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GE case study

This document discusses modifications to General Electric's Major Appliance Business Group's Project C, which aims to make GE the worldwide leader in dishwasher quality, profitability, and manufacturing excellence. It analyzes 5 potential modifications across qualitative and quantitative criteria. Modifications 1, 2, and 4 are recommended as they improve product/process quality, have minimal time delays, and positively impact human resource management. Modification 3 is not recommended as it adds complexity without clear benefits. Modification 5 is recommended for its cost savings despite some uncertainty. The recommendation is to seek board approval for a budget increase above $2.8 million to implement the recommended modifications.

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General Electric: Major Appliance Business Group
GE Overview Introduc tion Issue Analysis Decision Analysis Conclusi on Major Appliance Business Group (MABG) Kitchen appliances Refrigerators Home laundry appliances Ranges ovens Microwaves Disposal units Dishwashers Dishwasher Performance (1973-1979) 250,000 235,078 3.5% 220,407 200,000 150,000 194,168 168,190 3.2% 3.0% 2.8% 138,726 100,000 2.1% 2.5% 2.3% 2.2% 2.0% 50,000 0 2,913 1975 1976 Sales 4,466 3,700 1977 NetIncome 6,171 1978 Net Income to sales 7,522 1.5% 1979 1
Background Introduc tion Issue Analysis Decision Analysis Conclusi on Early 1970s Dishwashers had quality problems despite market shares exceeding 20% Medium Quality(Rust, Noise and High energy use) 1971 Deployed PermaTuf A as new high end model 1973 Deployed PermaTuf B as core of GE line and Model C as low-cost version 1976 Introduced GSD 1050 (Model A) Lower than planned Additional $4M investment 1978 Dec 1979 1980 Nov 1980 Introduced GSD 1200, GSD 1000, and GSD 900 (Model B) Lower than planned Ready to crate Model C as low-end dishwasher Approved for $28M investment for Project C Recession year • Lower volumes and profits than planned • Layoffs in Louisville of 17% (almost 2,000 employees) Decide which modifications Tom needs to execute 2
Goal of this project Jack Welch Request Introduc tion Issue Analysis Decision Analysis Conclusi on Became CEO in 1981  A world class product design and a world class factory  Automation and manufacturing competitiveness in quality and cost  Addressing workforce issue  A model for worker involvement and significantly improved worker attitudes and value-added Goal of Project C  A chive worldwide dishwasher industry leadership in product quality and profitability  Achieve world class leadership in process quality, productivity, and quality of work life; and  Achieve increased job security through high quality, low cost products that gain increased market share If project C becomes a model for GE business and provide strong Financial return, Jack is willing to consider more capital. 3
Issue 1. 2. 3. 4. 5. Introduc tion Issue Analysis Decision Analysis Conclusi on Improving the quality of the factory environment Skills training in technical problem solving Revision in GE’s management information and support systems Adding a value engineering development cycle Drop (postpone) construction of the integrated computer control room Issue “Which modifications should be applied for Project C?” Project C To be World Class Dish Washer Manufacturer 4
Options Introduc tion Issue Analysis Decision Analysis Conclusi on 3) Go back to the board of directors for authorization of budget increase 1) No change…..Wait until project C is completed in mid-1983 2) Go ahead now…..increase no more than $2.8 million (10%) 5
Decision Criteria Introduc tion Issue Analysis Decision Analysis Conclusi on Issue: Which modifications should be applied for Project C? Original project C Modification was approved by the board of directors in 1979 What What shouldbe should be considered? considered? Current situation  Jack Welch’s vision  Recession  Lay off How to evaluate each criteria? 6
Decision Criteria Introduc tion Issue Analysis Decision Analysis Conclusi on Project C aims at Worldwide leadership in product quality and profitability World class leadership in process quality, productivity, and quality of work life Job security through high quality, low cost products, increased market share All should be achieved for the success of Project C ! 1) Product / process quality Reducing complaints? Reducing cost, Increasing sales? 2) Timeliness Not causing delay for Proj. C? 3) Positive impact on HRM Improving motivation, Increasing skilled workers? 7
