Question

INTRODUCTION: The sun was setting and Arun Mittra was having the last sip of his coffee. He had not expected the day to start in such a strange fashion — and to say the least, the experience had not been very pleasant. The memories of that day kept rushing back and unsettled him more. That morning, the meeting had again started on an acrimonious note and had continued in the same vein until it was over. It was the same old story of choosing a vendor for the supply of one of the critical subassemblies for the assembly and manufacture of voltage stabilizers, the top product of A-CAT Corp. As Mittra noted, the way the manufacturing lead times are becoming the focal points with other manufacturers/competitors, A-CAT will be lucky if it survives the onslaught with their labored, never ending decision-making process. BACKGROUND: Vendor selection and management was always a tricky issue for A-CAT, and it always upset Mittra, vice president of A-CAT Corp. There were many contradictions and it was always a bone of contention between various departments within the organization. Purchasing, Finance, Manufacturing, Quality, and Sales and Service, became part of the discussion. There were four prominent suppliers vying for the contract, which was usually given on the basis of supply history, delivery promptness, quality, cost, salvage policy and intangible goodwill. THE COMPANY: A-CAT Corp. (A-CAT) was one of the leading producers of electrical appliances. It was a mid-sized manufacturer and distributor of domestic electrical appliances, and largely catered to the price-sensitive rural population. The company owned and operated two medium-sized manufacturing units in a sleepy town called Gondia, in one of the remote districts in Vidarbha, ironically a backward region in the most progressive state of India, Maharashtra. A-CAT had an alliance partnership with Jupiter Inc. for the production of cabinets and had a collaborative venture with Global Electricals for manufacturing TV signal boosters and battery chargers. A-CAT’s manufacturing units had been in operation since 1986. The budget year 2010-2011 showed annual sales of $9,800,000 and employed about 40 or more employees. The voltage regulators manufactured by A-CAT were used for many different purposes, although the focus was on its flagship product, VR500, a voltage regulator of 500 volt-amperes specifically used in households as a protective device for refrigerators and television sets, so as to protect the latter from the vagaries of load fluctuations and/or frequent power failures, which were very common phenomena in this backward region of Vidarbha. The primary functional departments of A-CAT were its Purchasing Department, Design Department, Manufacturing Department and Sales/Service departments. Rather than compete with the large-scale operations prevalent in similar types of industry, A-CAT preferred to focus on the rural segment. It offered nearly 100 different models of various electrical appliances for household use, including TV signal boosters, transformers, FM radio kits, electronic ballasts, battery chargers and voltage regulators. The broad range of products catered to the rural population, thus sticking to A-CAT’s policy of catering to the low end of the market segment in and around Vidarbha. The low end refers to the customers who were quite sensitive towards pricing. In the opinion of top-level management, there was more opportunity in this segment of the market, and management had been proved right. THE ISSUE: In choosing an important component (transformer) for A-CAT’s voltage regulator VR500, the objective was to choose the best supplier. The company decided to consider efficiency, power factor, losses, turn ratio and cost. Out of these five criteria, the first three lent themselves only to qualitative comparison, while for the last two criteria, quantitative information was easily available. Over the years, A-CAT had been relying on four major suppliers of transformers, and these had the brand names Ideal, Dolphin, Boss and Freedom. The company always knew with its focus on only these four vendors that it was missing out on opportunities to explore other options. It was also aware that these were by no means the only feasible ones, but to keep decision making to a less complex level, it arbitrarily decided to compare only these four. The decision making, though quantitative in nature, involved a lot of qualitative options and hence a lot of subjectivity. The consensus ranking, along with one-on-one comparison data, was available to the group of decision makers, as the performance of each brand under various criteria was on record, but the problem the whole group faced was how to make a rational and comprehensive framework for structuring the decision problem. Though the data was not concrete in nature, the comparative evaluations were thrashed out through deliberations and discussions. And the most notable and at the same time surprising aspect was that everyone seemed to agree with the process. In order to bring in their judgments about various criteria in the hierarchy, decision makers compared the criteria in a pair-wise manner. The need was to decide which one of the criteria was more important than the others in selecting the best transformer. The decision had to be made and priorities had to be set as to which criterion was more important for A-CAT in achieving its objective, and how much more important it was than the other criteria. The company had plenty of available data to fall back on (see Exhibits 1 to 3), but it was still not sure how best to utilize it and prepare an action plan. The company needed an approach to take decision making to the next level. It was aware of certain methodologies that helped to improve the decision-making process; it was not the lack of knowledge regarding the tools that was hampering the decision making, but the experience in applying the tools. THE OBJECTIVE: To select the best transformer brand/model for VR500 (out of the available alternatives). • Four Alternatives: Dolphin, Ideal, Boss, and Freedom • Four Criteria for Selection: 1- Efficiency, 2-Power, 3-Losses, 4-Cost. • Scale of pair-wise comparison: 1 - 3 - 5 - 7 – 9.  1 - Equal importance: Two elements contribute equally to the objective.  3 - Moderate importance: Experience and judgment slightly favor one element over the other.  5 - Strong importance: Experience and judgment strongly favor one element over the other.  7 - Very strong importance: One element is favored strongly over the other; its dominance is demonstrated in practice.  9 - Extreme importance: Evidence favoring one element over the other is of the highest possible order of affirmation. THE DECISION: The situation called for something out-of-the-box, as the important elements of the decisions were difficult to quantify or compare, and also the communication among the team members was impeded by their different perspectives. The aim was to judge all the alternatives without any prejudices and biases. Mittra knew that, being human, there was always a chance of being swayed by extraneous considerations — we all have our predilections and this plays a great part in our decisions, which are always thought of as rational by those making them. It was more or less clear to all concerned that there were lot of issues involved, and this would bring to the fore a lot of frayed tempers and bloated egos, and to end it all A-CAT had to do something about it. The decision making had to be formulated in a manner in which all concerned got their say, and the decision had to be taken without compromising the objectivity of the process. Wriggling out of the situation was very difficult and seemed almost impossible; all the functional departments were working at cross purposes and were seen to be almost at loggerheads. The perception always varied and day by day it was becoming very difficult to make a decision in favor of one or the other supplier without annoying one functional department or another. Not satisfied with the answers and solutions, Mittra decided to take a collective view. To make it really collaborative, he asked the group of decision makers to postpone the decision until they arrived at what they thought was the correct decision. Since they were on an unending rollercoaster ride of arguments and counter-arguments, Mittra put his foot down and asked the warring factions in the group to come up with some quantitative way of dealing with the issue at hand.

