From the analysis of the case study, Shell Case Fabricators (SCF) should reject the proposal by Air Connection Links (ACL) on the basis that changing the design at this later stage would have a huge financial implication to meet the set deadline. Changes in demands by clients tends to have notable financial implications considering that the company, involved in production, may need to restructure its production process to meet the set demands (Zhuang, Liu, & Xiong, 2018). ACL’s decision to change the modem design affects the ability for SCF to meet the deadline that it had set to deliver 91 modems in a period of 91 days. That means that the design team would need embark on the development of a new design that would then be considered by the engineering before production begins. Meeting the time demands for ACL would mean that SCF would need to restructure its production processes to ensure that the new design is considered as a priority for production.
If I was the project manager, the best and most viable option that I would consider is ACL meeting the financial implications arising from the change before SCF can agree to any change in the design of the modems. Based on the guesstimates provided, a change in the design at this stage would mean cost SCF £391,000. When making my decision, I would need to consider that SCF may face serious financial challenges if it fails to consider the financial implications. The main risk involved in the decision that I make is that ACL may opt to cancel the production process, as it may argue that is not in any position to meet the financial implication. Agreeing with ACL’s request would mean that SCF would most likely experience a loss in the production of the new modem design but is likely to capitalize on the out of sight demand for the modem.
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SCF may need to establish a front for negation with ACL as a way of ensuring that they reach an agreement that is acceptable to both parties to avoid possibility of ACL cancelling the production. Negotiation is an important aspect in any agreement, as it helps each of the parties involved to outline their set of demands based on the terms provided (Baranski, 2019). SCF may need to highlight the huge financial loss that it is likely to experience in case it agrees to change the modem design at this stage. Specifically, SCF would need to give ACL an incentive that would push them towards agreeing to continue their production with SCF. For example, SCF may agree to cut down on the financial cost of the change from £391,000 to £250,000 considering that the two companies have had a long relationship.
Negotiations between the two companies are expected to help develop a positive, long-range relationship considering the benefits that each company will get from the manufacturing of the modem. SCF and ACL may need to consider the fact that both companies have invested significantly on this project; thus, meaning that they need to come up with an agreement that does not humiliate any of the companies. In the example above, ACL would need to add £150,000 to the amount that Sabin is offering and SCF would cut £141,000 based on the guesstimate provided. Such gestures would show that each of the companies is committed to building a long-term relationship that goes beyond the current challenges experienced. Additionally, that would also mean that SCF understands ACL’s need to change the design of the modem as a way of improving possibility of a higher demand in different countries around the world.
Outsourcing of some of the project elements is one of the notable options to consider in reducing the financial implications of the change while ensuring that the production meets its deadline. Outsourcing refers to the process of subcontracting specific tasks to another company or organization for a vast number of reasons (Kenyon, Meixell, & Westfall, 2016). In this case, the decision to outsource would not be ethical considering that this is a subcontracted project. That means that ACL, which is the main contractor, has subcontracted SCF for the production process. Further subcontracting of the project would have serious unintended consequences including patent infringement among others for the company purchasing the modems. The main option available would be resource scheduling and prioritizing the production of the modem. SCF would focus all its resources towards the completion of the modem as a way of enhancing its capacity to meet the laid out timeline of 91 days.
If I were to look for another solution, the first aspect that I would include in the request for proposals (RFP) is production capacity. Focus would be on a company with the capacity to produce the modem at a much faster rate compared to that of SCF. Basically, this means that I would consider companies with a higher production capacity, especially those that operate on a 24-hour basis. The second aspect that I would include as part of the RFP is ability to meet strict deadlines considering that SCF is expected to deliver 60,000 modems within a limited period. The RFP would highlight the importance of working with a limited amount of time as one of the ways to ensure that qualified companies tender their proposals. In case a company is not able to meet these two aspects, it will not be considered as an option in providing SCF with the solution that is expects.
References
Baranski, A. (2019). Endogenous claims and collective production: an experimental study on the timing of profit-sharing negotiations and production. Experimental Economics , 22 (4), 857-884.
Kenyon, G. N., Meixell, M. J., & Westfall, P. H. (2016). Production outsourcing and operational performance: An empirical study using secondary data. International Journal of Production Economics , 171 , 336-349.
Zhuang, C., Liu, J., & Xiong, H. (2018). Digital twin-based smart production management and control framework for the complex product assembly shop-floor. The international journal of advanced manufacturing technology , 96 (1-4), 1149-1163.
