NAVEEN FISHERIES LTD.
The managing director of Naveen Fisheries Ltd. (NFL) received a message from one of the members of the crew that their mechanized boats had sunk at sea off Paradeep Port Trust due to unfavorable weather. The other directors of NFL ascertained the detailed information regarding the incident. All the promoters were fresh graduates.
Naveem, Praveen, Nagain, Ravi and Chandra were the promoters of the organization (NFL at Vishakhapattanam) with a capital contribution of Rs. 25 lakh each. Three of them had an engineering background. The other two were commerce graduates. They had thought of designing the vessels themselves so that the cost each mechanized boat would be reduced from Rs. 30 lakhs (if they bought them) to Rs. 22 Lakh. They designed three boats and these were sent out with a newly – appointed crew. Two vessels were sent to Paradeep and the third to Kakinada. Unfortunately, the weather was unfavourable. All the vessels sank. The crew also did not have experience. Two workers were injured and the rest arrived sagely. There was significant damage to the vessels and the residue was considered scrap. The cost of scrap of the vessels was nominal. As their working capital was scarce, and they were unable to invest more capital, they were in a dilemma whether to continue the business or not.
Case I Questions:
- What were the reasons for the sinking of the vessels?
- How could they reorganize the businesses?
At MNC Corporation, a foreman of inspection noticed a mistake in the assembly of transmitter cases. The foreman, a shy man when speaking to his immediate superiors, mentioned this matter to the senior supervisor in a weak, ineffectual manner. The senior supervisor nodded his head and continued to work on a report that he was writing. Later, a production slowdown occurred, and it was discovered that this flaw in the transmitter was the cause. The chief of production engineering, upset because this error had passed inspection unnoticed, reproved the senior supervisor in a brusque manner.
The senior supervisor called in the foreman of inspection and asked why this error had not been brought to his attention. The foreman said, “I told you the other day they were missing same of the punch-outs in those transmitter cases.” The senior supervisor said, “Yes, but you did not pound the desk when you told me!”
Case II Questions:
- Why did the communication problem arise?
- What do you suggest to prevent the communication problem?
MEHTA BANK LTD
Venkataraman was an officer in a leading nationalized bank with years of service to his credit. During his long period of service, he worked in different capacities and sections. His attitude and behavior made him a trusted in the organization. Having been posted in a big branch based in a large city, he was not keen on getting further promotions.
On one occasion, when he was working as an incharge of the draft issue section, he issued bundles of drawing books from the main stock of the security forms of the branch and kept the same in his custody in an almirah provided to him. One fine morning, he removed three drawing books out of the stock of books valued below Rs. 10,000 which he had in his own custody and kept them in his house. He then started issuing drafts in various names form his house out of the aforesaid stolen drawing books by allotting correct branch serial numbers obtained from the branch register under his control. The drafts were deposited in different banks/branches of the same bank in different accouns opened in the names of the payees of the drafts. These accounts were introduced by the bank employees, and some of them were in different representations only, like Mr. Venkataraman Aiyar, Mr Venkataraman Iyengar, etc. The drafts thus deposited were presented in clearing and were passed in the normal course without any doubt or suspicion. In the evening, he would visit the concerned drawee offices and collect such paid drafts.
Having found this technique successful, he tried his hand at yet another. This time he started issuing drafts in fictitious names or in the names of his close relatives drawn on outstations without any vouchers or deposits. After a few days, he would cancel the same drafts by allowing the credits to the respective accounts in his own branch by debiting the head office accounts. He continued to do this for about three months, causing a loss of over Rs. 700,000 to the bank.
The fraud came to light thanks to the presence of mind exercised by on e of the officers at another local office. He found that on the previous day also, he had paid a similar draft with the leaf number previous to the draft presented now. In his view, it was not possible for such a big office to avoid consumption of draft leaved in this fashion. Consequently, the matter was taken up with the issuing branch. Unfortunately for Venkataraman, someone else was working as the incharge of the draft issue section on that day. On checking up the records, it transpired that no such draft was issued. This led to promt investigations and detection of the whole fraud committed by Venkataraman.
Case III Questions:
- How do you view the present fraud case: a human failure or a system failure?
- What are the main issues in the case, and how can our present system of control prevent such fraud?
- How would you manage the situation on detection?
CASE IV – SHAHID FABRICS
Mr. Lateef, Chairman of Shahid Fabrics, a Hyderabad-based garments and piece goods firm which exported all its products to the USA, faced a decision in August 1985. The US government had imposed quota restrictions which reduced the exports of his firm by 40 percent. He had to find a new market for his products.
Shahid Fabrics was one of Pakistan’s major exporters of garments and piece goods. Its share was 25 percent of the exports of these goods of the whole country. It was established in 1954 as a producer of cotton cloth and later, in 1966, it extended production to include garments and piece goods. It had eight local production units and the total number of employees was 8,000. All its garments and piece goods were exported, and branded according to customer specification. All the goods were exported to the USA and the sales of the firm amounted to US$ 100 million. In 1984, the US government imposed quota restrictions. By August 1985, Shahid Fabrics exports had been reduced by 40 percent.
