Case Study of Babcoсk and Wilcox

The main problems that faced Babcock & Wilcox were; delivery delays, lawsuits and strikes. These issues made the already bad corporate culture even worse. Further on, they also managed to created new competitors In a marked they previously have dominated.

The main-error made by the management of B&W was the failing of identifying the ” Key Manufacturing Task”.

The definition of the KM is “the operation that is most important in the market” e.

G.Laity, quantity, delivery reliability or low costs. The KM is the most important process and thus what the firm should focus mostly on. It Is of high importance that the KM Is linked to both corporate strategy and marketing. Hence, the Identification of the KM should be highly prioritize. According to Professor Terry Hill at Oxford university, there are two main strategies to identify the KM.

The first one is to recognize the “order-winning criteria” the firm can offer its customers.

These could be related to the “competitive priorities” that Enders Feldman mentioned in the lecture about “Operations and Supply Chain Strategy’. The second strategy Is to identify the “market criteria” which constitutes of all the factors that Influence the customer’s choice of supplier.

We choose to look at ten order willing criteria Decease… I nee “Rorer-willing criteria” Tort choosing B& W when the company produced boilers were:

1. Price: Since boilers and replacement tubes were established components in the former market, the price of those was a key factor of the customer’s decision. The customers would most likely have chosen the cheapest alternative if the quality would have been basically the same regardless choice of firm.
2. Delivery Speed: Delivery speed is always important, especially when it comes to replacement parts since the customer want the facility to restart as soon as possible.
3. Basic Quality: Since boilers were old parts in these types of facilities, the quality standards were well established and not anything special. The basic quality of these boilers implies basic manufacturing that could have been maintained at low cost.

When B were mostly treating Just boilers, everything worked as planned and the company could live up to the order winning criteria listed above and were a leader in the industry. However when the decision as made to start producing a totally new thing (the pressure vessel), an increasingly number of problems occurred. These will be discussed more lately in the text. The “order winning criteria” that has been identified for the new pressure vessels are quite different compared to the criteria for the boilers.

They are listed below:

1. High Quality: Since nuclear could be highly dangerous, both for the surrounding population and the surrounding environment, it was critical that the qualities of the vessels met the necessary requirements and were as customer specified as possible. However, it was very difficult to ensure a high quality of the pressure vessels since they operated in extreme conditions. Furthermore, high quality also means that every process in the manufacturing is following the right procedures and that appropriate expertise is used.
2. Delivery Reliability: There is a huge difference between delivery speed and delivery reliability. When measuring the delivery speed which was the case with the boilers, it was the time that counted.

   But when they went over to vessels, measuring the reliability of delivery were more important, and it was the accuracy of the deliveries that counted. A firm should always keep what has been promised to the customer with no exceptions. Since a nuclear plant is big, which normally leads to long lead times , delays would be disastrous for the entire project.

3. Reputation: Since quality is the most important order winning criteria, the firm’s reputation for having high quality was crucial for the customer’s choice. As mentioned above, the key manufacturing tasks high quality and delivery reliability were the two most important criteria that had to be fulfilled.

Today we can easily conclude that the KM differed a lot between he two business areas of boilers and vessels. In the case with the boilers, the KM were Price and Delivery Speed since the market was mature and the quality standards were already set. The competitive factors on the market were therefore to have a low price on the boilers and be able to deliver them fast to the customers.

But in the case with the pressure vessels, the KM would instead have been “High Quality’ and “Delivery Reliability’. The main reason for this choice of KM is because these are the most critical factors in an immature market such as the nuclear market actually was back then in the ass’s and ass’s. Moreover, high quality is a factor that Just can’t be disregarded, which also was brought up by Enders Feldman in the lecture of “Operations and Supply Chain Strategy’.

At the lecture, it could be seen Tanat quality Is ten Automaton stone AT ten pyramid Tort performance adjectives. Quality was especially important in the nuclear market as faults can lead to terrible consequences. The struggle however, was that B&W continued to focus on the same order winning criteria as with the boilers, meaning that they continued to try pushing the costs down and at the same time keep the volume high. This directly led to pressure vessels that couldn’t meet the quality requirements of the nuclear market. Furthermore, the production processes for the pressure vessels was very different compared to the processes used to produce the boilers since the standardization and condition requirements were completely different.

