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Case Study

Corwin Corporation

By June 1983 corwin corporation  had  grown into a $150 million per year corporation with an international reputation for manufacturing  low-cost,  high-Quality rubber components. Corwin maintained  more than a dozen different product lines, all of which were sold as off-the-shelf items in department stores hardware stores,  and automotive parts distributors. The name “Corwin” was  now synonymous with “quality” This provided management with the luxury of having products that maintained extremely long  life cycles.

Organizationally,   Corwin had maintained the same structure for more than fifteen  years. The top management of corwin corporation was highly conservative and believed  in a marketing approach to find new markets for existing product lines rather than  to explore for new products. Under this philosophy,  Corwin maintained a small R&D group whose mission was simply to evaluate state-of-the-art technology and its application  to existing product lines.

Corwin’s  reputation was so good that they continually received inquiries about the manufacturing of specialty products. Unfortunately, The conservative nature of corwin’s management created a “do not  rock the boat” atmosphere opposed to taking any  type of risks. A management policy was established to evaluate all specialty-product requests. The policy required answering the following questions:

• Will the specialty product provide the same profit margin (20 percent) as existing product lines?
• What is the total projected profitability to the company in the terms of follow-on contracts?
• Can the specialty product be developed into a product line?
• Can the specialty product be produced with minimum disruption to existing product lines and manufacturing operations?

These stringent requirements forced corwin to no-bid more than 90 percent of all specialty-product inquires.

Corwin Corporation was a marketing-driven organization, although manufacturing often had different ideas. Almost all decisions were made by marketing with the expectation of product pricing and estimating, which was a joint undertaking between  manufacturing and  marketing. Engineering was considered as merely a support group to marketing and manufacturing.

For specialty products, the project  managers would always come out of marketing even during the R&D phase of development. The company’s approach was that if the specialty product should mature into a full product line, then there should be a product line manager assigned right at the onset.

The Peters Company Project

In 1980, Corwin accepted a specialty-product assignment from Peters Company because of the potential for follow-on work. In 1981 and 1982, and again in 1983, profitable follow-on contracts were received, and a good working relationship developed, despite Peter’s reputation for being a difficult customer to work with.

On December 7, 1982, Gene Frimel, the vice president of marketing at Corwin, received a rather unusual phone call from Dr. Frank Delia, the marketing vice president at Peters Company.

Delia: “Gene, I have a rather strange problem on my hands. Our R&D group has $250,000 committed for research toward development of a new rubber product material, and we simply do not have the

0 International College of Auckland                                                           721 Assessment 01 (v1)

Available personnel or  talent to undertake the project. We have to go outside We’d like your company to do the work. Our testing and R&D facilities are already overburdened”.

Frimel: “Well, as you know, Frank, we are not a research group even though we’ve done this once before for you. And furthermore, I would never be able to sell our management on such an Undertaking let sorne other company do the R&D work and then we’ll take over on the production end”

Delia. “Let me explain our position on this. We’ve been burned several times in the past. Projects like this generate several patents, and the R&D Company almost always requires that our contracts give  them royalties or first refusal for manufacturing rights”.

Frimel: “I understand your problem, but it’s not within our capabilities. This project, if undertaken, could disrupt parts of our organization. We’re already operating lean in engineering”.

Delia: “Look, Gene! The bottom line is this: We have complete confidence in your manufacturing ability to such a point that we’re willing to commit to a five-year production contract  if the product can be developed. That makes it extremely profitable for you”.

Frimel: “You’ve just gotten me interested. What additional details can you give me?”

Delia: “All I can give you is a rough set of performance specifications that we’d like to meet. Obviously, some trade-offs are possible.”

Frimel: “When can you get the specification sheet to me?

Delia: ”You’ll have it tomorrow morning. I’ll ship it overnight express”.

Frimel: “Good! I’ll have my people look at it, but we won’t be able to get you an answer until after the first of the year. As you know, our plant is closed down for the last two weeks in December, and most of our people have already left for extended vacations”.

Delia: “That’s not acceptable! My management wants a signed, sealed, and delivered contract by the end of this month. If this is not done, corporate will reduce our  budget for 1983 by $250,000, thinking that we’ve bitten off  more than we can chew. Actually, I need your answer within forty-eight hours so that I’ll have some time to find another source”.