Decision Criteria Introduc tion Issue Analysis Decision Analysis Conclusi on The decision for the possibility of the success for Project C should be made based on both qualitative and quantitative evaluations What should be considered? Quantitative Approach ↓ Profitable? How to How to evaluateevaluate each for each criteria? criteria? 1) Product / process quality 2) Timeliness 3) Positive impact on HRM Qualitative Approach ↓ Positive impact? 8
Quantitative approach Introduc tion Issue Analysis Decision Analysis Conclusi on 50000 40000 30000 $000s 20000 10000 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -10000 -20000 -30000 Market Share Impact Product Cost Savings CF Investment etc. Cumulative CF Original Project C IRR (w/o any modifications) = 6.1% Increases? or Decreases? 9
Decision Analysis (1) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification 1 is recommended from the qualitative perspective 1) Improving the quality of the factory environment (1) Quality (2) Time (3) HRM Increase workers’ motivation Positive Strong support from Project C members in dishwasher business Positive High motivation improves product process quality Positive No delay for the project C Positive The Union would press other plants to set similar facilities Total Negative/ Positive Positive Positive Positive 10
Decision Analysis (1) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification 1 is recommended from the quantitative perspective Investment Return • $1.5 mil • Provided a quality environment consistent with product & process quality +17% increase* of labor, service call reduction costs, and warranty savings 50000 40000 30000 $000s 20000 IRR increases to 10000 0 -10000 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -20000 -30000 Market Share Impact Product Cost Savings CF Cumulative CF Investment etc. 9.4% (*) additional investment $1.5 mil / product & process development investment $9.0 mil of Project C 11
Decision Analysis (2) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification 2 is recommended from the qualitative perspective 2) Skills training in technical problem solving (1) Quality Skilled workers reduce product defect (3) HRM Positive Insurance for smoother product ramp-up 1983 and beyond (2) Time Positive Support from manager, union, and skilled worker since being trainee motivates workers Positive No delay for the project C Positive Workers in other plant might migrate to dishwasher plant Total Negative Positive Positive Neutral 12
Decision Analysis (2) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification 2 is recommended from the quantitative perspective Investment Return • $1.5 mil • Added a higher paid job category • Insurance for a smoother product ramp-up in 1983 and beyond 50000 40000 0.8 mil increase of labor cost* +20% increase** of labor, service call reduction costs, and warranty savings 30000 $000s 20000 IRR increases to 10000 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 6.6% -10000 -20000 -30000 Market Share Impact Product Cost Savings CF Cumulative CF Investment etc. (*) $0.25 (labor cost / hour) * 8 (hours) * 200 (days) * 200 (employees) (**) additional investment $1.5 mil to 20% employees / quality related training $1.5 mil 13
Decision Analysis (3) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification 3 is NOT recommended from the qualitative perspective 3) Revision in GE’s management information and support systems (1) Quality Integrating information from accounting, material tracking to quality reporting (2) Time (3) HRM - - - Not essential to Project C Negative Adding complexly and work load Negative Causing delay for the project C Total Negative Neutral Negative Negative 14
Decision Analysis (3) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification 3 is NOT recommended from the quantitative perspective Investment Return • $2.8 mil • Additional time commitments • The activities of Project C would be complemented No financial positive effects 50000 40000 30000 $000s 20000 IRR decreases to 10000 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -0.1% -10000 -20000 -30000 Market Share Impact Product Cost Savings CF Cumulative CF Investment etc. 15
Decision Analysis (4) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification 4 is recommended from the qualitative perspective 4) Adding a value engineering development cycle (1) Quality Improving product quality, reducing defect →Reducing costs, Gaining market share (2) Time Positive Supported by workers in plant Positive Causing delay of 3-4 months Total (3) HRM Negative Positive Negative Positive 16
Decision Analysis (4) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification 4 is recommended from the quantitative perspective Investment Return • $1.2 mil • Would add 3 to 4 months • $1 per unit of product cost savings • Additional market share gains of up to 0.5% 50000 Delay of positive effects 40000 30000 $000s 20000 IRR increases to 10000 9.0% 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -10000 -20000 -30000 Delay considered Investment etc. CF Cummulative CF 17
