Miscellaneous / The Paradoxical Twins: Acme And Omega Electornics

The Paradoxical Twins: Acme And Omega Electornics

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Autor:  anton  29 December 2010
Tags:  Paradoxical,  Electornics
Words: 1993   |   Pages: 8
Views: 618

Analysis

In 1986 the technology products division of Erie was first bought out by a firm based in Cleveland and then resaled two plants to different investors. The two plants, later renamed to Acme and Omega, have been producing computer chips and integrated circuits and have been able to develop an expertise in printed circuit boards over the years. Whereas Acme maintained most of their original staff by for example promoting the general manager to the position of the company's president, Omega hired a new president who was a former director of a research laboratory. Because of intense growth and competition in the electronics industry both subcontractors were forced to fight for contracts. According to the ongoing and upcoming trends both companies added digital microprocessors to their product portfolios.

John Tyler, the president of Acme, promoted and stood for effectiveness in production, detailed organizational charts and retaining the basis structure developed for high volume manufacturing and being technology oriented. Jobs were narrowly defined and some managers even told that they would like to have more latitude. Acme was employing 550 people and posted annual sales of $20 m. higher than Omega's that employed 480 people.

However Jim Rawls, president of Omega, didn't believe in Org-Charts and promoted a working environment in that his specialists were able to work together in a communicative and creative way. Everyone should feel comfortable and as a part of the team. The head of the mechanical engineering department once even commented once Jim Rawls spent too much time on making everyone understand the real purpose of their jobs.

In 1992 both companies were facing a possible order from a photocopier manufacturer with a potential sales volume $7-9 m. To gain the contract Acme and Omega were required to build a number of prototypes of the rather novel and complex circuit boards. They got two weeks to finish and deliver them otherwise the customer's photo copier production would be delayed.

In July 1992, John Tyler received the blueprints and so he immediately sent out memos to the purchasing department, the drafting department and industrial department (methods work design dep. serving the production dep.) to initialize the given task. The top instruction Tyler gave on how to cope with this project was primarily to work on it as efficiently as they have done all their work in the years before.

Throughout the project and especially within the first weeks all specialized departments were nearly working on their own. After a while certain problems and delays in deliveries especially of one component arose. Because of the tight schedule they decided to start the assembly with this one missing part left. Tyler was in touch with the photo copier manufacturer on a regular basis pretending that everything was going fine.

After Omega has discovered failures in the blue prints of their costumer this information was passed on to Acme as well. This change resulted in a total disassembly, extra shifts and extra personnel to finish in time. Finally they shipped the prototypes with a delay in time and without quality inspection. Earlier Tyler had also do decide on an issue the production supervisor and the methods designer weren't able to cope with.

Before the blueprints were received, Rawls had already set up a meeting at first to find out whether the potential contract was worth pursuing it. Then they had a discussion among the heads of the departments regarding everyone's tasks and timelines. They were having scheduled meetings every day where they discussed about the progress and offered each other help. Omega's purchase department faced the same problem with the delivery time of one part as Acme's but the head of the electrical engineering department came up with an other japanese source that turned out working well. The first prototype was assembled in the presence of people from all departments. That was where they also discovered this failure in the blueprints, redesigned it over night and contacted the photo copy manufacturer for approval to proceed. Finally and after quality control the prototypes were shipped according to schedule.

Outcome

 Some of Acme's final memory units were defective

 Omega's units passed the test

 Photocopier disappointed with Acme's delivery delay

 Final contract splitted between Acme and Omega with two directions added

o Maintain zero defects

o Reduce final cost

Finally, in 1993, after cutting cost by 20%, Acme was awarded the total contract.

The main problems/conclusions are:

 Both Acme and Omega had to cope with an unstable environment in the electronics market. The most affecting elements within their environmental domain were the raw materials sector (prices and scarcity e.g. delay of shipment), market sector, technology sector and the international sector.

 On the one hand it requires high efficiency in manufacturing in order to reduce costs to be able to compete with other electronics companies from for example the Far East.

 On the other hand constantly R&D efforts (creativity) are necessary to secure the company's future by inventing new products.

 Acme focused on meeting the needs of a stable manufacturing sub environment by rather being organized vertical, centralized, with separate tasks & rules and a strict hierarchy based on a mechanical system. Their main attention focused on control, stability, reliability and efficiency in production by exercising individual specialization. For short Acme's framework for organizational response to uncertainty is more complex and unstable. Because of this formality of structure Acme was not prepared to deal with the development of a new product within a short period of time. There was a lack of communication between departments. Everybody was doing what he knew best.

 Omega was focusing on meeting the needs of an unstable R&D sub environment. Their organizational structure was more like horizontal and therefore promoted creativity. Jim Rawls, the CEO, tried to push communication and thinking as a team. For Omega efficiency is generated through a high level of informality and various job descriptions. For short Omega's framework for organizational response to uncertainty is rather simple and unstable. As Omega was forced to develop this new product they acted very target-oriented, creative and with a great deal of cooperation. The reason for not getting the contract in the end I believe was that they were not able to deliver a constant and appropriate quality for reasonable cost because of a lack of efficiency in manufacturing.

