Case Study Of One Heat Recovery Ventilators Manufactory

We are operating a 65,000-square-foot manufacturing plant to produce mainly heat recovery ventilators (HRV). Our planet manager, Patrick, discovered a serious quality problem with our main product line. The foam insulation in a batch of HRVs had begun to delaminate, making the likelihood of equipment malfunction very high. We have two types of HRV: residential and commercial. A typical HRV residential unit costs between $550 and $750.

According to the records, approximately 60 % of the 3,400 parts used in our manufacturing operations were procured from suppliers, while the remaining 40 % were produced in-house. The supply of the most critical components were single sourced, while sourcing decisions for less important commodities or commodity-like items were usually purchased based on the bid for the lowest cost. We sell more than 300 different products to large distributors under the AirPurity brand name. Additionally, we manufacture approximately 20 products for over a dozen large companies, which in turn sell these products under their own brand names, such as Honeywell, Lennox, and Sears.

Using large distributors and companies to take care of sales for us is good business practice. We only focus on manufacturing products. Big brand names, such as Honeywell and Sears, have long standing, positive reputations; therefore, their products typically sell more easily. Our business can grow along with these larger companies as we partner with them. However, regarding the parts used in manufacturing, we are experiencing quality control problems with those parts from our suppliers. In the case of the foam insulation delamination problem, we obtain the foam insulation from a company by the name of Suffolk. However, Suffolk does not produce foam themselves. They purchase the foam from other foam companies and simply cut the foam to our required shape. Therein lays the problem. We have difficulty controlling the quality of parts when our suppliers outsource