who had committed the most capital during Precision’s startup, had developed excellent relationships with the workers, and always was a source of encouragement to them, retired. All of this, combined with the new building’s expenses and a downturn in the economy, led to an immediate slowdown in production. Management was overly optimistic and turned a blind eye to economic conditions. The increased size of the company made it necessary to increase staff, and Precision hired 50 new hires mostly to develop highly specialized products they thought they could not afford in the old building. After the new hires, Precision purchased and implemented a computer aided design-computer aided manufacturing system (CAD-CAM) that was not liked or accepted by production staff. This system did not achieve the desired results, was expensive to install and operated and was difficult to operate. At the same time, Precision was slapped with a patent infringement lawsuit and laid out over one million dollars in legal fees. This in turn led to the auditors issuing an unqualified audit opinion for the 1991 financial statements. Management became untrustworthy by production staff, and production staff looked upon management as living in a glass tower, disconnected and not involved with production. The lower production in the new building worsened over time and led to higher scrap rates and increased absenteeism. Finished products per hour decreased well below company goals. Inferior materials resulted in a slow down in order delivery. Moral was low as there were not pay grades, and raises were only granted paid for high performance. Production staff wanted to unionize in an effort to alleviate the pay structure. 2.
Identify and describe the...
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