Decision Analysis (5) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification 5 is recommended from the qualitative perspective 5) Drop (postpone) construction of the integrated computer control room (1) Quality Can be added later if necessary (2) Time (3) HRM Positive Unsure the value of control room Positive Saving $ 1 Mil Already publicized, accepted by the union Total Negative Neutral Positive Neutral 18
Decision Analysis (5) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification 5 is recommended from the quantitative perspective Investment Return • The cancellation of publication • $1.0 mil No any costs 50000 40000 30000 $000s 20000 IRR increases to 10000 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 8.5% -10000 -20000 -30000 Market Share Impact Product Cost Savings CF Cumulative CF Investment etc. 19
Recommendation Modification Introduc tion Qualitative Issue Analysis Decision Analysis Conclusi on Quantitative Additional Investment 1 Improving the quality of the factory environment YES YES 1.5 mil 2 Skills training in technical problem solving YES YES 1.5 mil 3 Revision in GE’s management information and support systems NO NO 4 Adding a value engineering development cycle YES YES 1.2 mil 5 Drop (postpone) construction of the integrated computer control room YES YES -1.0 mil 3.1 mil 3) Go back to the board of directors for authorization of budget increase >$2.8Mil 20
Execution Plan Introduc tion Issue Analysis Decision Analysis Conclusi on Short term 1. Prepare recommendation to senior management and the board. In this recommendation, additional costs, resource allocation, and risks should be completely included. 2. Assign team members to be in charge of each change. 3. Communicate and get an agreement from union. 4. Get commitment with all team members involved. Mid term 1. Implement changes with PDCA cycles. 2. Hold a monthly status meeting with senior management and the board. 21
Future GE Introduc tion Issue Analysis Decision Analysis Conclusi on To improve the processes and products to be a World Leader 22
23
Positive impact on HRM Preferable decision (working environment) will be supported by the Union Herzberg's motivation-hygiene theory Mod. 2 Motivation       Mod. 1 Hygiene factors       Achievement Recognition Satisfaction Responsibility Promotion Skill Development Management objective Supervisor Human relationship Working condition Compensation Benefit package Drawing proactive participation the job Solving and preventing dissatisfaction of the job 24
GE applied Cellular approach Process Improvement 1 Line approach Workers do the same process ➔Product quality is consistent ➔Easy routine work Cellular approach Workers assemble 1 product by themselves ➔Required various skills ➔Easy to adjust the number of workers depending on demand 25
GE applied TOC and Throughput Process Improvement 2 Bottleneck ⇓ TOC is Theory of constraint Identifying where is the bottleneck of the task and improve the process. 26
Decision Analysis Decision Pros  1 Improving the quality of the factory environment Strong support from Project C members, workers, the union, and others in DW biz Increase workers’ motivation High motivation improve product quality No delay for the project C Cons  The Union would press other plants to set similar facilities (90% of hourly workers)  Additional cost $1.5 Mil Y E S  Increase skilled workers  Improve product quality  Insurance for smoother product ramp-up 1983 and beyond?  No delay for the project C  Support stuff view as vote of no confidence?  Workers in other plant might migrate to DW plant  Higher job category required higher pay  Additional cost $ 1.5 Mil Y E S N O    2 Skills training in technical problem solving 3 Revision in GE’s management information and support systems  Improving GE’s information support system     4 Adding a value engineering development cycle  Improving product quality, reduce warranty cost  Supported by people in Plant  Cost saving by 1$ per unit  Opposed by Marketing team  Additional cost $ 1.2 Mil  Causing delay of 3-4 months Y E S 5 Drop (postpone) construction of the integrated computer control room  Supported by operations MNG  Can be added later if necessary  Saving $ 1 Mil  Causing delay of automation  Already publicized  Already accepted by the union with long discussion Y E S Not essential to Proj. C Adding complexly and work load Additional cost $ 2.8 Mil Causing delay for the project C 27
