Case Study

TITEFLEX CORPORATION

(200 points)

Questions

1. Did they attempt to improve things? If so did they succeed or not, if not what were the reasons?

2. What are some examples of organizational goals from the case? What are some examples of functional goals? What is the difference between organizational and functional goals?

3. Refer to the 15 Principles of Operations Management, select a set of six of them that based on your analysis you consider to be most directly applicable to solve Titeflex Corporations problems. In each case support your recommendation based on a situation/problem as stated in the case.

4. Based on your recommendations in the previous question develop an operations strategy for Jon Simpson and his colleagues at Titeflex.

5. To what extent is your operations strategy also an organizational/business strategy? What is the difference between the two kinds of strategies and how are they related?

6. If you were Jon Simpson where would you lead/take Titeflex Corporation over the next three to five years?

(Please note that the total length of your report, that is answers to all question, should be three to four pages long, double spaced)

Principles of Operations Management

Case Study

TITEFLEX CORPORATION

On December 1, 1998, Jon H. Simpson, 41, became president of Titeflex Corporation, located in Springfield, Massachusetts. In that year Titeflex produced and sold $45 million worth of high-performance hoses to the aerospace, industrial, and automotive sectors. Earlier that year, Titeflexs parent, the Bundy Group, had been acquired by the British engineering conglomerate, Tube Investments (TI). Simpson had been vice president of operations in CHR Industries, another Bundy company, when TIs management made him president of Titeflex.

Strategy

TIs initial strategy was to divest Bundys Performance Plastics Group, which included CHR Industries and Titeflex. Another further study, however, TI pulled Titeflex out of the divestment package, because its technology had value for Bundys automotive business as well as for TIs flourishing aerospace business. All was not well with Titeflex, however. While the company was profitable and its sales were growing, competitors were nibbling away at Titeflexs market share, production was slow, deliveries were more often late than on time, and relations between management and Titeflexs union were abysmal.

TIs CEO, Sir Christopher Lewinton, would not be satisfied with Titeflexs performance. He wanted each of TIs 70 companies to be worldwide leaders in technology and market share. He expected sales and profits to grow at 15 percent per annum while yielding at least a 15 percent return on sales and a 30 percent return on net assets before interest and taxes.

Prior to the acquisition by TI, Simpson had been taking time away from CHR to help the Boston Consulting Group (BCG), which Bundy had brought in to study Titeflexs operations. As internal consultant, Simpson worked with BCG on flowcharting processes in every area to identify how efficiency and speed of response could be improved.

The promotion to the Titeflex presidency transformed Simpsons life. Suddenly, he found himself in Springfield, Massachusetts, managing a new division under a new set of (British) bosses. Simpson felt sandwiched between irate customers, warring employees, and demanding superiors. How should he deal with his customers? What could he do to improve Titeflexs operations and relations with the union? Simpson wondered what his priorities ought to be, where to begin, and how to proceed.

Products

According to customers that Simpson met in his first few days in the company, Titeflex had a reputation for producing pricey products of excellent quality. The product line consisted of some 100,000 different hoses varying in size, shape, fittings, and type of protective sleeving. Customers were clustered in three market segments: aerospace (50 percent of sales), industrial (30 percent), and automotive (20 percent).

Titeflex and two other firms had a 90 percent share of the aerospace market. Few competitors existed because of the long time it took for products to prove themselves through usage by the customer and for a supplier to become certified as qualified. While the number of pieces sold was only 10 units per day, products were highly customized and had high profit margins. Some complex hoses went through all 44 manufacturing processes, traveling 2 miles. Titeflexs market share had declined to about 25 percent, and two of the companys largest customers had told Simpson they were considering dropping Titeflex as a supplier.

Hoses for the industrial sector were used in applications ranging from oil field apparatus to refrigeration equipment. Titeflex was a minor player in the price-sensitive part of this market. However, it competed well in the high-pressure and high-temperature segment where quality and reliability were more important than price. Meeting delivery schedules was crucial for new hoses, whereas quick response to customer requests was critical for hose replacements.

Product variety was small and price competition was intense in the automotive sector. Late deliveries could shut down an auto assembly plant, and early deliveries were not accepted. High-performance auto engines had increased the technology involved in these hoses. This gave Titeflex, with its aerospace expertise, somewhat of an advantage. Of the three markets, automotive was expected to grow the fastest.

Operations

Titeflexs employment totaled about 750 people. Nearly 600 worked in its largest facility, in Springfield, with the rest in plants and offices in Canada and France. About half of the Springfield contingent were shop-floor people, while the rest worked in front-office support functions. Bundy had invested significant sums to expand and modernize the Springfield plant and strengthen the MIS system but had not tampered with its organization or processes.

For a standard product, total throughput time, from order receipt to shipment, totaled 10 to 15 weeks, provided that all went according to plan. Of that time, sales took 3 to 5 weeks for order entry and processing, while operations took 7 to 10 weeks for manufacturing. In operations, there were six organizational levels from the shop-floor employee to the head of the department. A purchase order for a bearing to fix a machine might require seven or eight signatures. Departmental loyalties were strong, and interdepartmental coordination required numerous formal meetings. Said one busy manager, We have morning meetings, afternoon meetings, quality review meetings, engineering review meetings, purchasing meetings, make-buy meetings, and meetings to schedule meetings!

The production process for an average hose began in the plant engineering department, which developed the manufacturing drawings---except when supplied by the customer. The hose fabrication shop manufactured the basic hose, while the machining department produced the fittings. All parts passed through a handful of very expensive machines in the two departments. The hoses and fittings, along with purchased parts, wound up in the assembly department, which assembled them into finished products.

All production employees and equipment were organized by type of activity rather than type of hose or type of customer. For instance, the same machine or operator might be used in the fabrication of a $10,000 hose for a jet engine and a $50 exhaust-recovery hose for a car. Most machine operators were paid on a piecework basis. Material handlers, accounting for nearly 20 percent of the shop-floor workforce, moved material from machine to machine and shop to shop in carts specifically designed to minimize damage.

Shipments were frequently held up for want of outside parts or because of internal production bottlenecks. In some cases delays extended for several weeks, infuriating customers. To cope, Titeflex built up inventories of parts and work-in-process at all stages. By 1988, inventories had risen to four months of sales. A computerized material requirements planning (MRP) system introduced in the mid-1980s at a cost of nearly $1 million generated detailed reports on schedules, inventories, and manufacturing costs (by order, by department, etc.). In addition, production planning and control (PPC) held periodic meetings to review the status of various jobs. When all else failed, the sales action group in the PPC department shepherded high-priority orders through the production maze to placate angry customers. Despite this, in 1988 only a fourth of all industrial orders and a tenth of all aerospace orders were delivered on time.

To maintain a reputation for high-quality products, a large quality department inspected parts and subassemblies at every stage of the production process. Inspectors sent to rework anything that fell short of meeting specifications. Rework typically accounted for 25 percent of the output. A competent 15-person (recently downsized) new-products engineering department focused heavily on product development for the automotive industry.

• Adapted from Ravi Ramamurti, Titeflex Corporation: The Turnaround Challenge, North American Case Research Association. Used with permission.