STAINLESS PRODUCTS PHILIPPINES

Stainless Products Philippines (SPP) is a small size manufacturing firm with a

wide assortment of resistance-welded wire products. Of the company’s annual
business of Php10,000,000, approximately fifty percent (50%) is accounted for by racks
for holding dishes and glassware in commercial dishwashing machines, forty percent
(40%) by point of purchase advertising display stands and ten percent (10%) by
miscellaneous special orders for many different purposes.

The company’s plant consists of two (2) floors of an old manufacturing building.
The building is so laid out that the first floor is used for all manufacturing operations.
Equipment includes a wire-straightening to cut to size the coils of wire that supply
ninety percent (90%) of the raw materials needed; two (2) forming machines to bend
the wire to desired shapes before fabrication; ten (10) spot-and-butt welders for
fabrication and miscellaneous equipment used in welding, painting and crating the
finished goods.

The personnel of the company, inclusive of salesmen, number about forty (40)
people. Most of the management functions are handled by Mr. Cruz, the owner of the
company and his secretary. All production management from the time a work order is
transmitted from the office is under the supervision of a salaried foreman who has
almost complete supervision of the workforce of thirty five men. The foreman is a man
of “old school” who carries a heavy workload but does not believe in modern
production management practices. At times, he has been reprimanded by the owner
as the workers are trying to skip production in rush times. He is however, a valuable
man who knows the business well. No logical successor to him has been found and no
assistant foreman is being trained.
Operations are for the most part, handled on a job-order basis. For
example, when an order for the disk racks is received, the secretary date-stamps the
order and places it in the Order Pending Basket. Shop orders are written up daily by
Mr. Cruz, usually after the morning mail is received. Because of the varying sizes and
types required for different washing machines, some technical knowledge is required to
write up the orders. Moreover, customers are often not clear in stating their needs.
The order is transmitted to the foreman, who is usually in a position through his general
knowledge of the progress of other orders in the shop, to give a fair estimate of when
the order will be started and finished. From this point forward, the foreman is
responsible for the routing, scheduling, dispatching and inspection of the order.

Few records are kept. the workers do turn in time slips but little utilization is
made of them. Workers are paid a straight hourly rate and most of the workers is of a
semi-skilled nature and the workers are highly unionized. Advancements in wages are
usually made on an overall negotiated basis. Although the foreman has a rough idea of
who the best workers are, he has no figures of productivity to give him definite
knowledge. No attempt has been made to specialize workers beyond allocating the
most difficult welding operations to these men that are obviously the most skillful.

Mr. Cruz has long appreciated the advantages that would accrue to the company
if some of the company’s production could be carried on continuously rather than on
job-lot basis. He realizes that certain sizes and models of the dish racks sell in larger
volume than others, but because of tying up working capital in finished inventory that
may move slowly, he hesitates to produce much stock. About half of the disk rack
sales is for original equipment, that is to the manufacturers of dishwashing machines.
The other half goes to hotels and restaurants for replacements of racks which are
broken or damaged in use.

Display stands are always of special design and usually orders are place for
several thousands or more to be delivered on rather short notice. This is quite
profitable but on the other hand, because of the piling up of work-in-process, it disrupts
plant operations and clutters floor areas. Moreover, dish rack orders are side tracked,
delivery promises are not met and steady customers become displeased. In fact, the
display stand business is so difficult to handle that in some cases, very large orders
have been refused because the present organization and plant simply could not handle
them.

Another problem that frequently confronts the management is the control of

wire-forming and welding fixtures. A set of permanent fixtures is used for the
fabrication of dish racks but display stands require special foreman. In general, the
conduct of business is characterized by lack of records keeping, which had been
excused by the management on the ground that the company’s small-size and its
inability to assume the additional overhead expense of adding non-productive workers
in the organization.

Recently, the management has received much advice regarding adoption of

more specific management methods particularly, the need for an effective system of
production control. So far, nothing had been done for three (3) reasons: first, there is
reluctant to add to the overhead; second, the foreman has expressed considerable
doubts to the value of such methods (he states that “I`m working as hard as is humanly
possible and can`t bother to fool around with any more details.”); and third, the
management feels that the company is so small that the present informal basis may
actually be the most efficient way to operate. Expansion has been contemplated for
some time, but there is some doubt whether the present organization could be
expanded without complete reorganization. Mr. Cruz is uncertain whether a change is
imperative!