Issue Identifications (5 Forces Analysis) Dish washer market is “Attractive”. Entry Barriers (High) • GE’s buying power due to large amount of purchases Large initial investment ($40-50 mil) Competition (Low) Suppliers (Low) • To be World Class Dish Washer Manufacturer, high quality product is essential. • High and stable market share : 26% in 1979 Buyers (Strong) • • Building Contractor: Price Sensitive Consumers: Long term reliability, convenience and performance Substitutes (Low) • • Hand washing Low quality dish washers 28
Internal Issues Issues • • People • • Products • Financials Actions Negative power of union Lack of skills in technical problem solving 17% Lay-off (almost 2,000 employees) in 1980 Motivation improvement both from motivating and hygiene factors Mid-class product • Susceptible to scratch • Excessive noise • Heavy water user Product quality improvement Substantially lower volumes and profits than planned during 1980 due to a recession Cost reduction opportunities Project C modification!! In order to cope with these issues, modifications of project C were identified. Five possible project modifications were identified for evaluation. 29
Decision Criteria Consider which criteria are strongly related to the success of Project C. What should What should be be considered? considered? How to evaluate for each criteria? 1) Positive impact on HRM 2) Timeliness 3) Improving product /process quality 4) Positive effects to the market 5) Structure of organization 6) Restructure of product portfolio 30
Appendix project C 1979 1980 Market Share Impact Product Cost Savings 1981 1982 1983 1984 1985 1986 1987 1988 1989 706 1,740 2,896 3,873 4,281 4,752 5,260 Investment etc. -20 -129 CF -20 -129 -350 2,479 6,777 9,198 12,572 13,743 14,995 16,382 -326 19,674 -3,033 -2,722 -4,030 -6,171 -7,011 -7,882 -8,829 -326 20,024 152 5,795 8,064 10,274 11,013 11,865 12,813 Cumulative CF -20 -149 -475 -20499 -20347 -14552 -6488 3786 14799 26664 39477
Appendix Modification 1 1979 1980 1982 -350 1983 1984 1985 1986 1987 1988 1989 706 Market Share Impact Product Cost Savings 1981 1740 2896 3873 4281 4752 5260 2844 7665 10268 13902 15156 16496 17982 Investment etc. -20 -129 -326 -21174 -3033 -2722 -4030 -6171 -7011 -7882 -8829 CF -20 -129 -326 -21524 Cumulative CF -20 -149 -475 -21999 -21482 -14799 -5666 517 6683 9134 11604 12426 13366 14413 5938 18363 31730 46142
Appendix Modification 2 1,979 1,980 1,981 1,982 1,983 1,984 1,985 1,986 1,987 1,988 1,989 Market Share Impact Product Cost Savings 706 1,740 2,896 3,873 4,281 4,752 5,260 Investment etc. -20 -129 CF -20 -129 Cumulative CF -20 -149 -350 2,597 7,210 9,793 13,395 -326 21,174 -3,033 -2,722 -4,030 -6,171 -326 21,524 270 6,228 8,659 11,097 -475 21,999 21,729 15,501 -6,842 4,255 14,665 16,024 17,529 -7,011 -7,882 -8,829 11,935 12,894 13,960 16,190 29,083 43,043
Appendix Modification 3 1979 1980 -20 -129 CF -20 -129 Cumulative CF -20 -149 1982 1983 1984 1985 1986 1987 1988 1989 706 Market Share Impact Product Cost Savings Investment etc. 1981 1,740 2,896 3,873 4,281 4,752 5,260 -350 2,479 6,777 9,198 12,572 13,743 -326 22,474 -3,033 -2,722 -4,030 -6,171 -7,011 -326 22,824 152 5,795 8,064 10,274 11,013 -475 23,299 23,147 17,352 -9,288 986 11,999 14,995 16,382 -7,882 -8,829 11,865 12,813 23,864 36,677
Appendix Modification 4 1979 Market Share Impact Product Cost Savings Delay considered Investment etc. CF Cummulative CF IRR -20 -20 -20 1980 1981 1982 -129 -129 -149 -350 -248 -326 -20,874 -326 -21,122 -475 -21,597 1983 1984 1,588 2,828 2,779 7,467 2,992 8,566 -3,033 -2,722 -41 5,844 -21,638 -15,795 1985 4,213 10,039 13,098 -4,030 9,068 -6,727 1986 5,487 13,611 17,684 -6,171 11,513 4,787 1987 6,065 14,782 20,337 -7,011 13,326 18,112 1988 6,732 16,034 22,206 -7,882 14,324 32,436 1989 7,452 17,421 24,258 -8,829 15,429 47,866 10 690 11 761 12 866 14 866 15 866 16 866 2,829 -350 2,479 7,128 -350 6,778 12 80 9,548 -350 9,198 13 173 12,922 -350 12,572 14 173 14,092 -350 13,742 15 173 15,346 -350 14,996 16 173 16,731 -350 16,381 10 11 12 13 15 16 17 3,129 300 7,818 690 13 10,389 841 14 13,961 1,039 15 15,131 1,039 16 16,385 1,039 17 17,770 1,039 1,983 1,525 0 1,984 1,650 0 1,985 1,810 0 1,986 2,000 0 1,987 2,000 0 1,988 2,000 0 1,989 2,000 0 0 Product cost savings cost savings for Tuf C vs. Pla volume cost savings for Tuf C vs. Tuf B volume Total Penalty UP cost savings for Tuf C vs. Pla UP cost savings for Tuf C vs. Tuf B UP total Margin 9 300 Market share Market size Market share
Appendix Modification 4 1979 Market Share Impact Product Cost Savings Investmen t etc. CF Cumulativ e CF IRR 1980 1981 1982 1984 1985 1986 1987 1988 1989 706 -350 1983 1,740 2,896 3,873 4,281 4,752 5,260 2,479 6,777 9,198 12,572 13,743 14,995 16,382 -20 -20 -129 -129 -326 -18,674 -3,033 -2,722 -4,030 -6,171 -7,011 -7,882 -8,829 -326 -19,024 152 5,795 8,064 10,274 11,013 11,865 12,813 -20 -149 -475 -19,499 -19,347 -13,552 -5,488 8.5% 4,786 15,799 27,664 40,477

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GE case study

  • 1.
  • 2.
