Chapter 1, Problem 2E

Hepworth Communications produces cell phones. One of the four major electronic components is produced internally. The other three components are purchased from external suppliers. The electronic components and other parts are assembled (by the Assembly Department) and then tested (by the Testing Department). Any units that fail the test are sent to the Rework Department where the unit is taken apart and the failed component is replaced. Data from the Testing Department reveal that the internally produced component (made by the Component Department) is the most frequent cause of product failure. One out of every 50 phones fails because of a faulty internally produced component.

Barry Norton is the manager of the Component Department. In a recent performance evaluation, the plant manager told Barry that he needed to be more sensitive to the needs of the department’s customers. This charge puzzled Barry somewhat—after all, the component is not sold to anyone but is used in producing the plant’s cell phones.

Required:

1. 1. Who are Barry’s customers?
2. 2. Explain the plant manager’s charge to Barry to be more sensitive to his customers. Explain also how this increased sensitivity could improve the company’s time-based competitive ability.
3. 3. What role would cost management play in helping Barry be more sensitive to his customers?