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Case #12
“EG&G Rotron Division,”
Harvard Business School Case #9-695-037 (Rev. April 14, 1997)
Academic instructors who are registered with the publisher’s
website (http://www.hbsp.harvard.edu) may download the Teaching
Note #5-679-100 (April 22, 1997) for this case free of charge.
ABSTRACT
EG&G Rotron Division manufactures military products as well
as AC motors and air moving equipment for commercial applications.
For the last three years, Rotron has implemented a just-in-time
(JIT) manufacturing program in Plant One which caters to military
TEACHING OBJECTIVES
The teaching objective of this case is to explore the complex
nature of supply chains operations in industrial settings; it
concerns the short term disadvantages of just-in-time production
SUGGESTED QUESTIONS FOR CLASSROOM DISCUSSION
1. What should be done about the Airdex order?
2. Should Rotron keep more inventory? In raw materials or in
finished goods?
6. How should Miller manage tomorrow’s meeting?
7. Using the engineering management lessons learned in this
ANALYSIS
1. What should be done about the Airdex order?
The case indicates that apparently Miller did not take any
action upon receiving the bad news on Friday about motor housings.
By Sunday evening, Miller has only one day left to do something
about the Airdex order before its scheduled delivery time on
Tuesday.
A. Take limited action to secure new supply of housings fro
Sunday evening.
Call the current supplier to check the availability of new
strong leader can reach innumerable people in a time of need.
Call the Rotron Machine Shop manager to check on the in-house
capability of reworking 50 percent of the available housings into
specification on Monday and assess the technical feasibility of
engaging the assistance of other local machine shops.
Call the Rotron foundry manager to see if its own foundry can
produce the motor housings (how many, by when?) needed for this
order, and consider switching the project priority and other
possible sources of outside help.
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Ask how many units the customer Airdex must have by Tuesday.
If the customer needs all 100 percent of the ordered units,
then Rotron should take additional steps to deliver the order as
soon as possible. Urge Procurement to search online and reach
If the customer does not need any unit on Tuesday, then
request for a reasonable extension (e.g., 5 days) and proceed to
fill the full order by then.
Inform the customer that specific corrective steps have been
C. After the partial or full order is delivered, contact Airdex
once again to ensure customer satisfaction.
Offer a progress report on the long-term corrective steps
D. Preserve learning.
Document the problems, action steps, observations and
2. Should Rotron keep more inventory? In raw materials or in
finished goods?
It is prudent for Rotron to keep a contingency inventory on
hand when implementing a new JIT manufacturing system at Plant
During an initial trial period, the inventory should consist
of both raw materials and finished goods. Raw materials are
useful for longer periods of time than finished goods which tend
to become obsolete faster. A small team should be assigned the
job of defining optimal levels of inventory (e.g., types, number
FIGURE C12-1. INVENTORY MANAGEMENT
3. What process did Rotron use to find new business? Elaborate
the advantages and disadvantages of the process used.
Rotron management initiated long term business planning (with
quarterly reviews) to systematically explore business
opportunities outside of the military markets. In-house cross-
functional teams were organized for these purposes and a
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The advantages of this process include: (1) Rotron’s business
becomes broad-based and multiple-market oriented by being
successful in this business expansion process; (2) empowers in-
The disadvantages of this “inside out” technology-based
business search process are:
A. It makes initial failures unavoidable due to a lack of needed
experience and knowledge of, for example, the commercial markets,
B. The company suffers from the fact that the existing suppliers
are accustomed to deliver high quality, long-life and low-
C. It goes too far with the division-based business search
process as diversified markets will cause EG&G, the corporate
4. What new capabilities are required for Rotron to enter the
Hi-Rel business (what should be learned and how well)? What role
will a just-in-time program play for Rotron in the new business?
