16 Jun Takata Airbag Quality Problem
Question
Takata Airbag Quality Problem
PART II • MANUFACTURING AND SERVICE FLOWS
2. Flooring market analysis by product (soft coverings, resilient flooring, non-resilient flooring, seamless flooring), by application (residential, commercial, industry), and segment forecasts to 2020. (2014). Grand View Research, http://www.grandviewresearch.com/industry-analysis/ flooring-market-analysis
3. Update on formaldehyde. (2013). Consumer Product Safety Commission, https://www.cpsc.gov/PageFiles/121919/AN%20UPDATE%200N%20 FORMALDEHYDE%20final%200113.pdf
4. Abrams, R. (2015, November 5). Lumber Liquidators names a longtime director as chief. New York Times, Business Day.
CASE 2: Statistical Process Control at the Jones Corporation The Jones Corporation had been doing well for years. It felt it was the best in its industry. Henry Jones, the CEO, decided that the corporation needed to achieve an award of national significance that was recognized across industries as a top-tier award. Thus, Henry decided that his company would apply for the Malcom Baldrige National Quality Award. Since the Baldrige Award criteria focus on results, the Jones Corporation would need to review its processes and document its results in order to demonstrate that it deserved to be selected as a Baldrige award recipient.
Jones and his staff reviewed the criteria categories: lead- ership, strategic planning, customer focus, measurement, analysis, and knowledge management, workforce focus, operational focus, and results. A “champion” was selected from the Jones Corporation for each of the seven catego- ries. Arthur Hopkins was assigned to operational focus and Bill Marley was assigned to customer focus. Both champions knew that their departments needed to collect data and analyze them in order to determine the perfor- mance results. They believed that the key to earning the award was to demonstrate that the processes within each of their departments were in statistical control. Furthermore, they needed to demonstrate that they had the tools needed to continuously monitor the processes, and to determine which processes required corrective actions to remain in control.
The Jones Corporation was a manufacturing company; therefore, Arthur knew that his department would be col- lecting variable data. These data would include information such as the time it took to assemble a unit of product, and the control limits of various products. Since Bill’s responsi- bility was to ensure the corporation had the proper level of customer focus, his department would be collecting attribute data. They would be monitoring and analyzing the custom- ers’ satisfaction levels in multiple areas such as frequency of meetings, ease of doing business, listens to customers’ needs, and provides cost-effective solutions. Some of the data col- lection was already being done and analyzed on a routine basis. However, there were areas that they had never mea- sured before; therefore, staff would need to develop and employ the proper tools to support statistical process control.
DISCUSSION QUESTIONS
1. What type of charts would Arthur’s staff use to monitor and analyze the variable data? Explain what each chart is designed to track.
2. What type of charts would Bill’s staff use to monitor and analyze the attribute data? Explain what each chart is designed to track.
3. Explain what is determined by collecting variable data samples and attribute data samples.
Note: Written by Rick Bonsall, D. Mgt., McKendree University, Lebanon, IL. The people and company are fictional and any resemblance to any person or company is coincidental. This case was prepared solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation.
Source:
1. 2013-2014 business/nonprofit criteria now available, http://www.nist. gov/baldrige/bus_np_criteria.cfm
CASE 3: Takata’s Airbag Quality Problem Consumers around the world rely on manufacturers to build safe products. The bigger the company, the more con- sumers trust it to deliver on their expectations concerning safety. Statistical quality control (SQC) enables all compa- nies, large and small, to ensure their processes are capable of meeting consumers’ expectations. Is it possible that a defective product could slip through and be sold and deliv- ered to a consumer? The answer is yes. However, it is area- sonable assumption that the quantity of defective units will not be in the millions.
