Reference no: EM133377587

Case Information: A company engaged in the manufacture of auto parts is located in the Bajío industrial corridor, the company manufactures a type of bolts used in family vans. Annual production is in the millions. A quality failure causes production lines to shut down, resulting in losses of millions of pesos.

The company has 30 operating and 15 administrative employees, including the general manager. Staff turnover has always been low and production has always been constant; however, for the last five months there has been at least one line stoppage per day. This has caused export orders to be delayed by an average of 10 days, so that some customers have cancelled several orders.

The quality supervisor mentions that the main defects for which the production line has been stopped are: nonconformity in diameters, screw length out of specification, and porosity in the material. The operators attribute this situation to the lack of quality of the material received; however, the nonconformity of the measurements is caused by the poor operation of the machines.

In addition, there have also been several operator incapacities due to accidents, especially inside the plant, with the forklifts. This has set off alarm bells in the production area because there has never been an accumulation of irregularities like this. Some employees have reported that forklift operators do not wear protective earplugs, but rather headphones with music, which makes them vulnerable.

If these problems described in the case are not properly controlled, the company will have to begin a process of employee layoffs to reduce the burden of fixed costs and reengineer the entire company.

Question:

5. Answer the following questions:

a. What are the advantages of using key performance indicators (KPIs) to control a company?

b. How important is the proper calculation of the metrics measurements?