Can you please write a case study analysis for the attached case with the excel file.
AIC Netbooks: Optimizing Product Assembly ________________________________________________________________________________________________________________ HBS Professor Steven C. Wheelwright and writer Sunru Yong prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration. Copyright © 2011 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. S T E V E N C . W H E E L W R I G H T S U N R U Y O N G AIC Netbooks: Optimizing Product Assembly November 15, 2008, was a cold night in Shenzhen, China. Inside the factory of electronics firm AIC, Inc., Production Manager Elias Chen watched completed QuiN 816 netbooks rolling toward the end of the conveyor belt, where the final assembly line worker placed each unit onto the rack for the shock test and the final burn-in test by quality assurance. After a frantic start-up phase in August 2008 and three months of frequently recalibrated production runs, the line was operating more smoothly. However, Chen knew that the Taipei office wanted to further improve performance at the Shenzhen plant. It was time to review the netbook assembly operations and identify ways to optimize the line. Company Background Advanced Integrated Circuitry, Inc.—later renamed AIC Systems—was founded in Taichung, Taiwan, in 1992 as a producer of printed circuit boards, focusing on motherboards and graphics cards for the personal computer industry. Initially, AIC Systems competed for business as a low-cost manufacturer in the industrial zone of Xitun, focusing on the PCI bus chipset that launched with the Intel Pentium CPU in 1993. The company supplied branded manufacturers of desktop and laptop computers such as Dell, Hewlett-Packard, and Compaq. While AIC Systems total volume was lower than Taiwanese rivals Elitegroup Computer Systems, ASUS, and MSI, the company’s relentless focus on cost management allowed it to be a competitive source. By the early 2000s, AIC Systems had evolved into what the industry considered an original design manufacturer (ODM). As an ODM, the company took an active role in innovating and designing each new generation of components. By doing in-house design and development work, the company was able to foster more exclusive, longer-term relationships with its customers. AIC Systems also protected its position as a low-cost supplier by opening its Kaizhi plant outside Shenzhen in early 2001 when the Taiwanese government relaxed restrictions on investments in mainland China. The company was among the first of the Taiwanese firms to shift all of its production volume to China. Management’s aggressiveness in transitioning away from Taiwan-based manufacturing enabled the 4245 J A N U A R Y 2 1 , 2 0 1 1 For the exclusive use of D. Troupe, 2020. This document is authorized for use only by David Troupe in 2020. 4245 | AIC Netbooks: Optimizing Product Assembly 2 BRIEFCASES | HARVARD BUSINESS SCHOOL operations team to quickly move down the learning curve and take advantage of the lower labor costs. In fall 2007, AIC Systems embarked on a new strategy: diversifying its product portfolio to include consumer electronics, with a particular focus on mobile technology. Anne Lin, chief strategy officer, explained the decision: In the technology world, most hardware has become a commodity, and this will continue to be a space with relatively thin profit margins. We have a solid position as a manufacturer of circuit boards, but we will continue to find ourselves beholden to our end-customers with established brands—Dell, HP, Sony, and so on. As middle-class demand for mobile technology grows in the Asia-Pacific markets, we have the opportunity to serve their needs directly and build a new proprietary consumer brand. This will be a multi-year investment, but we believe we are well-positioned with our technological and manufacturing capabilities. Mobile technology took several forms, including ultra-portable laptops called netbooks; traditional laptops; and mobile phones laden with variable arrays of computer-like functions. (See Exhibit 1, which compares types of mobile technology.) The success of the Eee, created by ASUS Tek Computer of Taiwan, made the netbook an attractive platform for AIC Systems’ first foray into consumer electronics. It appeared to be a fast-growing market where another Taiwanese firm had already taken the lead, and it presented an opportunity for the company to leverage its cost base and its capabilities in PC components. History of the Netbook Prior to 2007, “ultraportable” laptop computers were available but commanded steep premiums, retailing at $2,000 or more. No manufacturer had successfully introduced an inexpensive, lightweight computer. This changed with the efforts of a non-profit, One Laptop Per Child (OLPC), to build