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HarvardBusinessSchool9-689-030Rev.December11,1998Thiscasewaspreparedasthebasisforclassdiscussionratherthantoillustrateeithereffectiveorineffectivehandlingofanadministrativesituation.Copyright©1988bythePresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685orwriteHarvardBusinessSchoolPublishing,Boston,MA02163.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,usedinaspreadsheet,ortransmittedinanyformorbyanymeans—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.1DonnerCompanyInOctober1987,EdwardPlummer,presidentoftheDonnerCompany,wasreviewingthecompany'spositionpriortoplanning1988operations.TheDonnerCompanymanufacturedprintedcircuitboardstothespecificationsofavarietyofelectronicsmanufacturers.Eachboardconsistedofathinsheetofinsulatingmaterialwithnarrowmetalstrips(conductors)bondedtoitssurface.Theinsulatingsheetactedasastructuralmemberandsupportedelectroniccomponentsconnectedbytheconductingstrips.Inthecustomer'splant,assemblers(humanand/orautomatedmachinery)positionedelectroniccomponentsinthepre-drilledholesintheboard,solderedthemintoplace,andtheninstalledtheboardinthefinalelectronicproduct.Attheendof1987,therewere750printedcircuitboardmanufacturersintheUnitedStates.Thesemanufacturerscouldbeclassifiedeitherascaptiveorcontractmanufacturers.Largeelectronicsfirms,suchasIBM,AT&TandDigitalEquipment,producedmuchoftheirownrequirementsincaptiveboardshops.Whenlargequantitiesofsimpletechnologyboards,orsmallquantitiesoffastturnaroundprototypeboardswererequired,thesecustomerswouldusuallysubcontractproductiontocontractmanufacturers.Smallerfirmsalsopurchasedfromcontractmanufacturers,particularlywhensmalllotsofspecialboardswereneeded.Themoretechnologicallycomplexaboard,themorelikelyitwasthatcustomerswouldeventuallyproduceitin-house.Printedcircuitboards,withtheirelectroniccomponentsandcircuitry,arethegutsofvirtuallyallelectronicproducts.Duetotheincreasinguseofelectronicsinallaspectsofourlives,theprintedcircuitboardindustryhasparalleledthegrowthratesofthecomputer,telecommunicationsanddefenseindustries.Thisalsohaslefttheprintedcircuitboardindustryvulnerabletothefrequentupturnsanddownturnsoftheseindustries.Sincethestartofoperationsin19851,theDonnerCompanyhadspecializedinmakingcircuitboardsforexperimentaldevicesandforpilotproductionruns.Mostofthecompany'smanagerswereengineerswithsubstantialexperienceintheelectronicsindustry.Plummerandthefirm'sdesignengineer,BruceAltmeyer,hadcreatedseveralofthecompany'sprocessingmethodsandhadpatentedapplications,processes,andmodificationsofsomecommercialmachinery.PlummerandAltmeyerbothbelievedthattheDonnerCompanywasmoreadeptthanitscompetitorsatanticipatingandresolvingtheproblemsinherentinnewdesignsandprototypeproductiontechniques.1IncomestatementsareshowninExhibit1.689-030DonnerCompany2ManufacturingProcessDonner'smanufacturingprocessproducedcircuitboardsknowninthetradeassoldermaskoverbarecopper(SMOBC)boards.ThisSMOBCprocessbecamepopularintheearly1980sascustomersdemandeddensercircuitpatternsandgreaterreliability.TheSMOBCmanufacturingprocessconsistsofthreestages:preparation,imagetransfer,andfabrication.Inthefirststage,artworkandcomputercontroltapesareproducedwhilerawmaterialsarepreparedforprocessing.Inthesecondstage,theconductorpatternistransferredtodielectric(insulating)basestock.Inthethirdstage,thebasestockiscutandshapedtocreatetheindividualprintedcircuitboards.ThemostcommonsequenceofoperationsislistedinExhibit2.PreparationStageMasterartwork,receivedfromthecustomer,isusedtoproduceanegativeimagereplicatingtheexactcircuitpattern,withactualdimensions.Dependingonthefinalcircuitboardsize,theindividualimageisoftenrepeatedtomaximizethenumberofimagesperpanel.Standardpanelsizeis12by18.Becausefinishedboardsareoftensmallerthanthis,thetypicalnumberofimagesperpaneliseight;therepeatedimageisthereforereferredtoasan8-upimage.Theprincipalrawmaterial(double-sidedcopper-cladglassepoxysheets)ispurchasedin36by48sheets,typically0.059thick.Theglassepoxylayerservesasadielectricinsulator;thecopperfoilservesastheconductor.Afterinspectionforvisualdefects,the36x48laminateisshearedintoeight12x18panels.Then,locationholesarepunched,tobeusedlaterforaligningthepanelsindrilling,imagingandrouting.ImageTransfer2Imagetransferbeginstoconfiguretheboardsaccordingtocustomerspecificationsandthentotransferthepatternofconductingandinsulatingstripstothelaminatepanel.First,approximately500holespercircuitboardaredrilled,eithermanuallyononeofDonner'ssevenmodifieddrillpressesorautomaticallyonthecompany'scomputernumericallycontrolled(CNC)MicronicJr.high-speeddrill,recentlypurchasedfor$80,000(Exhibit3).Ineithercase,theoperatorfirstpinsapaneltothedrilltableusingthelocationholescreatedinthepreviousproductionstage.Incontrasttotheoperator-controlledmanualdrillingoperation,theCNCdrillautomaticallyselectspreprogrammedtoolsandthendrillstheholesinthecorrectpositions.Thedrillingaswellasthetoolselectionisdrivenbythe(x,y)-coordinatelocationssp