Silko Scalese Machining Corporation Harvard Case Solution & Analysis

Introduction

            The inception of Silko Scalese Machining Corporation began in the year 1969 when Alan Silko had set up a completely separate machine shop which was owned by him. At that time the General Machine Company which was owned by Silko and Ciccarino was dissolved and Alan Silko took his share of the total assets of the corporation in order to form the Silko Scalese Machining Corporation.

            The main jobs that were performed by the company were all high quality jobs that required high quality products with high precision to be produced. There were a wide variety of industries that required such type of jobs to be performed by the company. These industries ranged from aerospace to food processing. All such jobs required creative solutions for resolving the problems of the clients. All the major customers of the company were those customers that had long term growth potential. The company had long term viability and these owners of the company had achieved through its strong customer base of high growth potential clients.

            The sales of the company had grown to around $1.6 million and they were expected to grow at a rate of 10% to 15% over the coming five year period. However, in order to attain this level of sales, the company will need to capitalize over its competitive advantages and the most important of all of these competitive advantages were to manufacture high tolerance parts which was the key issue currently faced by the company, producing high quality products according to the specifications of the customers and meeting the needs of the customers by working with them.

Issues

            First of all if we analyze the industry as shown in the case, then it could be seen that the customer is the one who has the highest power in the machining industry. The machined parts constituted as a major portion of the total costs for the final products, therefore, the customers were more anxious to get their desired quality products and that too with the lowest of the possible prices in the market.

            The customers also posed the threat of backward integration for the manufacturers of these machining parts and as the number of the suppliers was large in this industry therefore, the customers shopped around all of the suppliers to get their desired products at the best prices possible and that too without compromising the quality. Furthermore, another significant threat for the new suppliers in the industry or for the new entrants was the huge investment that was required in the capital expenditure to create a competitive place in this market.

            Despite of all such hurdles, many supplier and customer relationships were formed due to the high quality and consistent delivery from the suppliers to their customers. However, now the trend of the industry was changing and most of the customers required that their suppliers had statistical process control at their manufacturing facilities so that the quality of the final products is improved. There were many advantages for the suppliers for having such process at their manufacturing facilities.

            It allowed the manufacturers to control the quality of the final part to be supplied. Under this process, the personnel had to continuously monitor the entire process and whenever, the control limits or the tolerance limits were exceeded they could make adjustments and in this way they could save a lot of inspection time as it was avoided. This resulted in significant reduction in the material costs, labor costs, rework costs and the costs of scrap. Harris computer had recommended Alan Silko to implement the SPC system in its manufacturing facility, as a result of the rejection of the total 440 parts that were recently produced by Silko which had exceeded the tolerance limits as specified by the Harris Computer.

Silko Scalese Machining Corporation Case Solution

            Now the decision need to be made by Alan Silko regarding the investment in the new SPC system as the total capital expenditure cost was going to be $70000. The proposal needs to be evaluated and analyzed before a final decision is to be made. The current samples for the order of Harris Computers and one other order related to terminal block has been provided which needs to analyzed to show how well the performance of the company is currently and whether the investment in SPC is recommended to meet the needs of Harris Computers and all other customers of not. Other issues that also needed to be addresses were how the employees would be affected by this system and whether they would be satisfied or dissatisfied...........................

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