Product quality and cost affect every firms reputation and profitability, as well as the satisfaction of customers. As director of quality for a major appliance manufacturer, Ruth was reporting to the executive committee on the results of a program for correcting problems with a newly redesigned compressor (the motor that cools the refrigerator) that the company had recently begun using in its refrigerators. Following several customer complaints, the quality lab had determined that some of the new compressor units ran more loudly than expected, although they still effectively cooled the units.

The Decision

Faced with this information, Ruth has been asked to recommend a strategy for the company. One corrective option was simply waiting until customers complained and responding to each complaint if and when it occurred. Fixing noisy units could be expensive, but the company wishes to maintain its high-quality image.

Ruth, however, decided that this approach was inconsistent with the companys policy of being the high-quality leader in the industry. Insisting on a proactive, pro-quality approach, Ruth suggests a program for contacting all customers who had purchased refrigerators containing the new compressor. Unfortunately, the quality-and-customers-first policy will be expensive. Service representatives nationwide will have to phone every customer, make appointments for home visits, and replace original compressors with a newer model. Because replacement time is only 30 minutes, customers will hardly be inconvenienced, and food will stay refrigerated without interruption.

Others have even suggested that the company require consumers to pay a part of the cost of repairing the noisy compressor because the compressors still meet all expectations with respect to cooling, and this is the primary function of the refrigerator. Advocates of this position argue that the new compressors will extend the life of the refrigerator and customers will benefit.

Follow-up Questions

7-16.If you were a customer, what would you hope that the company would do? Would your answer be different if you were an investor or stockholder?

7-17.How might Ruths boss, the Vice President for Operations, view the situation differently than Ruth?

7-18.Which is the best of the three options in the short-term? What about in the long-term?

7-19.How could the company have avoided this situation?