The employees who were involved in the construction process of the pressure vessel were used to the more basic construction regarding the boilers. When the decision to start the production of vessels was made, the employees ere more or less unprepared and therefore lacking the necessary knowledge of manufacturing. Likewise, welding steel together was a very demanding task even for experienced workers, especially when the weld were examined by an X-ray and supposed to be used in the nuclear-sector. 0% of these welds were rejected upon inspection and therefore had to be re-welded. The cause of this problem was that wages were too low to both attract and retain skilled staff. These owe wages also contributed to the Mount Vernon plant was closed for 40 days during the installation of the plant.

This is another contribute to the long delays. IT was practically too late already when the management board realized that manufacturing training of employees was necessary.

However, they started the manufacturing training for the employees anyway. But due to low wages and bad corporate culture, only one third of the employees were retained at B&W when they had completed their training. Attracting new skilled labor was difficult of the same reasons.

Further on, another mistake B&W made was to operate the production of pressure vessels in the same way as they did with the boilers regarding capital resources, location and human recourses. This was Another mistake done by B&W was the choice of plant site, Met.Vernon. The skill level of the workforce on the country was way too low for producing the pressure vessels which led to even worse quality than described above. The main reason for that choice of location was the low land costs, low wage demands and also the presence of a river close by that could be used for transports. It could be assumed that the management board of B&W thought that Met.

Vernon would be a perfect location to help them keep the costs down and keep the output volume high.

The conclusion of this is that the handling of their human resources and location could have been much better and more fitted for pressure vessels instead of boilers. Although, this was a natural approach for B&W since their production of boilers has been very profitable. Furthermore, since the nuclear industry was in its first phase when B&W started to produce the pressure vessels, the delivery reliability was of high importance to gain market shares and attract new customers.

When B&W had sold out its entire planned output of vessels before they even started to produce them, it was critical that they were committed to what they had promised.

But as some subcontractors failed to deliver some parts in time telling I nee tape-controlled machine center earlier 12 months late, together with the bad competence and low skills at Met. Vernon, it was almost impossible to accomplish what B&W had promised their customers General Electrics and Westinghouse Electrics. The thing that they ad promised delivery and sold out their entire output is the main reason for why GE and WE was so dissatisfied and sued B&W. Causing 14 of GE and Westinghouse ‘s vessels were taking out of B&W’s shops and they find other producers to complete the vessels.

However, it’s important to highlight the operations management which was a total failure. Nelson himself didn’t have a formal education and according to the article “Beyond World-class: The New Manufacturing Strategy’ by Hayes and Poison, the goal with the strategy in turbulent environments is to have a strategic flexibility.

Nielsen had worked at B&W since 1924 but despite that, he and the others in the management lacked skills when they went into the nuclear power plant industry.

But as Nielsen and the management board was lacking competence in the nuclear field, trots ATT Nielsen hade rarebit for B&W sedan 1924 SE datable:l, the management had a very hard time to form a flexible strategy and Just went on by improvising during the process. The incompetence of the management is also something that was highlighted of the engineers.

When they away the upcoming problems B&W soon would have to face, the management neither trusted nor listened to them. Another reason for the failure was because the management often took decisions far away from the plant. This was something John Paul Craven felt, the man directly responsible for the plant at Met.

Vernon. He felt that he haven’t got the right amount of authority and was fully controlled by the board in New York. The article by Hayes and Poison also points out the importance of doing a certain thing better than your competitors. In the case with the failure of B, that “certain thing” should be to deliver high quality on time.

But as they neither delivered products of high quality nor on time, GE and WE forced B to give the unfinished vessels via GE and WE to other firms with similar capabilities to complete products which implicitly meant that B had created their own competitors. In 1968 when Nelson retired he sold three quarters of his stocks.

When the retiring manager sells his shares in the company, it may be a sign to the world that things are going bad for the company.

It was first now B’s stockholders got their first official hint about the troubles B&W was facing.

Actually, even at this time all areas were profitable in the B&W Company except the nuclear sector, that they were unable to handle.

Finally, the situation was untenable and B&W officially informed their customers about the bad situation at Met. Vernon.

Summary The reasons for the failure by B&W and what it led to were: They sold up all the projected output of vessels before they even had started to produce them. The upcoming delays thereafter led to unsatisfied customers. Delays AT Key-component wanly lea to Tanat teen vessels couldn’t De leverage on time. Lacking in skills in both management board and labor force which led to poor quality and that B couldn’t handle the incoming troubles they were facing.