Frimel: “You know, Frank, today is December 7, Pearl Harbor Day. Why do I feel as though the sky is about to fall in?”.

Delia: “Don’t worry, Gene! I’m not going to drop any bombs on you. Just remember, all that we have available is $250,000, and the contract must be a firm-fixed-price effort. We anticipate a six-month project with $125,000 paid on contract signing and the balance at project termination”.

Frimel: “I still have that ominous feeling, but I’ll talk to my people. You’ll hear from us with a go or no-go decision within forty-eight hours. I’m scheduled to go on a cruise in the Caribbean, and my wife and I are leaving this evening. One of my people will get back to you on this matter”.

Gene Frimel had a problem. All bid and no-bid decisions were made by a four-man committee composed of the president and the three vice presidents. The president and the vice president for manufacturing were on vacation. Frimel met with Dr. Royce, the vice president of engineering, and explained  the situation.

© International College of Auckland

721 Assessment #1 (v1)

Royce:”You know, Gene,  i totally support projects like this because it would help our technical people grow  intellectually. People grow  intellectually. Unfortunately, my vote never appears to carry any weight”.

Frimel: “The profitability potential as well as the development of good customer relations makes this attractive, but I’m  not sure we want to accept such a risk. A failure could easily destroy our good working relationship with Peters Company” .

Royce: “i’d have to look at the specification sheets before assessing the risks, but I would like to give it a shot” .

Frimel: “I’ll try to reach our president by phone” .

By late afternoon, Frimel was fortunate enough to be able to contact the president and received a reluctant authorization to proceed. The problem  now was how to prepare a proposal within the next  two or three days and be prepared  to make an oral presentation to Peters Company.

Frimel: “The Boss gave his blessing, Royce, and the ball is in your hands. I’m leaving for vacation, and you’ll have total responsibility for the proposal and presentation. Delia wants the presentation this weekend. You should have his specification sheets tomorrow morning” .

Royce: “Our R&D director, Dr. Reddy, left for vacation this morning. I wish he were here to help me price out the work and select the project manager. I assume that, in this case, the project manager will come out of engineering rather than marketing.”

Frimel: “Yes, I agree. Marketing should not have any role in this effort. It’s your baby all the way. And as for the pricing effort, you know our bid will be for $250,000. Just work backwards to justify the numbers. I’ll assign one of our contracting people to assist you in the pricing. I hope I can find someone who has experience in this type of effort. I’ll call Delia and tell him we’ll bid it with an unsolicited proposal.”

Royce selected Dan West, one of the R&D scientists, to act as the project leader. Royce had severe reservations about doing this without the R&D director, Dr. Reddy, being actively involved. With Reddy on vacation, Royce had to make an  immediate decision.

On the following morning, the specification sheets arrived and Royce, West, and Dick Potts, a contracts man, began preparing the proposal. West prepared the direct labor man-hours, and Royce provided the costing data and pricing rates. Potts, being completely unfamiliar with this type of effort, simply acted as an observer and provided legal advice when necessary. Potts allowed Royce to make all decisions even though the contracts man was considered  the official representative of the president.

Finally completed two days later, the proposal was actually a ten-page letter that simply contained  the cost summaries (see Exhibit 10-2) and the engineering intent. West estimated  that thirty tests would be required. The test matrix described only the test conditions for the first five tests. The remaining twenty-five test conditions would be determined at a later date, jointly by Peters and Corwin personnel.

International College of Auckland

721 Assessment #1 (v1) t,

Direct labour and support                                                          $30,000

Testing (30 tests at $2,000 each)                                               $60,000

Overhead at 100%                                                                     $90,000

Materials                                                                                    $30,000

G&A (general and administrative, 10%)                                   $21,000

Total                                                                                          $231,000

Profit                                                                                          $19,000

Total                                                                                          $250,000

 

On Sunday morning, a meeting was held at Peters Company, and the proposal was accepted. Delia gave Royce a letter of intent of authorizing  Corwin Corporation to begin working on the project immediately the final contract  would not be available for signing until late January, and the letter of intent simply stated that Peters Company would assume all costs until such time that the contract was signed or the effort terminated.

