Situation Analysis

Identify Concerns Set Priority Process

Major Sub-concern Timing Trend Impact Action
Concern needed
GROUP PROBLEM

PROBLEM ANALYSIS
 Oh, Nuts!!! *
The NutsnBolts Auto Parts Company manufactures and distributes auto parts throughout the United States. Over a
period of several months, they have been receiving a large number of complaints about corroded bolts from
consumers. Virtually all of the complaints were received between June and August. There were a few complaints during
some of the other months, but almost none in January and February.
In addition to its manufacturing plant in Detroit, NutsnBolts has four major distribution centers in Atlanta, Phoenix,
Denver, and Houston, where shipments from Detroit are stored in warehouses. There seems to be a strong
geographical pattern to the complaints with respect to where shipments originated. A majority of the complaints came
from shipments from the regions in Houston and Atlanta. Virtually no complaints came from the centers at Denver and
Phoenix. Sampling indicates that not every part from any given shipment is corroded; only some of the parts, some of
the time, from certain geographical locations. Also, due to excellent quality control, virtually no product leaves the plant
with any signs of corrosion.
The parts are packaged in cardboard boxes, with cardboard placed in between layers of bolts to act as a shock
absorber. A few years ago paper was supplied exclusively by Wolverine Paper, whose plant is located near Lake
Superior in Michigan. The newly appointed manager in the NutsnBolts packaging department noted that Wolverine
Paper was overcharging for their product and decided to look into other suppliers.
The best price offered by far (almost 20% cheaper than the next lowest bid) was from Acadia Paper, located in Maine.
Research into how Acadia was able to provide such a low bid yielded the following information. The plant was intended
to produce high-grade paper, but the water intake for the mill is located in a tidal basin, allowing seawater to enter the
processing water supply. Because of this, only low-grade paper can be produced at the plant. In order to get rid of their
excess low-grade paper, Acadia began offering packaging paper well below the market price.
The manager also set up a contract with Badger Paper, whose plant is located near Lake Michigan in Wisconsin.
Badger had recently been fined by the Environmental Protection Agency for dumping excessive waste in Lake
Michigan. As a result, several changes in Badgers production were made to stay within the EPAs waste limits. This
resulted in a decrease in the overall paper quality. In addition to these two suppliers, NutsnBolts still purchased some
of its paper from Wolverine Paper Co. Current prices offered by the paper companies determine which companys
paper ends up as packaging material for any batch of product.
A confounding factor is that NutsnBolts has noticed that the quality of the steel to make bolts provided by Heavy Metal
has decreased substantially after several key personnel retired. On one occasion Heavy Metal tried to supply materials
that arrived exhibiting excessive amounts of corrosion. The president of NutsnBolts had the shipment sent back to
Heavy Metal and threatened to pull the account. After this, there were two other similar incidents of corroded Heavy
Metal materials reported.
THANKS