a cheap laptop for classroom use in developing countries. In close partnership with a Taiwanese firm, OLPC aimed to produce a $100 laptop and received support funding from the likes of AMD, eBay, Google, Red Hat, and others. The organization failed to hit the $100 price target, but its initiative had an indirect effect on the entire PC industry. The publicity generated by OLPC led other companies to explore their own versions of a low-priced, ultraportable computer. Intel introduced the unsuccessful Classmate PC that cost too much and lacked a keyboard, while VIA launched the Nanobook but struggled to overcome production challenges, a high retail price, and software bugs. Ultimately, it was Taiwan manufacturer ASUS that proved a viable market existed—not in serving students in the developing world, but rather in selling to middle-class consumers in western Europe and the United States. The ASUS Eee came with a 7-inch screen, an Intel Celeron ULV Dothan processor, 4 gigabytes of solid-state flash memory, and weighed just 2 pounds. The necessary trade- off in functionality to achieve better portability and affordability was no hindrance to sales. Indeed, for many consumers, it served as a second laptop used primarily for email and surfing the Web while on the go. The retail price of $399 made it a popular choice for consumers looking for an affordable, ultra-portable, web-enabled computer. Launched in fall 2007, the ASUS Eee sold 350,000 units in just four months. Over the next few months, every major PC manufacturer launched a similar device or announced plans to do so. In June 2008, Intel launched another ultramobile platform with its new Atom processor that combined high performance with low voltage requirements. In addition, Microsoft extended the life of its Windows XP Home edition operating system specifically to serve netbook For the exclusive use of D. Troupe, 2020. This document is authorized for use only by David Troupe in 2020. AIC Netbooks: Optimizing Product Assembly | 4245 HARVARD BUSINESS SCHOOL | BRIEFCASES 3 devices. Industry analysts estimated that the total industry unit volume for 2008 could top 15 million (see Exhibit 2 for sales estimates and projections for 2007–2008). Development of the QuiN Netbook AIC Systems began development of the QuiN (short for “quick net”) in March 2008, and Elias Chen was charged with bringing a netbook to market by the third quarter of the year. An early, critical decision that Chen had to make was the selection of the processor. He challenged James Ashey, the chief industrial engineer, to avoid developing a “me-too” product. Ashey explained the key consideration: ASUS was very successful using the mobile Intel Dothan processor in the Eee netbook. We knew we could do the same. However, we also knew that Intel was close to introducing another processor, which turned out to be the Atom. We wanted to be among the first to introduce an Atom-based netbook, but this meant waiting until it became available, then quickly designing the motherboard and production process for it. Although waiting for the Intel Atom processor made their task more difficult, Ashey was confident that they could adhere to the timeline set by the Taipei corporate office. Following the mid- year introduction of the Atom 230 with an accompanying Mini-ITX motherboard, Ashey and his team quickly designed an improved motherboard. The engineering team dubbed the board “Koda,” a portmanteau that recognized the production facility (“Kaizhi”) and paid homage to Yoda, the Star Wars character that was small, green, and powerful—just like the Koda. The Koda board offered solid capacitors, a BIOS that allowed overclocking, and a lower-profile heat sink that allowed for a thinner netbook. The Atom processor was soldered in, and it featured Intel GMA950 integrated graphics, 5.1 channel audio, and a Realtek LAN. The rest of the QuiN 816 netbook consisted of parts that AIC Systems sourced externally, including the LCD screen, the clamshell consisting of the base and cover assemblies, the solid-state hard drive, the built-in webcam, and the touchpad (see Exhibit 5 for a glossary on these components). Netbook Assembly Line While Ashey and his team completed the development of the Koda board and moved the Kaizhi plant into production, Chen focused on establishing the assembly line process for the QuiN 816 netbook itself. Working closely with Will Lapin, his process engineer, he designed a 16-meter assembly line that would be staffed by 10 operators (see the line’s functions in Exhibit 3). With four of these lines set up, Chen and Lapin designed the operation of each line to produce 700 netbooks per nine-hour shift (including one hour for lunch and breaks), with two shifts per day, six days per week. Chen described their goals with the assembly line: The major