    GE Overview Introduc tion Issue Analysis Decision Analysis Conclusi on Major ApplianceBusiness Group (MABG) Kitchen appliances Refrigerators Home laundry appliances Ranges ovens Microwaves Disposal units Dishwashers Dishwasher Performance (1973-1979) 250,000 235,078 3.5% 220,407 200,000 150,000 194,168 168,190 3.2% 3.0% 2.8% 138,726 100,000 2.1% 2.5% 2.3% 2.2% 2.0% 50,000 0 2,913 1975 1976 Sales 4,466 3,700 1977 NetIncome 6,171 1978 Net Income to sales 7,522 1.5% 1979 1
  • 3.
    Background Introduc tion Issue Analysis Decision Analysis Conclusi on Early 1970s Dishwashers had qualityproblems despite market shares exceeding 20% Medium Quality(Rust, Noise and High energy use) 1971 Deployed PermaTuf A as new high end model 1973 Deployed PermaTuf B as core of GE line and Model C as low-cost version 1976 Introduced GSD 1050 (Model A) Lower than planned Additional $4M investment 1978 Dec 1979 1980 Nov 1980 Introduced GSD 1200, GSD 1000, and GSD 900 (Model B) Lower than planned Ready to crate Model C as low-end dishwasher Approved for $28M investment for Project C Recession year • Lower volumes and profits than planned • Layoffs in Louisville of 17% (almost 2,000 employees) Decide which modifications Tom needs to execute 2
  • 4.
    Goal of thisproject Jack Welch Request Introduc tion Issue Analysis Decision Analysis Conclusi on Became CEO in 1981  A world class product design and a world class factory  Automation and manufacturing competitiveness in quality and cost  Addressing workforce issue  A model for worker involvement and significantly improved worker attitudes and value-added Goal of Project C  A chive worldwide dishwasher industry leadership in product quality and profitability  Achieve world class leadership in process quality, productivity, and quality of work life; and  Achieve increased job security through high quality, low cost products that gain increased market share If project C becomes a model for GE business and provide strong Financial return, Jack is willing to consider more capital. 3
  • 5.
    Issue 1. 2. 3. 4. 5. Introduc tion Issue Analysis Decision Analysis Conclusi on Improving the qualityof the factory environment Skills training in technical problem solving Revision in GE’s management information and support systems Adding a value engineering development cycle Drop (postpone) construction of the integrated computer control room Issue “Which modifications should be applied for Project C?” Project C To be World Class Dish Washer Manufacturer 4
  • 6.
    Options Introduc tion Issue Analysis Decision Analysis Conclusi on 3) Go backto the board of directors for authorization of budget increase 1) No change…..Wait until project C is completed in mid-1983 2) Go ahead now…..increase no more than $2.8 million (10%) 5
  • 7.
    Decision Criteria Introduc tion Issue Analysis Decision Analysis Conclusi on Issue: Whichmodifications should be applied for Project C? Original project C Modification was approved by the board of directors in 1979 What What shouldbe should be considered? considered? Current situation  Jack Welch’s vision  Recession  Lay off How to evaluate each criteria? 6
  • 8.
    Decision Criteria Introduc tion Issue Analysis Decision Analysis Conclusi on Project Caims at Worldwide leadership in product quality and profitability World class leadership in process quality, productivity, and quality of work life Job security through high quality, low cost products, increased market share All should be achieved for the success of Project C ! 1) Product / process quality Reducing complaints? Reducing cost, Increasing sales? 2) Timeliness Not causing delay for Proj. C? 3) Positive impact on HRM Improving motivation, Increasing skilled workers? 7
  • 9.
    Decision Criteria Introduc tion Issue Analysis Decision Analysis Conclusi on The decisionfor the possibility of the success for Project C should be made based on both qualitative and quantitative evaluations What should be considered? Quantitative Approach ↓ Profitable? How to How to evaluateevaluate each for each criteria? criteria? 1) Product / process quality 2) Timeliness 3) Positive impact on HRM Qualitative Approach ↓ Positive impact? 8
  • 10.
    Quantitative approach Introduc tion Issue Analysis Decision Analysis Conclusi on 50000 40000 30000 $000s 20000 10000 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -10000 -20000 -30000 Market ShareImpact Product Cost Savings CF Investment etc. Cumulative CF Original Project C IRR (w/o any modifications) = 6.1% Increases? or Decreases? 9
  • 11.
    Decision Analysis (1) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification1 is recommended from the qualitative perspective 1) Improving the quality of the factory environment (1) Quality (2) Time (3) HRM Increase workers’ motivation Positive Strong support from Project C members in dishwasher business Positive High motivation improves product process quality Positive No delay for the project C Positive The Union would press other plants to set similar facilities Total Negative/ Positive Positive Positive Positive 10
  • 12.
