POM CASE STUDY 1

GROUP 6
Alex Ponnraj
Daniel Prado
Erik Szöllos
Henrique Bulus
Prateek Sharma
Task 2. Risk Assessment
Supplier A - Germany:
-Climate Change: LOW
Rhine an Important shipping artery in
Germany. Record level low water levels as
of 2018 (WSV) pose as a threat to supply
chains.
-Inventory Risk: LOW
HIgher cost per unit & Increased max
annual order capacity makes an excess
inventory a potential risk. Leads to unused
material and less budget per unit that
could’ve been spent on product research or
wages.
Supplier B - China:
-Major Quality Failure: HIGH
With a maximum order of 45,000 units and
an identical annual demand if we take
defects and replacement return products
into consideration we risk input shortage.
-Loss of Customers: LOW
“Made in China” carries a negative
connotation. Manufacturing industry
notorious for harsh workplace policy, not
being environmentally friendly, and
decreasing potential domestic jobs.
Supplier C - Brazil:
-Sensitive Fiscal Position: HIGH
The fluctuation of differing currencies can
result as catastrophic for business activity.
The BRL has dramatically decreased in
value in the past decade, fluctuating from
0.6 and settling to 0.2 (USD/BRL).
-Theft & Vandalism: HIGH
According to the TT Club, 90% of South
America’’s high jackings take place in
Brazil. Median theft values (USD): South
America: 77,940, Europe: 55,947, Asia:
14,582.
Task 2. Risk Mitigation
Supplier A - Germany:
-Climate Change: LOW
Rhine an Important shipping artery in
Germany. Record level low water levels as
of 2018 (WSV) pose as a threat to supply
chains.
Alternative shipping methods through land
Ex. trucking need to be used
-Inventory Risk: LOW
Higher cost per unit & Increased max
annual order capacity makes an excess
inventory a potential risk. Leads to unused
material and less budget per unit that
could’ve been spent on product research or
wages.
Ordering the appropriate quantity/
allocation of resources
Marketing of Pros “Domestically Produced”
Supplier B - China:
-Major Quality Failure: HIGH
With a maximum order of 45,000 units and
an identical annual demand if we take
defects and replacement return products
into consideration we risk input shortage.
Further simplify component design,
although risk is not as serious for simple
parts like gears
-Loss of Customers: LOW
“Made in China” carries a negative
connotation. Manufacturing industry
notorious for harsh workplace policy, not
being environmentally friendly, and
decreasing potential domestic jobs.
Delivering Improved Product Performance
Factory Quality Reassurance
Change of Supplier
Ex. GM’s Switching production to Mexico
Supplier C - Brazil:
-Sensitive Fiscal Position: HIGH
The fluctuation of differing currencies can
result as catastrophic for business activity.
The BRL has dramatically decreased in
value in the past decade, fluctuating from
0.6 and settling to 0.2 (USD/BRL).
Establish a hedge and settle on an
exchange rate for purchase. Value settled
on will be the amount paid. Ex. 1976 GE
-Theft & Vandalism: HIGH
According to the TT Club, 90% of South
America’’s high jackings take place in
Brazil. Median theft values (USD): South
America: 77,940, Europe: 55,947, Asia:
14,582.
Invest in load cargo and marine cargo
insurance to protect assets and provide
reassurance. Higher risks = higher rates
Task 2 Cont.
 Task 2. Cont. Chosen Supplier

Gears Supplier A Supplier B Supplier C Based on Risk Assessment and annual cost
difference. Germany selected as sole chosen
Max Capacity 50,000 45,000 48,000 supplier.
Price € 2 1.6 1.8

Lead Time 1 Day 4 Weeks 6 Weeks

Annual Cost € 95000 76000 85500

● 47,250 Pieces ordered assuming 5%

Failure Rate; Accounting for
defective/damaged components and
returned products
Task 3 Customer requirements
The motor should be:

- Lightweight (should be less than 800 grams)

- Quick (should fully close in ~2.8 sec)
- Safety (anti-trap protection)
- Adaptable
- Reliable (should be higher than 2100 hrs)
- Low noise output (should be less than ~70 db)
- Compact
 Task 4.
Task 4.
Task 4. KEY
Task 4.

Customer
requirement
and relation
with
controlled
factors
Task 4. Roof of the House
Interaction of controlled factors with each
other
Task 4.

Customers voice
on comparison
with competitor

Our product: RED

Comp A: BLUE

Comp B: Green
Task 4. Target Values and their Weight
Task 4.Technical Assessment based on data of Old Product
Task 5. Pros and Cons of the QFD Method
PROS CONS

Efficient Qualitative

“QFD can reduce the development time by 50 “Need to input and analyse large amounts of
per cent, and start-up and engineering costs by subjective data” (Bouchereau and Rowlands,
30 per cent” (Clausing and Pugh, 1991) 2000)

Priority-Based Slow Process

“Prioritizing helps the QFD team balance the Time-consuming. Top issue in a study conducted
cost of fulfilling a need with the benefit to the by D. Ginn and M. Zairi. (2005)
customer.” (Hauser, 1988)

Diverse Applications Interdisciplinary Effort

Ex: “The implementation of QFD...is studied Challenge to maintain the integrity of the
within the bank sector” (TQM Journal, 2009) interdisciplinary effort (Ginn and Zairi, 2005)
 KA
Task 6. Decision Tree Cost/1000 Euros Expenses Expansi German
(4 Years) on y China Brazil
Above: Cash Flow
Below: NPV Ramp Up 12500 17000 15000 16000

KA Expansion 2521.6 New

2459.1 Machine 200 200 200 200

%
Employme
80 nt 80 80 80 80
2252
2173 Scrap 5 5 15 100
20
%
Production
AY

Germany Cost 12187.5 12187.5 8750 9968.5

ST

-269.5
-285.24
Sales
Revenue 28125 28125 26250 27187.5
MO
VE Cash Flow 3152.5 -1347.5 2205 839
China 1323
458.5 Discount
%

Rate/ Year 0.25% 0.25% 4.20% 5.50%

60

DO
NO 1659 NPV 3073.8 -1426.2 764.09 -945.23
TH 80.4 40
IN %
G

Brazil 335.6
-378.1
Task 7. Alternative Investment
10% Annual Interest Rate

12500*(1.0+0.1)^4= 18031.25

=> 18031.25 - 12500 = 5801.25 => *1000 = 5801250 Euro Gain

The investment opportunity offered by the firm has a potential yield greater than
any of our current options: Expansion in KA being the most risk free and profitable
(Requiring the 12.5m Euro investment). Depending on the risks of the firm’s offer
it’s likely prove to be the better alternative.
Bibliography
Andronikidis, A., Georgiou, A., Gotzamani, K. and Kamvysi, K., "The application of quality function deployment in service
quality management", The TQM Journal, (2009): Vol. 21 No. 4, pp. 319-333.

Bouchereau, Vivianne, and Hefin Rowlands. "Methods and techniques to help quality function deployment (QFD)."
Benchmarking: An International Journal 7, no. 1 (2000): 8-20.

Central Bank Rates: Worldwide Interest Rates. (n.d.). Retrieved from http://www.cbrates.com/.

Clausing, D. and Pugh, S. , “Enhanced quality function deployment”, Proceedings of the Design Productivity International
Conference, Massachusetts, (1991): 15-25

Ginn, D. Zairi, M.. “Best practice QFD application: an internal/external benchmarking approach based on Ford Motors'
experience”, International Journal of Quality & Reliability Management, (2005): 1, 256-275.

Hauser, John R., and Don Clausing. "The house of quality." (1988): 63-73.