Rotron needs to acquire a number of new capabilities in order
to successfully pursue the Hi-Rel business. These capabilities
include:
A. Marketing Management
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B. Product Design Orientation
For Rotron’s success in the commercial markets it is critical
that they re-orient the product design team toward the new
emphasis on low-cost, short-life, harsh operations, and product
C. Supply Chain Management
Contributing to its need to reduce unit product cost,
increase product feature variety, and speed up supply cycle,
Rotron must master its supply chains by qualifying and selecting
new suppliers, forming the supply chain networks, and managing
the supply process effectively. Ding so will allow Rotron to
chain. Its effective implementation at Rotron will work off
5. What are the medium- and long-term options open to Rotron
with respect to the just-in-time program?
For the medium-term, Rotron has the following options to
upgrade its JIT program. They can strengthen the quality control
of parts delivered by the suppliers (e.g., Statistic Process
Control, six sigma, operational guidelines, measurement standards)
to avoid repeating the housings problem. They can develop and
6. How should Miller manage tomorrow’s meeting?
Miller should take the firm stance that JIT is critical to
Rotron’s success in the commercial markets. The initial setback
they are currently experiencing is due to quality control of the
motor housings. The meeting should be managed as follows:
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C. Point out that the JIT program will continue with some
contingency inventory until the JIT program is made to run
smoothly.
D. Organize a technical team to investigate the root causes
(e.g., due to specifications, inspections, foundry process
G. Welcome everyone to support and contribute to the successful
implementation of the JIT program at Plant Four.
7. Using the engineering management lessons learned in this
course, how do you assess the performance of Scott Miller as
Plant Four Manager?
8. What are the lessons you learned from this case?
The following lessons can be extracted from this case:
A. The success of any corporate strategy (e.g., JIT in this case)
depends heavily on its effective implementation which must be
action planned to include risk management (e.g., contingency
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TABLE C12-1. EVALUATION OF SCOTT MILLER AS A MANAGER
EVALUATION OF SCOT MILLER
Planning
Forecasting The vision of using JIT to help Rotron expand markets is excellent
and gutsy
Organizing
Organizing Structures Team organization is productive; Organized the supply chain poorly
Delegating Empowered teams to pursue new markets
Leading
Deciding Indecisive and not knowing what to do upon hearing the bad news
on Friday; Made poor decision to implement JIT so fast
Communicating Poor communicator with a number of people remain convinced of
the JIT value for Plant Four
Controlling
Set Standards Set no standards for supplier to self-control
Measure Performance Quality of housings was not checked before shipment by the
supplier
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C. Empower teams by using transparent project evaluation
criteria (e.g., NPV) which is conducive to the identification of
new business opportunities.
TABLE C12-2. PROBABILITY OF ORDER LOSS
Inventory Holding Length (Weeks)
Order Size Units/Month 0 2 4 6 8
1 to 5 69 10% 5% 5% 0 0
The next step is to determine the number of units which would
be lost at each inventory level. (See Table C12-3 below).
TABLE C12-3. NUMBER OF UNITS LIKELY TO BE LOST
Inventory Holding Length (Weeks)
Order Size 0 2 4 6 8
1 to 5 6.9 3.5 3.5 0 0
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TABLE C12-4. ESTIMATED INCOME LOST DUE TO ORDER LOSS
Inventory Holding Length (Weeks)
Order Size Income/Unit 0 2 4 6 8
1 to 5 $40 6.9 3.5 3.5 0 0
5 to 10 $30 2.25 1.5 0.75 0 0
The next step is to estimate the holding cost of the inventory.
Table C12-5 presents the number of units to be kept in inventory
in order to satisfy the projected unit sales in each order size.
TABLE C12-5. NUMBER OF UNITS TO KEEP IN INVENTORY
Inventory Holding Length (Weeks)
Order Size Units/Month 0 2 4 6 8
1 to 5 69 0 35 69 104 138
5 to 10 15 0 8 15 23 30
TABLE C12-6. TOTAL COST OF MANUFACTURED GOODS AND STORAGE COSTS
Inventory Holding Length (Weeks)
Order Size Manufactured 0 2 4 6 8
cost/Unit
1 to 5 $83 0 35 69 104 138
5 to 10 $80 0 8 15 23 30
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It is clear that the storage cost increases with the length of
inventory in weeks, whereas the income reduction due to order
loss moves in the opposite direction. The following figure
summarizes these costs and illustrates that the minimum of these