Case Study Details

Background:

You work for Harrow Manufacturing Company (HMC) and are the Central Division Senior Director; you are based in HMCs Winnipeg office. You report directly to Layla El-Faouly. Layla is the CEO of HMC and is based at the companys head office in Ontario.

HMC manufactures custom equipment for other manufacturers and wholesalers, and specializes in providing custom prototypes, that once thoroughly tested, can be manufactured at one of HMCs many assembly lines across the country. HMC has been in business for over thirty years, but lately, business has been poor, primarily because HMCs main clients in the construction sector have been sourcing their work to other companies that are located overseas.

Since 2016, HMCs revenue has dropped 15% annually. As a result, to lower costs, the company has shut down three manufacturing plants (with five plants remaining in operation at this time). HMC has also, in the last two months, laid off 1,200 employees, and currently has 4,500 employees. The remaining employees are all worried that there may be a second round of job cuts, and obviously morale and productivity at HMC are quite low. As a private company, youve been fortunate in that these closures and layoffs have not been reported in the news.

In an attempt to find another niche where HMC can increase revenue, the company has been focusing on sourcing other types of clients, including companies that are focused on technology. Senior management within HMC has been divided on this new direction for the company. Some feel that the company should focus on what it does bestmanufacture equipment for the construction sector, while others feel that the company must continue to expand and enter new (but related) markets.

Your Situation:

On June 20, 2022, you received a call from Layla and she was quite upset about a conversation she just had with HMCs newest client, Steven Grant. Steven is the CEO of Moon Knight Inc. Moon Knight is based in Vancouver, but has clients across the country. Moon Knight designs and provides point of sale (POS) devices for retail stores.

Layla and Steven met three years ago, when they were at a local business function. They are both avid hockey fans, and have since bumped into one other at different hockey games, and also started to invite each other to their corporate executive suites from time to time. Over six months ago, Layla introduced you to Steven, and you were able to secure a contract with Moon Knight. This was a big win that came at a crucial time, as HMC needs to land clients who are in a sector other than construction. In addition, by securing such a client, HMC will be able to expand their expertise in other forms of prototyping and manufacturing, and leverage this experience to focus on different market sectors.

During one of their recent hockey games, Steven told Layla that HMC messed up two orders, and that he was thinking of cancelling the contract with HMC. You already know that you must do everything that you can to keep Moon Knight as a customer, such as provide the maximum total refund authorized, rebuild goodwill and Moon Knights confidence in your company, and not lose Moon Knights business. Moon Knight ordered a number of different POS adaptors for various devices, and there were issues with how the adaptors were manufactured. For the first order, the adaptor is supposed to hold credit card machines, and this adaptor was manufactured to specifications, but over a quarter of the adaptors are missing a screw for the base of the adaptor. For the second order, the adaptor is supposed to hold current generation iPad Airs (10.9-inch screens), but the adaptor only works for iPad Pros (12.9-inch screen versions). The first order was $96,000 for 1,500 adaptors; the second order was for $148,000 for 2,000 adaptors, along with an extra charge of $2.70 per adaptor (not included in the $148,000 charge) to manufacture the adaptors in various colours.

Steven wants a full refund. He is also demanding a letter of explanation and an apology.

After speaking to Layla, you investigated and found the following:

• For the first order, the quality control team checked only a third of the adaptors, rather than every single adaptor as they rolled off the assembly line. Proper procedure is that they check every adaptor. Because of the recent layoffs and closures, many employees workloads have been increasing, and as such, staff started to take some shortcuts. The quality control team is usually quite good but this is the second time this type of mistake has occurred.

• The quality control team is worried that because of this mistake, theyll be included in the next round of layoffs. There are no plans to disband this team or to let any of the employees go.

• Manufacturing has suggested that they can quickly add the missing screws if the client returns the shipment. If you take this approach, you can cover the return shipping costs. You do not need to deduct the return shipping costs (or any costs related to shipping) from your refund total, nor from any additional funds stated in this case.

• For the second order, Moon Knight correctly specified on the order contract that the adaptor needs to be built for current generation iPad Airs, and this information was entered properly into HMCs order system. However, when the designer created the mockup, he missed this information and used an iPad Pro (12.9-inch screen) as the model for the design. As such, the adaptors work for iPad Pros, but do not fit properly for the 10.9-inch display iPad Airs, as the overall dimensions are different.

• The manufacturing staff tried adding extension pieces and spacers to improve the fit for these adaptors, but this approach still did not solve the problem, as it did not provide a solid enough fit for Moon Knight to use these adaptors. Moon Knight does not want iPads that wobble or arent secure in their adaptors, as Steven cannot sell these systems to different retail stores.

• Moon Knight also placed a third order (for different adaptors) that is currently in the initial design stages, and will be manufactured four months from now.

Layla has ordered you to write Steven a letter granting him a partial adjustment, rather than a full refund. She knows that Steven will not be happy about this approach, but HMC cannot afford to eat the entire cost of this order. You can provide a partial refund of up to 70 percent. If you have creative ways in which you can generate goodwill, you may include or implement these activities/options, as long as they are realistic and plausible, and, of course, do not result in increased costs or expenses of over $800 for HMC (this amount is completely separate from the partial refund amount). You cannot provide future discounts, even though Moon Knight is an important new client.