    Decision Analysis (1) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification1 is recommended from the quantitative perspective Investment Return • $1.5 mil • Provided a quality environment consistent with product & process quality +17% increase* of labor, service call reduction costs, and warranty savings 50000 40000 30000 $000s 20000 IRR increases to 10000 0 -10000 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -20000 -30000 Market Share Impact Product Cost Savings CF Cumulative CF Investment etc. 9.4% (*) additional investment $1.5 mil / product & process development investment $9.0 mil of Project C 11
  • 13.
    Decision Analysis (2) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification2 is recommended from the qualitative perspective 2) Skills training in technical problem solving (1) Quality Skilled workers reduce product defect (3) HRM Positive Insurance for smoother product ramp-up 1983 and beyond (2) Time Positive Support from manager, union, and skilled worker since being trainee motivates workers Positive No delay for the project C Positive Workers in other plant might migrate to dishwasher plant Total Negative Positive Positive Neutral 12
  • 14.
    Decision Analysis (2) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification2 is recommended from the quantitative perspective Investment Return • $1.5 mil • Added a higher paid job category • Insurance for a smoother product ramp-up in 1983 and beyond 50000 40000 0.8 mil increase of labor cost* +20% increase** of labor, service call reduction costs, and warranty savings 30000 $000s 20000 IRR increases to 10000 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 6.6% -10000 -20000 -30000 Market Share Impact Product Cost Savings CF Cumulative CF Investment etc. (*) $0.25 (labor cost / hour) * 8 (hours) * 200 (days) * 200 (employees) (**) additional investment $1.5 mil to 20% employees / quality related training $1.5 mil 13
  • 15.
    Decision Analysis (3) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification3 is NOT recommended from the qualitative perspective 3) Revision in GE’s management information and support systems (1) Quality Integrating information from accounting, material tracking to quality reporting (2) Time (3) HRM - - - Not essential to Project C Negative Adding complexly and work load Negative Causing delay for the project C Total Negative Neutral Negative Negative 14
  • 16.
    Decision Analysis (3) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification3 is NOT recommended from the quantitative perspective Investment Return • $2.8 mil • Additional time commitments • The activities of Project C would be complemented No financial positive effects 50000 40000 30000 $000s 20000 IRR decreases to 10000 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -0.1% -10000 -20000 -30000 Market Share Impact Product Cost Savings CF Cumulative CF Investment etc. 15
  • 17.
    Decision Analysis (4) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification4 is recommended from the qualitative perspective 4) Adding a value engineering development cycle (1) Quality Improving product quality, reducing defect →Reducing costs, Gaining market share (2) Time Positive Supported by workers in plant Positive Causing delay of 3-4 months Total (3) HRM Negative Positive Negative Positive 16
  • 18.
    Decision Analysis (4) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification4 is recommended from the quantitative perspective Investment Return • $1.2 mil • Would add 3 to 4 months • $1 per unit of product cost savings • Additional market share gains of up to 0.5% 50000 Delay of positive effects 40000 30000 $000s 20000 IRR increases to 10000 9.0% 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -10000 -20000 -30000 Delay considered Investment etc. CF Cummulative CF 17
  • 19.
    Decision Analysis (5) Introduc tion Issue Analysis Decision Analysis Conclusi on Qualitative Modification5 is recommended from the qualitative perspective 5) Drop (postpone) construction of the integrated computer control room (1) Quality Can be added later if necessary (2) Time (3) HRM Positive Unsure the value of control room Positive Saving $ 1 Mil Already publicized, accepted by the union Total Negative Neutral Positive Neutral 18
  • 20.
    Decision Analysis (5) Introduc tion Issue Analysis Decision Analysis Conclusi on Quantitative Modification5 is recommended from the quantitative perspective Investment Return • The cancellation of publication • $1.0 mil No any costs 50000 40000 30000 $000s 20000 IRR increases to 10000 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 8.5% -10000 -20000 -30000 Market Share Impact Product Cost Savings CF Cumulative CF Investment etc. 19
  • 21.
    Recommendation Modification Introduc tion Qualitative Issue Analysis Decision Analysis Conclusi on Quantitative Additional Investment 1 Improving the qualityof the factory environment YES YES 1.5 mil 2 Skills training in technical problem solving YES YES 1.5 mil 3 Revision in GE’s management information and support systems NO NO 4 Adding a value engineering development cycle YES YES 1.2 mil 5 Drop (postpone) construction of the integrated computer control room YES YES -1.0 mil 3.1 mil 3) Go back to the board of directors for authorization of budget increase >$2.8Mil 20
  • 22.
