Elver Derequito

eBA- Enterprise Management

eBA203: Quantitative Management

I. Summary
An experiment will be done wherein 40g M&M packet will be used and assume it as a Bead
Manufacturing plant. The M&Ms are considered as the bead, and every color has its corresponding
value. 1 production batch is equivalent to 10 beads and every bead that goes out from the packet is
documented without sorting it out. The financial performance of the manufacturing plant will be
computed based on the corresponding amount the bead represents after which measures of the defect
beads shall be created and lastly recommendations that will be discussed to the top management.

II. Color Distribution of beads

Distribution of
beads Color
Defects For Distribution
Red Orange Blue Green Yellow Brown Total
Batch 1 1 2 1 3 0 3 10
Batch 2 2 1 2 1 2 2 10
Batch 3 1 1 2 4 1 1 10
Batch 4 2 1 2 3 1 1 10
Batch 5 1 0 0 0 0 0 1
Total 7 5 7 11 4 7 41
Percentage 17.07% 12.20% 17.07% 26.83% 9.76% 17.07% 100.00%
The table and graph above shows that for all the 5 Batches, for sale and/or distribution, Green has a
total of 11 beads with an average of 26.8%, Blue and Brown along with Red which is a defect has a total
of 7 beads with an average of 17.1%, Yellow has a total of 4 beads with an average of 9.8%; for defects,
Reds percentage was tied with blue and brown which was mentioned earlier, and lastly, Orange has a
total of 5 beads with an average of 12.2. In summary, Green has the most number of beads and the least
amount of beads is the color yellow.

III. Manufacturing Plant’s Performance

Performance
Total Beads for sale Total Defects
Batch 1 7 3
Batch 2 7 3
Batch 3 8 2
Batch 4 7 3
Batch 5 0 1
Total 29 12
Percentage 70.73% 29.27%

Based on the table and data above 70.73% of the manufactured beads are for sale or distribution, and
29.27% are defects. With this, even though the beads for distribution are higher than the defects, the
number of defective beads is still at an alarming percentage which is dominated by Red beads which is a
major defect based on the earlier graph.

IV. Manufacturing Plant’s Financial information

Sales/Revenue in Peso Cost in Peso

Labor
Cost /
Cost/Bea day/10
Blue Green Yellow Brown Total d Electricity workers
Batch 1 250 600 0 300 1150 750
Batch 2 500 200 300 200 1200 750

Batch 3 500 800 150 100 1550 750 526.854 2,000

Batch 4 500 600 150 100 1350 750

Batch 5 0 0 0 0 0 75
Total 5250 3075 526.854 2,000

Batch 1 has accumulated 1,150 profit, Batch 2 has accumulated 1,200, Batch 3 has accumulated
1550, Batch 4 has accumulated 1,350 and lastly, Batch 5 hasn't accumulated any sales as it
produces defect outputs. Costs in Batch 1 up to 75 (per bead) is amounting to ₱ 750, and Batch
6 has accumulated a cost of ₱ 75. The cost of electricity is amounting to ₱ 526.854. And the
cost for labor is amounting to ₱ 2,000 per day per 10 workers.
Total Manufacturing Cost = 2,000 + 526.854 + 3,075 = 5,601.854 per day
Total Revenue computation = Sales of beads - 5,250 - 5,601.854 = net loss (351.854)
V. Measures to be taken up on Bead with Defects

Based on the plant’s performance, the defects percentage per day is around 27.27% which is a high
margin of error. The following measures are to be taken up with regards to the beads with defects:
● CORRECTIVE ACTION THROUGH PRODUCT REWORK - Product rework is most suitable for
defects that workers can easily fix in a short amount of time following product inspection.
● RE-INSPECTION AND CHARGEBACKS FOR PRODUCT DEFECTS - You might consider setting an
agreement with your supplier before production.
● PRODUCT DESTRUCTION FOR UNSELLABLE GOODS -For serious defects that render your goods
unsellable and can’t be corrected, you may have to resort to destroying the defective goods.
 You’ll definitely want to consider all of your options before resorting to product destruction, but
sometimes it’s a necessary step to take.
● UPDATING YOUR QC CHECKLIST TO PREVENT RECURRENCE OF PRODUCT DEFECTS - You can
generally address product defects almost immediately after they’re found during QC inspection.
But you can also use inspection results to prevent recurrence of the same types of defects in the
future. You should always update your QC checklist and product specifications following every
inspection with any new and relevant information

VI. Recommendations to Top Management

The data has shown that per day of production the plant will incur net loss and might be able to
continue so if there will be no measures to be done to either prevent it or after the QC inspection on
post production. With this the recommendations of this problem are the following, for starter is
considering the agreement between the supplier and the manufacturer with the specificities of the
following: The supplier will bear any costs for re-inspections, such as those for third-party inspection ;
The supplier will pay a penalty for any substandard units shipped over a certain quantity ; he supplier
will replace any substandard units found during inspection over a certain quantity. Such an agreement
can incentivize the factory early on to meet your expectations while helping hold them accountable for
defects and other issues. But both you and your supplier should understand this agreement before
production or QC inspection. Without a prior agreement, it’s generally much harder to force inspection
costs or other penalties on your supplier in response to quality problems.
Another factor that determines how effective this kind of agreement will be is your relationship with the
supplier in question. It’s typically much easier to enforce an agreement with a supplier when you have a
strong, long-standing relationship with them.

Lastly, creation or updating the inspection criteria, especially new known quality defects to report, not
to mention adjustments to product dimensions and changes to product components or materials
required . Providing your supplier as well as the plant with an updated QC checklist will alert them to
particular defects or other issues they should take steps to prevent. Tailoring your checklist to reflect
your quality standards will also improve your inspector’s efficiency in checking for the relevant quality
problems. In turn, you can more easily interpret future inspection reports and be confident that the
inspector attended to all of your quality concerns.

Additional question:
Given the linearity of your production line, in what manner can you prevent or eliminate the
randomness element in production?
With regards to this question, the manner that you can prevent or eliminate the randomness element in
production, is being able firstly study the defects on a longer time basis like for a week or 10 days in
order to get the grasp of the data more close to accurate. Then after getting the statistical data of the
amount or percentage of defects in average production, with that information you can come up with a
plan to prevent it. One as mentioned above is creation or updating the inspection criteria, especially
new known quality defects to report, not to mention adjustments to product dimensions and changes to
product components or materials required. Two is in relation to the first one which is done by training
personnel, creating benchmarks for product quality, and testing products to check for statistically
significant variations. A significant aspect of quality control is the establishment of well-defined controls.
These controls help standardize both production and reactions to quality issues. Limiting room for error
by specifying which production activities are to be completed by which personnel reduces the chance
that employees will be involved in tasks for which they do not have adequate training.

There are several methods of measuring the performance of quality control. A quality control chart is a
graphic that depicts whether sampled products or processes are meeting their intended specifications—
and, if not, the degree by which they vary from those specifications. When each chart analyzes a specific
attribute of the product, it is called a univariate chart. When a chart measures variances in several
product attributes, it is called a multivariate chart. To state those three methods are X-Bar Chart,
Taguchi Method , and 100% Inspection Method.