West was truly excited about being selected as the project manager and  being able to interface with the costumer, a luxury that was usually given only to the marketing personnel. Although the corwin Corporation was closed for two weeks over Christmas, west still went into the office to prepare the  project schedules and to identify the support he would need in the other areas, thinking that if he presented this information to management on the first day back to work, they would be convinced  that he had everything under control.

The Work Begins . . .

On the first working day in January 1983, a meeting was held with the three vice presidents and Dr. Reddy to discuss the support needed for the project. (West was not in attendance at this meeting, although all participants had  a copy of  his memo.)

Reddy: “I think we’re heading for trouble in accepting this project. I’ve worked with Peters Company previously on R&D efforts, and they’re tough to get along with. West is a good man, but I would never have assigned  him as the project  leader. His expertise is in managing internal rather than external projects. But, no matter what happens, I’ll support west the best I can.”

Royce: “You’re too pessimistic. You have good people in your group and I’m sure you’ll be able to give him the support he needs. I’ll try to look in on the project every so often. West will still be reporting to you for this project. Try not to burden him too much with other work. This project is important to the company.”

West spent the first few days after vacation  soliciting the support that he needed from the other line groups. Many of the other groups were upset that they had  not been informed earlier and were unsure as to what support they could provide. West met with Reddy to discuss the final schedules.

Reddy: “Your schedules look pretty good, Dan. I think you have a good grasp on the problem. You won’t need very much help from me. I have a lot of work to do on other activities, so I’m just going to be in the background on this project. Just drop me a note every once in a while, telling me what’s going on. I don’t need anything formal. Just a paragraph or two will suffice.”

By the end of the third week, all of the raw materials had been purchased, and initial formulations and testing were ready to begin. In addition, the contract was ready for signature. The contract contained a clause specifying that Peters Company had  the right to send an in-house representative into Corwin

International College of Auckland                                                     721 Assesment #1 (v1)

Corporation  for  the duration of  the project. Peters Company informed corwin that Patrick ray would be in-house representative, reporting to Delia, and would assume his responsibilities on or about February 15.

By the time Pat Ray appeared at Corwin corporation, West had completed the first three tests results were not what was expected, but gave promise that Corwin was heading in the right direction, Pat Ray, interpretation or the tests was completely opposite to that of West. Ray thought that Corwin was “way ill base,” and redirection was needed.

Roy: “Look, Dan! We have only six months to do this effort and we shouldn’t waste our time on marginally acceptable data. These are the next five tests I’d like to see performed.”

West: “let me look over your request and review it with my people. That will take a couple of days, and, in the meanwhile, I’m going to run the other two tests as planned.”

Ray’s arrogant attitude bothered West. However, West decided that the project was too important to “knock heads” with Ray and simply decided to cater to Ray the best he could. This was not exactly the working relationship that West expected to have with the in-house representative.

West reviewed the test data and the new test matrix with engineering personnel, who felt that the test data were inconclusive as yet and preferred to withhold their opinion until the results of the fourth and fifth tests were made available. Although this displeased Ray, he agreed to wait a few more days if it meant getting Corwin Corporation on the right track.

The fourth and fifth tests appeared to be marginally acceptable just as the first three were. Corwin’s engineering people analyzed  the data and made their recommendations.

West: “Pat, my people feel that we’re going in the right direction and that our path has greater promise than your test matrix.”

Roy: “As long as we’re paying the bills, we’re going to have a say in what tests are conducted. Your proposal stated that we would work together in developing the other test conditions. Let’s go with my test matrix. I’ve already reported back to my boss that the first five tests were failures and that we’re changing the direction of the project.”

West: “I’ve already purchased $30,000 worth of  raw materials. Your matrix uses other materials and will require additional expenditures of $12,000.”

Ray: “That’s your problem. Perhaps you shouldn’t have purchased all of the raw materials until we agreed on the complete test matrix.”

During the month of February, West conducted fifteen tests, all under Ray’s direction. The tests were scattered over such a wide range that no valid conclusions could be drawn. Ray continued sending reports back to Delia confirming that Corwin was not producing beneficial results and there was no indication that the situation would reverse itself. Delia ordered Ray to take any steps necessary to ensure a successful completion of the project.

