UCI School of Engineering

ENGR 190W Engineering Ethics Scenario

(Allowing Defective Chips to go to Market…)

Section I – Chip Production Scenario

Shane, a production line engineer, is checking every chip for quality control (QC). His workers are finding defective chips once every 150 chips. The defective chips must either be sent back for repair or discarded. His manager, Rob, has mandated that all defective chips be discarded. Rob walks over to Shane’s production line and engages him in conversation by saying, “I don’t understand why some other production lines spend additional dollars on failed chips. We only make a 25-cent profit from each chip anyway! Spending an additional $2.00 per chip to repair it only means that more money is being wasted. Shane, in our line of work we can’t afford to flush money down the drain.” The following afternoon Rob informs Shane that his production line is discarding too many chips, “One chip every hundred and fifty is unacceptable! This is becoming a substantial cost to the company. I believe that it would be more beneficial to allow all the chips to be sold to customers without performing quality control.” Shane asks, “What about the defective chips? Won’t customers complain?” Rob replies, “Yeah, yeah, but that’s not your problem. Our company has a return department that will replace the defective chips as customers complain.” Rob further estimates that allowing all the chips to be sold on the market will yield a $416,000 profit for the company. Pertinent Facts Regarding Shane’s Production Line:

• The line produces 100,000 finished chips per year.

• Every chip is purchased.

• Chips cost $9.00 to produce.

• Chip testing costs $4.00 per chip.

• Chip repair (manpower and materials) is $2.00/chip.

• This repair cost includes re-testing.

• Profit per chip is $0.25 after testing.

• There are fifteen full-time employees and two part-time employees working under Shane.

• Shane’s manager has been with the company for about seven years.

• Shane has been working under Rob’s management for several years and has developed a relatively good working relationship with him.

Additional Information Regarding Shane’s Production Line:

Shane’s production line performs the final inspection of the bond wires, which attach the chips to the prongs and spot plates (the prongs protrude from the final product). The chips are then encased in molding compound for final packaging. You may assume that all defects can be traced to faulty bond wire attachment and not to the chip itself because the chips have been previously tested, before the bond wires were attached.

Section II – Summary of Numerical and Design Data

1. If Xanthum, Inc. orders 15,000 chips from Shane’s production line, and 1/150 chips are found to be defective, then: 1/150 = 0.67% of the chips may not be functional.

2. If Shane’s line produces 100,000 chips per year, then the following three scenarios will produce the given financial results shown below:

• Scenario 1 – Test all chips and repair the defective chips: test all chips: 100,000 chips x $4.00 testing cost = $400,000 repair cost: 667 defective chips x $2.00 repair cost = $1,334 profit loss on repaired chips: 667 defective chips x -$1.75 profit loss = –$1,167.25 profit on functional chips: (100,000 – 667) x $0.25 = $24,833.25 net profit: $24,833.25 – $1,167.25 = $23,666

• Scenario 2 – Test all chips and discard the defective chips: test all chips: 100,000 chips x $4.00 testing cost = $400,000 discard cost: $0.00 loss on discarded chips: 667 defective chips x ($9.00 + $4.00) = –$8,671.00 profit on functional chips: (100,000 – 667) x $0.25 = $24,833.25 net profit: $24,833.25 – $8,671.00 = $16,162.25

• Scenario 3 – Test no chips and replace defective chips when returned by customers: “Best Case” – no returns of defective chips Test no chips: 100,000 x $4.25 = $425,000 “Worst Case” – all defective chips are returned 100,000 – 667 returns = 99,333 – 667 replacements = 98,666 chips to generate dollars Profit from “satisfied” customers: 98,666 x $4.25 = $419,330.5 Original profit on the 667 returned chips: 667 x $4.25 = $2,834.75 Profit from replacement chips: 667 x -$9.00 = -$6,003 Net profit: $419,330.5 + $2,834.75 – $6,003 = $416,162.25

Section III – Questions on Ethics and Professionalism NOTE:

Before responding to the questions below in your ethics essay, refer to the assignment description for the assignment details.

1. What issues are involved in following Rob’s recommendation described in Scenario 3?

2. Is it acceptable to follow Rob’s suggested course of action, based on the numerical and design data shown in Section II for Scenario 3?

3. How should Shane, the engineer, present his case to Rob, his superior, if he has a differing opinion regarding Rob’s suggested course of action described in Scenario 3?