    Execution Plan Introduc tion Issue Analysis Decision Analysis Conclusi on Short term 1.Prepare recommendation to senior management and the board. In this recommendation, additional costs, resource allocation, and risks should be completely included. 2. Assign team members to be in charge of each change. 3. Communicate and get an agreement from union. 4. Get commitment with all team members involved. Mid term 1. Implement changes with PDCA cycles. 2. Hold a monthly status meeting with senior management and the board. 21
  • 23.
  • 24.
  • 25.
    Positive impact onHRM Preferable decision (working environment) will be supported by the Union Herzberg's motivation-hygiene theory Mod. 2 Motivation       Mod. 1 Hygiene factors       Achievement Recognition Satisfaction Responsibility Promotion Skill Development Management objective Supervisor Human relationship Working condition Compensation Benefit package Drawing proactive participation the job Solving and preventing dissatisfaction of the job 24
  • 26.
    GE applied Cellularapproach Process Improvement 1 Line approach Workers do the same process ➔Product quality is consistent ➔Easy routine work Cellular approach Workers assemble 1 product by themselves ➔Required various skills ➔Easy to adjust the number of workers depending on demand 25
  • 27.
    GE applied TOCand Throughput Process Improvement 2 Bottleneck ⇓ TOC is Theory of constraint Identifying where is the bottleneck of the task and improve the process. 26
  • 28.
    Decision Analysis Decision Pros  1 Improving thequality of the factory environment Strong support from Project C members, workers, the union, and others in DW biz Increase workers’ motivation High motivation improve product quality No delay for the project C Cons  The Union would press other plants to set similar facilities (90% of hourly workers)  Additional cost $1.5 Mil Y E S  Increase skilled workers  Improve product quality  Insurance for smoother product ramp-up 1983 and beyond?  No delay for the project C  Support stuff view as vote of no confidence?  Workers in other plant might migrate to DW plant  Higher job category required higher pay  Additional cost $ 1.5 Mil Y E S N O    2 Skills training in technical problem solving 3 Revision in GE’s management information and support systems  Improving GE’s information support system     4 Adding a value engineering development cycle  Improving product quality, reduce warranty cost  Supported by people in Plant  Cost saving by 1$ per unit  Opposed by Marketing team  Additional cost $ 1.2 Mil  Causing delay of 3-4 months Y E S 5 Drop (postpone) construction of the integrated computer control room  Supported by operations MNG  Can be added later if necessary  Saving $ 1 Mil  Causing delay of automation  Already publicized  Already accepted by the union with long discussion Y E S Not essential to Proj. C Adding complexly and work load Additional cost $ 2.8 Mil Causing delay for the project C 27
  • 29.
    Issue Identifications (5 ForcesAnalysis) Dish washer market is “Attractive”. Entry Barriers (High) • GE’s buying power due to large amount of purchases Large initial investment ($40-50 mil) Competition (Low) Suppliers (Low) • To be World Class Dish Washer Manufacturer, high quality product is essential. • High and stable market share : 26% in 1979 Buyers (Strong) • • Building Contractor: Price Sensitive Consumers: Long term reliability, convenience and performance Substitutes (Low) • • Hand washing Low quality dish washers 28
  • 30.
    Internal Issues Issues • • People • • Products • Financials Actions Negative powerof union Lack of skills in technical problem solving 17% Lay-off (almost 2,000 employees) in 1980 Motivation improvement both from motivating and hygiene factors Mid-class product • Susceptible to scratch • Excessive noise • Heavy water user Product quality improvement Substantially lower volumes and profits than planned during 1980 due to a recession Cost reduction opportunities Project C modification!! In order to cope with these issues, modifications of project C were identified. Five possible project modifications were identified for evaluation. 29
  • 31.
    Decision Criteria Consider whichcriteria are strongly related to the success of Project C. What should What should be be considered? considered? How to evaluate for each criteria? 1) Positive impact on HRM 2) Timeliness 3) Improving product /process quality 4) Positive effects to the market 5) Structure of organization 6) Restructure of product portfolio 30
  • 32.
    Appendix project C 1979 1980 MarketShare Impact Product Cost Savings 1981 1982 1983 1984 1985 1986 1987 1988 1989 706 1,740 2,896 3,873 4,281 4,752 5,260 Investment etc. -20 -129 CF -20 -129 -350 2,479 6,777 9,198 12,572 13,743 14,995 16,382 -326 19,674 -3,033 -2,722 -4,030 -6,171 -7,011 -7,882 -8,829 -326 20,024 152 5,795 8,064 10,274 11,013 11,865 12,813 Cumulative CF -20 -149 -475 -20499 -20347 -14552 -6488 3786 14799 26664 39477
  • 33.