In April 2013, Takata announced that its airbags, which are used by many of the leading automobile brands, had defec- tive inflator and propellant devices. The defects could result in metal fragments shooting into drivers during a crash. As early as 2002, Takata reported that its Mexico plant had _a defect rate six to eight times acceptable quality levels. Th~s implies that Takata used some type of SQC; consequently, it was able to determine that defects existed and at what ]eve!. However, there is no indication that the out-of-control pro- cess was ever corrected.
Chapter 13S • Supplement: Statistical Quality Control 435
ro:x:imately 34 million vehicles are possibly affected .J\ftn the United States. Worldwide, another 7 million wit estimated to be affected. Whatever the size of the air- ~r~ recall, it is quickly taking a backseat to the number of . \ries and deaths associated with the defective airbags. ~~confirmed reports put the number of injuries at 105 and the current death toll at 8.
obviously, the human cost from these defects is immeasur- able. There is also a powerful economic effect on Takata, which controls 22% of the worldwide airbag market, as costs continue to increase as additional cars are recalled. Takata will take a huge financial loss. That is in addition to fines being placed on the company. The National Highway Traffic Safety Administration (NTHSA) imposed a record civil penalty of $200 million. A few months later, Takata was fined an addi- tional $14,000 a day for not cooperating with a national safety investigation. Although the final cost to replace an airbag dif- fers with brands, it can cost from $1,000 to $1,500 per airbag to be replaced. If the number of vehicles mentioned above all need replacement airbags, the cost will be astronomical.
Honda, Takata’s biggest customer, dropped Takata as its sup- plier of airbag inflators. This is a significant blow to Takata. Although it sells other equipment such as seatbelts, steering wheels, electronics, and child seats, airbags make up approx- imately 40% of its business. The consequences of Takata’s poor quality testing continue to pile up. Nissan and Toyota also dropped Takata as their supplier. Following suit, Ford and Mazda joined the other major automobile manufacturers
and dropped Takata as a supplier of airbag inflators for all future cars. Although they have not yet dropped Takata, Fuji Heavy Industries Limited (maker of Subaru) and Mitsubishi are deciding if they will do the same .
The financial cost for Takata is growing. Its market share for airbag inflators may drop from 22% to 5% by 2020. To make matters worse, Takata’s competitors, Daicel Corporation, Autoliv Incorporate, and TRW Automotive, will fill the void left by the cancellations. Because of its apparent lack of-or adherence to-statistical process con- trol, Takata could end up going out of business, or at least becoming a much smaller company. Within just three days of its announcement, its stock declined 39%. Takata reduced its profit forecast by a mammoth 75%.
DISCUSSION QUESTIONS
1. What process or activity should Takata have employed to enable it to determine there was such a high defect rate with its airbag inflators?
2. Based on the narrative, which type of data, variable or attribute, should Takata have collected and analyzed in order to determine if its process was in control? Explain why you selected the specific data type.
3. Based on your response to Question 2, what type of charts would it use to monitor and analyze the data?
4. What is the current financial condition of Takata?
Note: Written by Rick Bonsall, D. Mgt., McKendree University, Lebanon, IL. This case was prepared solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. Sources:
1. Teen driver’s death linked to Takata air bag problems. (2015, November 3). CBS News, http://www.cbsnews.com/news/is-your-takata-air-bag-under- recall/
2. Addady, M. (2015). Ford dumps Takata after massive airbag recall. Fortune, http://fortune.com/2015/11 /23/ford-dumps-ta kata-airbag/
3. Nissan joins Toyota, Honda in dropping Takata airbag inflators. (2015, July 15). Automotive News, http://www.autonews.com/article/20151107/ OEM01/151109845/nissa n-joi ns-toyota-honda-in-dropping-takata- airbag-inflators
VIDEO CASE STUDY Learn more about statistical quality control from real organizations that use operations management techniques every day. Jim Biafore is the Senior Director at Beefsteak, a restaurant in Washington, D.C. Like many businesses, Beefsteak regularly measures and evaluates the effective- ness of their products and services to ensure that they are meeting their own standards of quality. Watch this short interview to learn how.
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