Unruly Spider

Case Name: The Unruly Spider

1. Major Facts:

1. 32 spider gears from Speedy Tool Company, a supplier, rejected by inspection department of Alex Precision Manufacturing Company

1. The three 1 1/8-diameter holes on gear had rough finish on the bore

1. Rejection of parts causing delay of foreign shipment of substantial spare parts order
2. Engineer responsible for part refused to use gear as bored holes were actually bearing seats and needed to have a smooth or ground surface – indicated inferior workmanship
3. No notation on engineering drawing calling for any finish on bore of holes specification, and all other specifications within tolerance
4. Engineer felt that a good subcontractor making the spider gear should understand the need for a smoothed surface for a bearing seat, and thus refused to add a notation to drawing regarding that need

1. Magnaflux mark not clearly legible on all pieces

1. Marking stamp supplied to Speedy by Alex in poor condition
2. Drawing called for stamp to be applied on curved surface of gear
3. Best effort at applying mark with supplied stamp not very legible but not subject to improvement without new stamp

1. Speedy Co. objected to rejection of gears on basis of rough finish

1. Rough Finish – No notation on drawing, and nothing provided him indicated it needed to be smoothed
2. Impossible to add smooth finish to already finished pieces without moving size of hole out of specification
3. Prohibitively costly to chrome plate operation in order to be able to smooth rough finish
4. Additional costs to change process on gears currently being manufactured would be $2000.00 and $25.00 per unit, over and above price bid previously
5. Speedy could provide 100 newly finished pieces, with smooth finish on bored holes, under new pricing consideration within one week

1. Major Problem:

1. Alex Co. had 10-12 year history and a good relationship with Speedy Co., and Mr. Jones did not want to potentially damage that relationship

1. Original quote from Speedy based on Alex supplying all tooling equipment
2. Tooling equipment supplied was in poor condition, and had to be repaired before being used
3. Costs to repair tooling equipment, already paid for by Speedy, $25,000.00

1. Contract had not stipulated smooth finish on bore holes, and drawing also did not reflect same.

1. Possible Solutions/Alternatives (Possible Solutions, including advantages and disadvantages):

1. Compensate Speedy for amount spent to repair poor condition of supplied tooling equipment, and accept raise in pricing for future parts ensuring smooth finish. Also, add amendment clause to original contract for all future gears to have that finish

1. Advantages would include keeping alive a good supplier relationship; enhanced goodwill for reimbursement on repair costs that Speedy should not, as per terms already in existence, have been responsible for; and satisfaction for doing things ethically.
2. Disadvantages include higher price than originally contracted for

1. Accept raise in price for the next 100 pieces, to complete current order. Shop elsewhere for different supplier

1. Advantages here would include completing current order for shipping with only small delay
2. Disadvantages would include effort, expense and delay inherent in finding new, reliable, and trustworthy supplier

1. Cancel contract and get back tooling, compensating for out of pocket work done to repair same. Shop for new supplier

1. Advantages here are least obvious
2. Disadvantages would include those listed in (B, ii) above

1. Cancel contract and get back tooling, compensating for out of pocket work done to repair same. Set up returned tooling in own operation and start producing in house

1. Advantages here would be the absolute level of control on the quality of the part produced
2. Disadvantages would include additional costs necessary to implement such a project (very likely wind up spending much, much more than miniscule raise in pricing due to current situation would account for)

1. Choice and Rationale:

1. My choice in this situation would be decision A. I feel Alex Co. is solely responsible for not ensuring the specifications showed a notation indicating the necessity of a smoothed surface within the bored holes prior to getting pricing on having Speed Co. do the work. More importantly, Speedy Co. acted in good faith by producing the product exactly as the plans and contract called for. Furthermore, Mr. Speed of Speedy Co. had already amply shown his commitment to the contract when he took it on himself to repair the tooling equipment out of his own pocket without adding that cost to his billing. This is a good, reliable company, one with whom a strong relationship already exists. What we face here is an opportunity to make it an even stronger one, maybe even a partnership for the future. That kind of relationship is worth considering. I think doing the right thing and admitting responsibility is the best way to go about doing that. Plus, by so doing, the door is opened to a collaborative effort on figuring out ways and means by which both companies can work on improving the product and lowering the costs involved in doing so.

1. Implementation – The Action Plan:

1. Who Does What; Where; How; When: Etc.

1. Speedy Co. will upgrade their operation so as to finish current work in process, providing smooth finish on the ground holes for the bearing seats
2. All future work, including that mentioned here in (i) above, will be at the new pricing structure mentioned earlier by Mr. Speed
3. Mr. Jones of Alex Co. will have addendum to contract drawn up reflecting the change in pricing and have same agreed to by both companies, so indicated by appropriate signatures.
4. Mr. Jones will have plans reviewed and amended to reflect the change in requirements on the drawing, i.e., having a notation on the bored holes indicating the smooth surface requirements
5. Mr. Jones will reprimand the engineer that refused to do so in the past because he ‘felt’ only a poor subcontractor would not “just realize” it needed to be that way. He will then either retrain that engineer or get in an engineer that understands that if it is not written down it does not exist.
6. Mr. Jones will contact both production superintendent and foreign customers awaiting the shipment to inform them of the delay and make any arrangements necessary to smooth any ruffled feathers
7. Mr. Jones and Mr. Speed will set up an inter-organization, cross-functional team to collaborate and look at ways to improve the spider gear while lowering costs in the process for implementation if one can be found

1. (When requested, prepare a plan to implement your choice)

1. As described in (A) of this section