    Appendix Modification 1 1979 1980 1982 -350 1983 1984 1985 1986 1987 1988 1989 706 MarketShare Impact Product Cost Savings 1981 1740 2896 3873 4281 4752 5260 2844 7665 10268 13902 15156 16496 17982 Investment etc. -20 -129 -326 -21174 -3033 -2722 -4030 -6171 -7011 -7882 -8829 CF -20 -129 -326 -21524 Cumulative CF -20 -149 -475 -21999 -21482 -14799 -5666 517 6683 9134 11604 12426 13366 14413 5938 18363 31730 46142
  • 34.
    Appendix Modification 2 1,9791,980 1,981 1,982 1,983 1,984 1,985 1,986 1,987 1,988 1,989 Market Share Impact Product Cost Savings 706 1,740 2,896 3,873 4,281 4,752 5,260 Investment etc. -20 -129 CF -20 -129 Cumulative CF -20 -149 -350 2,597 7,210 9,793 13,395 -326 21,174 -3,033 -2,722 -4,030 -6,171 -326 21,524 270 6,228 8,659 11,097 -475 21,999 21,729 15,501 -6,842 4,255 14,665 16,024 17,529 -7,011 -7,882 -8,829 11,935 12,894 13,960 16,190 29,083 43,043
  • 35.
    Appendix Modification 3 1979 1980 -20 -129 CF -20 -129 CumulativeCF -20 -149 1982 1983 1984 1985 1986 1987 1988 1989 706 Market Share Impact Product Cost Savings Investment etc. 1981 1,740 2,896 3,873 4,281 4,752 5,260 -350 2,479 6,777 9,198 12,572 13,743 -326 22,474 -3,033 -2,722 -4,030 -6,171 -7,011 -326 22,824 152 5,795 8,064 10,274 11,013 -475 23,299 23,147 17,352 -9,288 986 11,999 14,995 16,382 -7,882 -8,829 11,865 12,813 23,864 36,677
  • 36.
    Appendix Modification 4 1979 MarketShare Impact Product Cost Savings Delay considered Investment etc. CF Cummulative CF IRR -20 -20 -20 1980 1981 1982 -129 -129 -149 -350 -248 -326 -20,874 -326 -21,122 -475 -21,597 1983 1984 1,588 2,828 2,779 7,467 2,992 8,566 -3,033 -2,722 -41 5,844 -21,638 -15,795 1985 4,213 10,039 13,098 -4,030 9,068 -6,727 1986 5,487 13,611 17,684 -6,171 11,513 4,787 1987 6,065 14,782 20,337 -7,011 13,326 18,112 1988 6,732 16,034 22,206 -7,882 14,324 32,436 1989 7,452 17,421 24,258 -8,829 15,429 47,866 10 690 11 761 12 866 14 866 15 866 16 866 2,829 -350 2,479 7,128 -350 6,778 12 80 9,548 -350 9,198 13 173 12,922 -350 12,572 14 173 14,092 -350 13,742 15 173 15,346 -350 14,996 16 173 16,731 -350 16,381 10 11 12 13 15 16 17 3,129 300 7,818 690 13 10,389 841 14 13,961 1,039 15 15,131 1,039 16 16,385 1,039 17 17,770 1,039 1,983 1,525 0 1,984 1,650 0 1,985 1,810 0 1,986 2,000 0 1,987 2,000 0 1,988 2,000 0 1,989 2,000 0 0 Product cost savings cost savings for Tuf C vs. Pla volume cost savings for Tuf C vs. Tuf B volume Total Penalty UP cost savings for Tuf C vs. Pla UP cost savings for Tuf C vs. Tuf B UP total Margin 9 300 Market share Market size Market share
  • 37.
    Appendix Modification 4 1979 Market Share Impact Product Cost Savings Investmen tetc. CF Cumulativ e CF IRR 1980 1981 1982 1984 1985 1986 1987 1988 1989 706 -350 1983 1,740 2,896 3,873 4,281 4,752 5,260 2,479 6,777 9,198 12,572 13,743 14,995 16,382 -20 -20 -129 -129 -326 -18,674 -3,033 -2,722 -4,030 -6,171 -7,011 -7,882 -8,829 -326 -19,024 152 5,795 8,064 10,274 11,013 11,865 12,813 -20 -149 -475 -19,499 -19,347 -13,552 -5,488 8.5% 4,786 15,799 27,664 40,477