Mr. Lateef believed that finding new markets was the only way to survive. The possible alternatives according to him were the EEC countries, the USSR, the Middle Eastern Arab countries and the other Asian countries. The EEC was a very good potential market, but Europeans were very tough buyers. It would be necessary to segregate the EEC from other buyers because of their existing specifications with regard to style, colour and packing. The USSR too was a potential market as far as demand was concerned, but the country did not have enough money in foreign exchange.
The Middle Eastern Arab countries had money, but their requirements were small due to their smaller population. Second, these countries preferred not to buy Pakistani goods directly from Pakistan$. They would rather like to buy the same Pakistani goods, branded differently from other Western countries, say France.
Asia was a big market, but the Asian countries, including turkey, were Shahid Fabrics’ competition in the international market. Mr. Lateef was deeply concerned with the loss of 40 percent of his export goods. He was eager to determine which new market offered the highest potential. He wondered what specific information he could use to help his decision.
Case IV Questions:
- What information should Mr. Lateef develop to evaluate foreign markets?
- Where should he look for this information?
- Develop a framework to help Mr. Lateef identify his best potential foreign markets.
CASE V – WESTWARD EXPORTS LTD.
Mr. Abdul Ahmed, Production Manger, Westward Exports Ltd, Karachi, faced a decision in 1984. the rejection rate of their exports of readymade garments was 20 percent of total production. He also felt that their productivity was not as high as it might have been.
Westward Exports Ltd. was a large Pakistani company exporting ladies fashion garments made of pure cotton. Their main product items were blouses, skirts, dresses, shirts, pants, etc. their main overseas markets were the USA, Europe and Japan, and production was Rs. 100 million. They had about 2,000 workers engaged in production through their various subcontractors.
Production was carried out by 138 subcontractors. They did not utilize assembly line production: each individual worker carried out all the jobs required on each garment. The machinery and equipment used by the machines had a low output, and were not suited to high technology application. Mr. Abdul knew that male workers performed 60 percent of the total production and the rest was done by females. He also knew that while male workers were always willing to work overtime, their absentee rate was greater than that of women. Abdul felt that productivity could be higher, and he wondered how he should approach this issue.
The company purchased raw material (grey cloth) from several sources and had it dyed by different concerns, which sometimes caused variation in the colors. Both dyeing and inferior stitching caused the rejection rate, to rise to 20 percent of their total production. Mr. Abdul was worried about this high rate of rejection, and wondered what sequence of steps he should take to help reduce this high rejection rate.
Case V Questions:
- What alternatives are available to Mr Abdul?
- Other than purchasing higher technology machinery, in what ways might Mr Abdul increase the effectiveness and efficiency of the dyeing and stitching operations?
CASE VI — BABA BEARINGS COMPANY
The quality circle Sigma was started in the heat treatment section of Baba Bearings Company with seven members.
The members prepared the following list of various factors affecting the productivity of the heat treatment section.
- Distortion of bearing races in sealed quench furnaces.
- Loss of productivity and energy in sealed quench furnaces.
- Excess consumption of LPG.
- Rejection of cages due to scaling during annealing.
- Shrinkage in tapered roller bearing outer rings.
- Broadly, bearing are manufactured in the following three stages: (a) Turning, (b) Heat Treatment, and (c) Grinding.
The circle members, in their brainstorming session, gave priorities to the study aspects with the help of Pareto analysis. Distortion of bearing races in sealed quench furnaces was a major factor affecting the productivity. Hence, the circle decided to take this up for study. Turned rings in the soft condition are hardened and tempered. After heat treatment, it was noted that about 30 percent of the rings were beyond the specified limits of distortion (ovality). These rings were subject to straining for rectification.
Straining is a laborious process involving extra manpower and time. It affected schedules and deliveries to customers. The cause and effect diagram was employed for analysis, and the following causes identified:
- Design of heating elements
- Mesh baskets distortion
The members collected data regarding the heating element. Rings are loaded into the furnace keeping in a mesh basket in layers. The rings are heated by corrtherm heating elements; the heat is made to circulate uniformly throughout the furnace by a circulating fan. After the hardening process, it was observed that in general, the rings arranged at the sides of the basket adjacent to the heating elements showed greater ovality (50 per cent) than those at the centre (17 percent).
The members felt that rings at the sides were directly exposed to the radiant heat of the elements, and this resulted in a temperature gradient within the cross-section of the rings, causing more distortion. The temperature adjacent to the heating elements was higher by 26 degree Celsius than at the centre of the furnace.
Case VI Questions:
- What are the measures to be taken to avoid direct effect of heat?
- Design a quality improvement process for the bearings company.