RAS Technologies had a long relationship with Girard, and Victoria had dealt with several of the company's senior executives. In addition to purchasing the 21C stainless steel pressure sensor, RAS Technologies also purchased the CL150 gas pressure regulator, which was part of the RAS-1200 series of industrial gas pressure monitoring systems. The CL150 regulator was a standard in the industry, and several customers specified it when ordering RAS1200 gas pressure monitoring systems. In the previous year, RAS Technologies purchased approximately 1,500 of CL150 regulators at a cost of approximately $260 each. (See Exhibit 2.) Victoria determined that there were 1,225 units of the 21C stainless steel pressure sensors in inventory, which was now considered obsolete'because of the quality issue at Guangxi Gas. There was also an outstanding payable to Girard for approximately $326,665, due the end of November. This payable was for a large order of CL150 regulators. In an effort to address the sensor quality problem with Girard, Jon Kormos sent a letter via email to Jamie Adams, regional distribution manager at Girard Sensing Technologies, on August 21. In the letter, Jon outlined the findings from tests on the 21C stainless steel pressure sensor, asked that Girard provide full credit for the sensor inventory valued at $86,509.50, and compensate RAS Technologies for all costs associated with the recall of the electronic volume correctors. A copy of the letter to Jamic Adams is provided in Exhibit 2. A formal reply from Jamie was received on October 28, which refuted the conclusions from the test results for the sensoc, denied any responsibility for the recall, and refused to provide credit for the sensor inventory. Several Girard executives were copled on the email, including Jill Adams, the company's senior vice president and general counsel. PREPARING A RESPONSE TO GIRARD Victoria felt that Girard should be held accountable for the recent recall and was unsure how to respond to the recent series of events with the supplier. However, Victoria recognized that RAS Technologies had a long relationship with Girard, and she did not want to lose this important supplier. Attending the meeting the next day would be Henry Zhao, Jon Kormos, and Jenessa Olson, senior parther at the law firm of Palin \& Scott, who represented RAS Technologies in corporate litigation matters. The purpose of the meeting was to decide how to respond to the email from Jamie Adams and to decide next steps. EXHIBIT 1 Shipments of RAS-200 Series Meters" Required information This case is important because supply managers must be able to understand altematives and decide on appropriate action when dealing with supplier quality issues. Read the following case on RAS Technologies and then answer the questions that follow: RAS Technologies Victoria Barclay, president of RAS Technologies, sat in her Fremont, California office, reviewing an email from Jamie Adams, reglonal distribution manager for a division of Girard Corporation (Girard), received on October 28. Girard supplied RAS Technologies with a sensor that had been the cause of a recent product recall of the RAS-200G electronic volume corrector. Test results from an independent third.party lab indicated that the sensor failed under conditions of extreme heat and humidity. Howbver, Jamie's email refuted the conclusions from the test results and denied any responsibility for the recall, It was now late in the afternoon of Monday, November 4, and Victoria was preparing a meeting the following morning at 9.00 o.m. to discuss how to address the problem with Girard. RAS TECHNOLOGIES Based in Fremont, Colifornia. RAS Technologies provided technology solutions for companies in the energy sector. Its products included oll and notural gas measurement devices and control technology, communications systems, and related software. The company was founded in 1974 by a group of three engineers and held more than 50 patents. Company soles surpassed $50 million for the first time in the most recent fiscal year. One of RAS Technologles' main product lines was the RAS-200 series of electronic gas volume correctors. These devices were used for measuring the volume of natural gas thot passed through a meter corrected to operating base conditions. adjusting for parameters such as gas pressure and temperature. The correctors were powered by lithium batteries and connected to the communication network of the gas company that enabled transmission gas volume data in the pipoline. RAS Technologles operated a 100,000-square-foot plant for product assembly and distribution, omploying approximately 150 hourly workers. Operations for machining. plastic injection molding. subassemblies and wire harnesses, and printed circuit boords were outsourced to local suppliers. Victoria Barclay was a graduate of Stanford University School of Engineering, and had been with the company for more than 15 years, working in product development and sales before being promoted to president and CEO, a position she had held for four years. The quality problem with the RAS-200G correctors sold to Guangxi Gas Corporation is an example of Multiple Choice supplier failure cost prevention cost external failure cost internal failure cost appraisol cost During the meeting to decide what action to take, Victoria Barclay needed to Multiple Choice consider the effects on the long-term relationship between Girard Corporation and RAS Technologies consider fequiring all suppliers to be iso 9000 certified perform a cost-benefit analysis of recalling RAS-200G electronic volume correctors from other customers consider changing the supplier quality systems at RAS Technologies evaluote alternotive sensor suppliers Three years prior, RAS Technologies received an order from a Chinese company, Guangxi Gas Corporation (Guangxi Gas). for 1,600 RAS-200G correctors. Approximately 330 units were delivered that year, with the balance shipped the following year. On May 16, Victoria received an email from Mr. Zhong Chen, vice president at Guangxi Gas, indicating that several of the RAS-200G correctors had failed in the field and the company was missing critical data about gas volumes shipped through its network, In the email, Mr. Chen demanded that RAS Technologies replace the 1,600 RAS-200G correctors and compensate Guangxi Gas for all costs, including lost gas revenues. Henry Zhao, the sales representative for RAS Technologies in Southeast Asia, and Jon Kormos, quality assurance manager, were sent to investigate the problem. They confirmed that 11 RAS-200G correctors had falled in the field. They were able to recover lost data on gas volumes using the mechanical back-up feature on the units, thereby avoiding problems related to lost gas revenues for Guangxi Gas. Victoria also sent the five versions of the RAS-200 series meters (RAS-200A, RAS-200G, RAS-201A, RAS-201G, and RAS202A) to a third-party lab, Bekker Engineering, to conduct accuracy verification tests. Findings indicated that four of the five meters, including the RAS-200G, failed when exposed to temperatures of 50 degrees Celsius (122 degrees Fahrenheit) and 90 percent humidity. The root cause of the problem was determined to be the 21C stainless steel pressure sensor supplied by Girard Corporation, The cost of the sensor was $70.62. The total number of RAS-200 series meters shipped by customer location for the previous five years is provided in Exhibit 1. Although the standard RAS Technologies general warranty was for one year, Victoria agreed with Mc. Chen to replace all 1,600 correctors at Guangxi Gas, which included a different sensor that was determined to have higher performance characteristics at elevated temperatures and humidity. The average manufacturing cost of a corrector was $350. In exchange for replacement of the correctors, Guangxi Gas was to remove all existing product from the field and return them to RAS Technologies: GIRARD CORPORATION Girard Corporation was a Fortune 100 company with divisions in aerospace, building technologies, and sensing technology solutions for the energy sector, Girard's annual revenues were $43 bilition with a global workforce of 125,000 . RAS Technologies had a long relationship with Girard, and Victoria had dealt with several of the company's senior executives. In addition to purchasing the 21C stainless steel pressure sensor, RAS Technologies also purchased the CL.150 gas pressure regulator, which was part of the RAS-1200 series of industrial gas pressure monitoring systems. The CL150 regutator was a standard in the industry, and several customers specified it when ordering RAS1200 gas pressure Girard Corporation responded to RAS Technologies that it Multiple Choice agreed with the conclusions from the test results for the sensor and denied any responsibility for the recall agreed with the conclusions from the test results for the sensor and accepted responsibility for the recall refuted the conclusions from the test resuits for the sensor and denied any responsibility for the recall refuted the conclusion from the lest results for the sensor and held AAS Technologios responsible for the fecall refuted the conclusion from the test results for the sensor but offered to split the costs of the recall