Ray and  West met again as they had done for each of the past forty-five days to discuss the status and direction of the project.

Ray and west met again as they had done for each of the past forty-five days to discuss the status and direction of the project.

Roy: “Dan, my boss is putting tremendous pressure on me for results, and thus far I’ve given him nothing. I’m up for promotion in a couple of months and I can’t let this project stand in my way. It’s time to completely redirect the project.”

© International College of Auckland                                721 Assessment It 1 (v1)

West: “Your redirection of the activities is playing havoc with my scheduling. I have people in other departments who just cannot commit to this continual rescheduling. They blame me for not communicating with them when, in fact, Its embarrassed to.”

Roy: “Everybody has their  problems. We’ll get this problem solved. I spent this morning   working with some of your lab people in designing the test fifteen tests. Here are the test conditions.”

West: “I certainly would have liked to be involved with this After all; I thought I was the project manager. Shouldn’t I have been at the meeting?”

Roy: “Look, Dan! I really like you, but I’m not sure that you can handle this project. We need some good results immediately, or my neck will be stuck out for the next four months. I don’t want that Just have your lab personnel start on these tests, and we’ll get along fine. Also, I’m planning on spending a great deal of time in your lab area. I want to observe the testing personally and talk to your lab personnel.”

West: “We’ve already conducted twenty tests, and you’re scheduling another fifteen tests. I priced out only thirty tests in the proposal. We’re heading for a cost-overrun condition.”

Roy: “Our contract is a firm-fixed-price effort. Therefore, the cost overrun is your problem.”

West met with Dr. Reddy to discuss the new direction of the project and potential cost overruns. West brought along a memo projecting the costs through the end of the third month of the project

Dr. Reddy: “I’m already overburdened  on other projects and won’t be able to help you out Royce picked you to be the project manager because he felt that you could do the job. Now, don’t let him down. Send me a brief memo next month explaining the situation, and I’ll see what I can do. Perhaps the situation will correct itself.”

During the month of March, the third month of the project, West received almost daily phone calls from the people in the lab stating that Pat Ray was interfering with their job. In fact, one phone call stated that Ray had changed the test conditions from what was agreed on in the latest test matrix. When West confronted  Ray on his meddling, Ray asserted that Corwin personnel were very unprofessional in their attitude and  that he thought this was being carried down to the testing as well. Furthermore, Ray demanded that one of the functional employees be removed immediately from the project because of incompetence. West stated that he would talk to the employee’s department manager. Ray, however, felt that this would be useless and said, “Remove him or else!” The functional employee was removed from  the project.

Original Proposal Cost               Total Project  Cost                               

                                                         Summary for Six                        Projected at End of                                                   

                                                         Month Project                            Third Month

Direct labor/support                         $30,000                                        $15,000

Testing                                               60,000 (30 tests)                            70,000 (35 tests)

Overhead                                            90,000 (100%)                               92,000(120%)*

Materials                                            30,000                                            50,000

G&A                                                   21,000 (10%)                                22,700(10%)

Totals                                                 $231,000                                         $249,700

International College of Auckland                                 721 Assessment #1 (v1)

By the end of the third month, most Corwin employees were becoming disenchanted with the project and were looking for other assignments. West attributed this to Ray’s harassment of the employees. To aggravate the situation even further, Ray met with Royce and Reddy, and demanded that West be removed and a new project manager be assigned.

Royce refused to remove West as project manager, and ordered Reddy to take charge and help West get the project back on track

Reddy: “You’ve kept me in the dark concerning this project, West. If  you want me to help You as Royce requested, I’ll need all the information  tomorrow, especially the cost data. I’ll expect you in my office tomorrow morning at 8:00 A.M. I’ll bail you out of this mess.”

West  prepared the projected cost data for the remainder of the work and presented  the results to Dr. Reddy (see Exhibit 10-4). Both West and Reddy agreed that the project was now out of control, and severe measures would be required to correct the situation, in addition to more than $250,000 in corporate funding.

Reddy: “Dan, I’ve called a meeting for 10:00 A.M. with several of our R&D people to completely construct a new test matrix. This is what we should have done right from the start.”

West: “Shouldn’t we invite Ray to attend this rneeting ? I’m sure he’d want to be involved in designing the new test matrix.”

