It was Charles Talbert’s first major assignment after graduating from Tech top in his Industrial Engineering class. He was excited and didn’t want to blow it, but how hard could it be? All he had to do was select the contract manufacturer with the best yields. His company, Excalibur, has rapidly become a leader in designing premier laptops and mobile phones. Excalibur’s exciting and highly functional designs have made it the envy of the industry and a great place to work. So Charles wanted to add value by helping Excalibur find the best EMS firm. To make his job even easier, senior management performed preliminary screening, limiting the candidates to two: ACME and AJAX. Charles visited both and found they both had excellent quality systems in place including an effective continuous improvement program founded on statistical process control. It looks like it would come down to the yield numbers.
ACME argued that it was clearly the best choice as it had superior yield in both laptop and mobile phone manufacturing. AJAX argued that, while that was true, AJAX’s overall yield beat ACME’s 96.6 to 95.4% (table). How is this possible? And which vendor would you choose?
Laptops
No. Built Yield (%)
ACME 90,000 95
AJAX 10,000 93
Mobile Phones
No. Built Yield (%)
ACME 10,000 99
AJAX 90,000 97
Overall Yield (%)
ACME 95.4
AJAX96.6
The overall yield was figured by total units passed divided by total units built. Acme had 95400 units pass out of 100K. So they had 95.4% yield. Ajax had 96600 pass out of 100K so their yield was 96.6%.
Which would I pick? Since I assume my company wouldn’t incur any rework costs, I would go with the company that could give me a better profit margin. If the better profits are in laptops, I’d go with ACME. If it’s in phones, then AJAX.