Homework 5 (30 points)

I. Narrative

Shane, a production line engineer, is checking every chip for quality control (QC). His workers are finding errors approximately once every 150 chips. The defective chips must either be sent back for repair or thrown away. The manager, Rob, has mandated that all defective chips are to be discarded. Rob walks over to Shane's line and has a conversation in which he says, "Why some lines sink more dollars into a chip which has failed, I can't understand. We only make 25 cents off of each chip anyway! Spending an additional $2.00 per chip will only be more money down the drain. Shane, in our line of work we can't afford to flush money down the drain."

The following afternoon, Shane's manager, Rob, asks to hold a meeting in his office. Shane, the engineer, is informed by Rob that Shane's line is discarding too many chips, "One chip every hundred and fifty is unacceptable! This is becoming a substantial cost to the company. I believe that it would be more beneficial to allow all the chips to go out the door without checking."

Shane asks, "What about the defective chips? Won't customers complain?"

Rob replies, "Yeah, yeah, but that's not your problem. The company has a return department that will replace them as customers complain." Rob further estimates that allowing defective chips on the market will yield a $425,000 profit for the company.

Facts:

The line produces 100,000 chips per year.

Every chip is purchased.

Chips cost about $9.00 to produce.

Chip testing runs about $4.00 per chip.

Chip repair (manpower and material) is about $2.00.

This repair cost includes re-testing.

Profit per chip is $0.25 after testing.

There are fifteen full time employees working under Shane.

Two part-time employees work under Shane's supervision.

Shane's manager has been with the company for about 7 years.

Shane has been working under the same manager for several years and has had relatively good relations with Rob.

Additional information regarding Shane's line:

The engineer's line performs the final inspection between the bond wires, which attach the chips to the prongs and spot plates, (the prongs protrude from the final product), just before the chips are encased in molding compound for final packaging. You may assume that all defects can be traced to faulty bond wire attachment and not the chip itself. This is because the chips have been tested in the preceding phase, before the bond wires were attached.

II. Numerical and/or Design Problem(s)

1. What percent of the chips may fail if Xanthum, Inc. Orders 15,000 chips from Shane's production line?

2. Do you believe this is an acceptable failure rate? From the perspective of Xanthum? From the perspective of the manufacturer? Why (not)?

3. If Shane's line produces 100,000 chips per year how much will it cost to:

a) Test and repair each chip?

b) Test all chips and ax the defective chips?

c) Test no chips and replace customers chips on an as-need basis?

4. Is the Rob's estimate reasonable? What about his assertion that it is cheaper not to discard the defective chips?

1.Questions on Ethics and Professionalism

1. What issues are involved in following Rob's recommendation?

2. Is it acceptable to follow Rob's suggested course of action, based on your calculations above?

3. How could the engineer, Shane, present his case to Rob, his superior, if he has a differing opinion?

IV. Additional Scenario 

The chips ordered by Xanthum, Inc. are to be placed in aircraft navigation units, and Shane's boss still believes that the failures are inconsequential. Rob claims, "They always have backup navigation systems anyway. Besides, they fail less than one percent of the time! You should know that. Calculate the percent of chips that will fail."

1. What flaws can be found (based on your previous calculations and present observations) with Rob's argument? Hint: look at the logic used in Rob's statement.

2. Perform a (utilitarian) cost/benefit analysis based on the above data. How much will it cost the company in litigation, etc? Make any necessary assumptions such as dollar values for your calculations, as long as your assumptions are not in direct conflict with the stated facts above.

3. How does this scenario influence your response to question 2 from part III?

4. How can the engineer, Shane, constructively present an argument against his superior's opinion?