Reddy: “I’m running this show now, not Ray!! Tell Ray that I’m instituting new policies and procedures for in-house representatives. He’s no longer authorized to visit the labs at his own discretion. He must be accompanied by either you or me. If he doesn’t like these rules, he can get out. I’m not going to allow that guy to disrupt our organization. We’re spending our money now, not his.”

West met with Ray and informed him of the new test matrix as well as the new policies and procedures for in-house representatives. Ray was furious over the new turn of events and stated that he was returning to Peters Company for a meeting with Delia.

Direct labor/support                                                                                      47, 000*

Testing (60 tests)                                                                                          120, 000

Overhead (120%)                                                                                          200,000

Materials                                                                                                      103,000

G&A                                                                                                              47,000

$ 517,000

Peters contract                                                                                              250,000

Overrun                                                                                                      $ 267,000

*Includes Dr. Reddy .

On the following Monday, Frirnel received a letter from Delia stating that Peters Company was officially cancelling the contract. The reasons given by Delia were as follows:

1. Corwin had produced absolutely no data that looked promising.

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2. Corwin continually changed the direction of the project and did not appear to have a systematic plan of attack

3. Corwin did not provide a project manager capable of handling such a

4. Corwin did not provide sufficient support for the in-house representative.

5. Corwin’s top management did not appear to be sincerely interested in the project and did not provide sufficient executive-level support.

Royce and Frimel met to decide on a course of action  in order to sustain good working relations with Peters Company. Frimel wrote a strong letter refuting all of the accusations in the Peters letter, but to no avail. Even the fact that Corwin was willing to spend $250,000 of  their own funds had no bearing on Delia’s decision. The damage was done. Frimel was now  thoroughly convinced that a contract should not be accepted on “Pearl Harbor Day.”

Source: http://www.studymode.com/essays/Corwin-Corporation-941834.html

© International College of Auckland                                             721 Assessment #1 (v1)

Question 01 (L01 a)                                                                                              14 Marks

 

1.1 Explain the importance of each of the following four (4) stages of the project management life cycle;

1. a) Initiation and definition

1. b) Planning

1. c) Executing

1. d) Controlling

(0.5 marks for each explanation of the four (4) stages listed, (4 x 0.5 = 2 marks)

1.2 Evaluate Corwin’s approach at each of the above stages in the Peters Company Project

                 (2.5 marks for each evaluation of a stage listed in 1.2, (4 x 2.5 = 10 marks)

 

1.3 Explain the importance of effectively closing out a project                            (2 marks)

Question 02 (L01 b)                                                                                               3 Marks

 

2.1 Compare how each of the following carried out their particular role and responsibilities in the Peters Company Project.

1. a) Dan West (Project Manager)

1. b) Dr Royce (Sponsor / Purchaser)

1. c) Pat Ray (Client Co-ordinator)

 

                                                          (1 mark for each comparison, 3 x 1 = 3 marks)

 

 

 

 

Question 03 (L01 c)                                                                                                8 Marks

3.1 Identify

1. a) two (2) shortcomings in Dan West’s communication style in the context of the Peters Company Project

                                          (1 mark for each shortcoming identified, 2*1  = 2 marks)

 

and

1. b) Provide one (1) recommendation, for each of the each of the two shortcomings identified, as to how he might address these in future projects.

 (1 mark for each recommendation on addressing the shortcomings, as identified in Q3.1, 2*l = 2 marks)

 

 

3.2 Identify

 

1. a) two (2) shortcomings in Dr. Boyce’s management style in the context of the Peters Company Project

 (1 mark for each shortcoming identified in Q3.2, 2 *l = 2 marks)

And

1. b) Provide one (1) recommendation, for each of the each of the two shortcomings identified, as to how he might address these in future projects.

(1 mark for each recommendation addressing the shortcomings, as identified in Q3.1, 2*1 = 2 marks)

 

 

Question 04 (L02 a and b)                                                                    34 Marks

4.1 (LO 2 a) Critically review the system and sub systems put in place by Corwin Corporation, to carry out the Peters Company Project, with regards to the following

1. Scope
2. Time management

iii. Cost

1. Quality
2. HR
3. Communication

vii. Risk

viii. Procurement