Alternatives

Formal Strategic Alliance1

It is undeniable that Acme and Omega have been part of one company before 1986 and still are geographically close-by. They are in the same environmental domain and have the same agenda regarding technology and potential contracts. However due to reorganizations Omega modified their emphasis towards creativity and efforts in R&D. Acme is good in manufacturing at low cost and high quantities.

Each of the two companies could contribute its own competence to build one strong alliance to improve competitiveness and to be able to respond fast to changes within the electronics market. Omega could focus on the development of new products for customers according to given blueprints, the selection of used production technologies and the manufacturing of prototypes. Acme fully concentrates on process development, swift ramp-up of production and reduction of cost as fast as possible. This idea required strong collaboration between the two plants and all departments making a project manager indispensable. Depending on the total order quantity and the cost-benefit ratio I could imagine that whole machines, which have been used to produce prototypes at Omega, are being transported to Acme's plant for continuous-process-improvement.

Change of environmental domains2

According to Richard L. Daft a company can seek new environmental relations in order to align its own core competences better with the requirements of the market.

Acme's actual strength is it to improve processes in order to achieve high efficiency and low cost which is very important in electronics market. So what they could do is to change their environmental domain towards serving a niche market where they only produce for others. That task includes continuous process-improvements. That means that they won't do any basic Research & Development any more.

Omega's actual strength is the horizontal linkage and creativity among the departments. They could focus on basic Research & Development as well as process-development for their customers. In this case Omega for example would serve as a subcontractor for OEM's (Original Equipment Manufacturers) whereas Acme again would serve as a subcontractor for Omega and/or OEM's.

Acme: Improved horizontal linkage and Integration3

Because Acme principally is made up of the five key departments purchasing, drafting, productions, industrial engineering and mechanical engineering communication has to be well structured to avoid disarrangement and undersupply of information. Besides the fact that a vertical organization doesn't support creativity and communication that's also one department more than Omega has got. In order to being able to handle similar projects more structured in the future Acme needs to set up the position of an integrator like a project manager. That person has to assure that the necessary coordination between all people and departments and especially between R&D departments and manufacturing departments is done. That's the only way to avoid bad surprises such as product features that can't be produced cost-effective in the long term. The contribution of people of different backgrounds to solve given problems prevents narrow perspectives and enables the feeling of shared responsibilities. Moreover solving problems more creative and faster over and over again is the way to take the lead.

Omega: Improved efficiency for lower manufacturing costs

Omega was struggling with process improvements and consequently cost reduction in the long term. In order to improve efficiency the company could be geared to the Lean Production approach that originally comes from Japan. That approach strives towards manufacturing products in the right quality for prices the customer is willing to pay by focusing on adding value processes. The focus is on continuous-process-improvement (KAIZEN) and elimination of all kinds of wastefulness. Another philosophy that could be applied to achieve cost savings is Six Sigma. According to that approach that can be reached by process improvements and consequently narrowing the spread.

Recommendation

Forming a Strategic Alliance certainly requires the partial abandonment of independence of both parties. It depends on the attitude of the top management and if they can get used to the idea. Because of these barriers I recommend Acme and Omega to set up programs to eradicate their weaknesses.

Mentioned as one of the alternatives above I suggest that Acme needs a project manager to cope with novel projects. That person will be responsible for improving the horizontal linkage between the highly-specialized departments in order to promote creativity. I also suggest that the project manager should be a member of the industrial engineering department in order to improve the structured execution of all tasks.

I suggest that Omega should implement the Leaner Production concept in order to achieve the efficiency they need to provide both highly sophisticated and low cost products.

It is very important that Acme and Omega constantly monitor the progress and effectiveness of their programs and if they improve in coping with new business situations. If the outcome is not satisfying enough both companies should consider the advantages and disadvantages of a formal strategic alliance and should get in touch with the other company to discuss this matter.

Implementation

Acme

1. Review of positive and negative aspects of projects in the past with the heads of all departments.

2. Setting up of a job description for the position of the project manager.

3. Selection of a project manager that should be a member of the industrial management department.

4. Setting up of communication rules that promote creativity and that all employees must observe.

5. Presentation of the project manager and his job description to all employees including the explanation why the company need's a project manager for certain projects.

6. Reviews to monitor the improvements at regular intervals.

Omega

1. Review of positive and negative aspects of projects in the past with the heads of all departments.

2. Lean Production: Cost-Benefit analysis, advantages, disadvantages.

3. Team selection for the planning and implementation process of the concept.

4. Data-Collection and Concept design.

5. Lean Manufacturing training for all affected employees.

6. Implementation.

7. Audits at regular intervals.

Notes

1. Richard L. Daft: Organization Theory and Design (2007), 157

2. Change of Domain, 159

3. Differentiation and Integration, 149

Bibliography

Daft, Richard L..Organization Theory and Design. Vol. 9th Edition, Thompson/South-Western Publishing Co., 2007.



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