Written Analysis: DR Technologies

Executive Summary

This case highlights the lack of intensity in the communication of the

importance and urgency of the new policy by Ed Claiborne, Corporate VP –

Procurement to the Procurement executives at the Plant.

Ed Claiborne spearheading the cost cutting strategies at DRW technologies

believes that the new policy (any procurement contracts above $250,000 shall

get Claiborne’s approval before proceeding further) will be most effective and

eagerly waits for implementation. However, with the special orders lined up in

the production plan and delay in manufacturing, the plant team has been busy

with its regular day to day production activity. This created a delay in the

response to the contract submission policy adherence which was unexpected by

Claiborne. To effectively make this policy a success, ED Clairborne has to visit

the plant, meet the managers and explain to them about the new policy implying

the key purpose behind it so that the managers understand the need to

priorities this contract policy.

DRW technologies, a consistently profitable and innovative defense and

aerospace company in the US with 21 different manufacturing plants around the

globe faced a challenge in running the operations at the lower cost due to

decline in the US defense budget.

DRW technology has a decentralized organization where the corporate

headquarters is responsible for strategy, HR, Corporate finance, Marketing and

sales, PR, etc. and the manufacturing units have their own HR, Procurement,

finance, product development and manufacturing departments.

Dagmar Hilgard, the first woman CEO of the company saw great opportunity in

procurement to cut costs of the products and hired Ed Clairborne as the

company’s first ever VP – Procurement.

After analyzing the cost history of procurement of materials, Claiborne rolled

out new policy that any contract above $250,000 needs to be approved by him

before being signed and this was communicated to the plant executives via an

email.

Though the managers at Plant did respond to the mail affirmatively, there was

not even a single contract submitted to Claiborne.

Situation Analysis

The corporate headquarters is responsible for strategy, human resources,

finance and accounting, marketing, sales among other things. Despite corporate

being responsible for a lot of things, the plants had a high degree of autonomy.

They had their own departments. Plant managers worked in tandem to help each

other with materials from vendors, each plant had their own budgets but all of

them did not perform up to the mark. So, the losses have to be borne due to
fixed contract prices. Hilgard was concerned about the need to cut cost, so he

hired a VP of procurement ED Clairborne. ED Clairborne comes from a firm that

had a strict hierarchical chain of command. Hilgard stressed about cutting costs

hence ED Clairborne started reading about cost of materials over 10 plants over

the previous year. He projected 50% savings in 6 years and wanted to send a

notice to plant managers. Debby Lopez suggested that he meets all plant

managers in person but ED Clairborne frowned upon it due to travel expenses.

Instead, he sent an email.

Problem Analysis

ED Clairborne received a generic email from most plant managers that they look

forward to meeting him. The problem to solve is the relationship between plant

managers and Ed Clairborne and how they can work together to help the

organization.

Solution Options

Ineffective communication between Ed Claiborne and plant procurement

managers hasn’t helped implementing new policies to cut cost.

Option 1 Without bringing much change, a proper communication bridge can

solve the problem effectively. Ed Claiborne could do a formal visit to different

plants will be productive. By approaching the plant executives at their workplace

will give ED Clairborne a chance to realize the busy schedule they are packed

with.

Option 2 Increasing the price of contract that are predefined to compensate

for the increase in cost prize.

 Taking into consideration the view of Debby Lopez (experienced

employees).

 Transparency in communication within the procurement & plant managers.

 Revisiting fixed priced contracts.

Recommendation

Option 1 should be implemented as it is the suitable one. Without having much

change, a proper communication bridge can solve the problem effectively. ED

Claiborne is new to the company and a formal visit to various plants will create

better communication. This can also provide information on contracts valued at

or above the $25,000 which is necessary to avoid increase in cost. The overall

plan to work on economic way and complete potential cost savings can be easily

achieved.

Action Plan

 Dagmar Hilgard Hired DRW Technologies’ first corporate vice president

of procurement ED Claiborne.

 Claiborne’s primary concern should be cutting cost.

 Debby Lopez appointed as Executive assistant for Claiborne.

 Claiborne announced a new Purchasing Policy.

 Email sent to every manager saying need to get approval for purchasing

material worth 250000$ and above with Claiborne in 2 weeks before

contract need to sign.

Contingency Plan

Debby recommended to visit some of the larger plants, have a personal connect

with the plant and procurement managers and asked for the feedback for the

proposed policy.