BUS341 : Company Introduction In this Exercise you will play the role of a plant Manager who has to Negotiate some Arrangements with Another Plant Manager: Business Negotiations in International Perspective Case Study, MU, Singapore

Universal Computer

Company Introduction In this exercise you will play the role of a plant manager who has to negotiate some arrangements with another plant manager. You will be in a potentially competitive situation where cooperation is clearly desirable. Your task is to find some way to cooperate. when to do so might seem to put you at a disadvantage. Read the background information section and the role information that the instructor has provided. Do not discuss your role with other class members. Plan how you will handle the forthcoming meeting with the other plant manager. Record your initial proposal on the Initial Settlement Proposal form. Do not show this to the other party you are negotiating with until after the negotiations are completed.

The Quality Problem

Production at the Phillips plant has been plagued by poor quality. Upon examination, it has been found that a considerable portion of this problem can be traced to the quality of the modules received from the Crowley plant. The Crowley plant maintains a final inspection operation. There has been a considerable dispute between the two plants as to whether the Crawly plant is to maintain a 95 percent overall acceptance level for all modules shipped to the Phillips plant. or to maintain that standard for each of the 42 modules shipped.

The Phillips plant manager has insisted that the standard has to be maintained for each of the 42 individual modules produced. The Crawly plant manager maintains that the requirements mean that the 95 percent level has to be maintained overall for the sum of modules produced. Experience at the Phillips plant shows that while some module types were consistently well above the 95 percent acceptance level, 12 types of modules had erratic quality and would often fall far below the 95 percent level. As a result, while individual types of modules might fall below standard, the quality level is 499.

• Plant How do you propose that the following expenses and repairs should :::/e handled? The expense of repairing all faulty coulees:
• The expense of repairer, faulty modules other than the 12 types that fall below the 95 percent level:
• The expense of repair the faulty modules of the 12 type S that fall below the 95 percent level:
• How to handle the repair of the faulty modules of the 12 types that fall below the 95 percent level:
• How to handle the repair of the modules another than the 12 types that fall below the 95 percent level:

The Interplant Dispute The management of the Phillips plant felt that the quality problem of the modules received from the Crawly plant was causing them great difficulty. It caused problems with the customers. who complained about the improper operation of the products that contained the Crawly modules.

As a result. the Phillips plant operation had earlier added secondary final inspection of its completed products. More recently it had added an incoming inspection of 12 poor-quality modules received from the Crowley plant. There were times when the number of modules rejected was large enough to slow or es en temporarily stop production.

At those times, to maintain production schedules, the Phillips plant had to work overtime. In addition, the Phillips plant had the expense of correcting all the faulty units received from the Crawly plant. Ideally, the management of the Phillips plant would like to receive all modules free of defects. While this was recognized as impossible.

they felt that the Crawly plant should at least accept the expense of repairs, extra inspections. and overtime required by the poor quality of the parts. Since installing incoming inspection procedures on the 12 modules. the Phillips plant had been rejecting about SI5.000 of modules a week. For the most part, these had been put into storage pending settlement of the dispute as to which plant should handle.

Final Settlement Agreement

• How, exactly. did you agree that the following expenses and repairs would be handled? Expense of repairing all faulty modules:
• Expense of repairing faulty modules other than the 12 types that fall below the 95 percent level:
• Expense of repairing the faulty modules of the 12 types that fall below the 95 percent level:
• How to handle the repair of the faulty modules of the 12 types that fall below the 95 percent level:
• How to handle the repair of the modules other than the 12 typos that fall below the 95 percent level:

repairing them. Occasionally. when the supply of good modules had been depleted. repairs were made on some of the rejected units to keep production going. The Phillips plant had continued to make repairs on the remaining 30 types or modules as the need for repairs was discovered in assembly or final inspection.

its perspective. the Crawled plant management felt that it was living up to its obligation by maintaining a 95 percent or better quality level on all its modules shipped to the Phillips plant. Further. they pointed out that using sampling methods on inspection meant that some below-standard units were bound to get through and that the expense of dealing with these was a normal business expense that the Phillips plant would have to accept as would any other plant.

They pointed out that when buying parts from outside suppliers it was common practice in the company to absorb the expenses from handling the normal level of faulty parts. The Phillips plant management argued that the Crawly plant management was ignoring its responsibility to the company by forcing the cost of repairs onto their plant. where only repairs could be made—rather than having the costs borne by the Crawley plant. where corrections of faulty processes could be made.

Universal Computer Role Information For The Phillips Plant Manager

Phillips and Crawley are two separate plants and profit centers owned by Universal Computer. The quality problem on the modules coming from the Crawley plant has been the most frustrating problem you have had for some time.

Not only has the expense of rework and repairs, overtime and additional inspections increased the cost of operation of your plant. but complaints from customers and occasionally failing to meet production schedules have gotten you a lot of unfavorable attention from higher management. What is particularly frustrating is the fact that the difficulty comes from a single area, and also that there is so little you can do directly about the matter.

You would like the additional expenses resulting from these problems to be transferred to the Crawley plant. The plant manager at the Crawley plant has been very stubborn about this matter and has refused to accept any of the costs. While Crawley has been working on the problem and quality has improved somewhat. you have doubts that it will ever be of a desired level for all modules that you receive from their plant.

They have made the argument that expenses incurred because of faulty modules should be borne as a regular business expense the way they are for all products purchased outside. While it is true that Phillips has repaired some poor quality items received from other vendors, this is usually done to avoid interrupting production by sending them back to the supplier. You do not know why the company does not charge the supplier for these costs. but assume that it is because it is diffrent.

some poor quality items received from other vendors, this is usually done to avoid interrupting production by sending them back to the supplier. You do not know why the company does not charge the supplier for these costs. but assume that it is because it is difficult to write into a purchasing agreement. In any event. when the materials received from an outside supplier do occasionally get bad enough, a shipment will be rejected and sent back. You do not think it is to the company’s benefit to accept these costs on items made in its own plants.

If the supplying plant had to absorb the costs, pressure would be created within that plant to reduce. if not eliminate, these expenses. Because the company does not have this practice, however, you are not sure you can get the other plant to accept the repair expenses for ail poor quality modules.

You are determined, however, that they will have to absorb the expenses on the cost of repairing faulty items of the twelve types of modules where quality has been found to be below the 95% level. You feel strongly that the plant manager of the Crawley plant is making an inaccurate and unfair interpretation of the way the 95% level of quality is to be applied.

You are also troubled by the delays in production (often requiring overtime) when large numbers of rejects occur on the twelve types of modules often found with poor quality. You are not too optimistic about getting the Crawley plant manager to accept overtime costs for production, but you are going to insist that either they accept the faulty parts back to replace or repair them quickly, or that they pay you to put repair staff to work on them. even if overtime is necessary.