1. Rate Arun Mittra as a (Corporate) leader.  List any strong and weak points
2. Discuss the current decision-making process at A-CAT.  Evaluate it’s; Complexity, Effectiveness and Accuracy.
3. Suggest ways to improve A-CAT’s decision-making process.  Make specific recommendations to improve the process.
4. Have the quality of the comparison tables used in this case study helped or hindered your ability to resolve this case study? Why?
5. Do you agree or disagree with A-CAT’s decision, during this vendor selection process, to limit the number of potential vendors to four in order to simplify the process?  Explain your answer.

Answer 1

Answer:

Rate Arun Mittra as a (Corporate) leader.  List any strong and weak points

As a corporate leader, Arun Mittra is weak in decision making process, handling the employees as far as maintaining the discipline at the workplace is concerned and handling the conflict among the employees.

Strong points of Arun Mittra are that he is able to analyse the situation and the tendency of the human behaviour towards that situation. As far as the case is concerned, Arun Mittra knew that the selection of the supplier for the transformer would involve the biased decision from the team members as it is human tendency of preferring someone over the other only because of liking developed for a particular person on the basis of some of his/her attributes. Moreover, Arun Mittra is able to provide alternatives to the team members for arriving at the certain decision regarding the selection of the supplier as Arun Mittra has ordered the team members to produce quantitative analysis of their decision for the suppliers.

Weak points of Arun Mittra are that he is not able to manage the discipline among the team members and cannot handle the conflict among them. Arun Mittra is not able to provide a proper direction to the team members on how to arrive at the decision. Arun Mittra is not able to make the faster decision and is not able to explain the seriousness of the decision to his team members. Arun Mittra is not able to explain the step by step guidelines for arriving at the decision to his team members.

Discuss the current decision-making process at A-CAT.  Evaluate its; Complexity, Effectiveness and Accuracy.

The current decision making process at A-CAT was through the successful and unbiased rating provided by the team members on the scale designed for the selection of the supplier and the discussion over the ratings and judgements by the team members.

The decision was to be made for the selection of the supplier for ordering the transformers from them for the production of VR500. The four available alternatives of suppliers were Dolphin, Ideal, Boss, and Freedom. The criteria developed for the selection includes efficiency, power, losses and cost. Scale of pair-wise comparison was having the rating of 1 - 3 - 5 - 7 – 9. 1 represents equal importance i.e. the two elements contribute equally to the objective. 3 represents moderate importance i.e. experience and judgment slightly favour one element over the other. 5 represents strong importance i.e. experience and judgment strongly favour one element over the other. 7 represents very strong importance i.e. one element is favoured strongly over the other; its dominance is demonstrated in practice. 9 represents extreme importance i.e. evidence favouring one element over the other is of the highest possible order of affirmation.

The team members were asked to make the decision on the basis of rating the four suppliers for the four criteria over the developed scale. However, the decision making process was highly complex as the rating of the team members had a risk of biasness and favours. Moreover, the team of different functional departments were having the conflict related to the ratings being provided to the suppliers by the individual departments and this was making it difficult to arrive on a single decision. As far as accuracy of the decision making process is concerned, the criteria and the scale can get highly effected as a result of biasness of the team members which may affect the accuracy and effectiveness of the decision making process for selecting the supplier.

Suggest ways to improve A-CAT’s decision-making process.  Make specific recommendations to improve the process.

In order to improve the decision making process, A-CAT should rely on the secondary data rather than the primary data from the team members. A-CAT should compare the previous data for efficiency, power, losses and cost of all the suppliers for the previous years with their current feedback from their other customers or from the data provided by all the individual suppliers for the current year.

Using secondary data will reduce the time required for collecting and organising the primary data from the team members and converting this data into the useful information for arriving at the decision. This will also reduce the tension created among the functional departments as a result of conflicts between them and it will help in faster decision making process.

Have the quality of the comparison tables used in this case study helped or hindered your ability to resolve this case study? Why?

The quality of the comparison tables used in this case study helped the ability to resolve this case study. The comparison table helped to identify the key parameters on the basis of which the decision regarding the selection of the supplier has to be made. These parameters have helped to identify the key decision variables that A-CAT is looking for while selecting the vendors and depending on these parameters the best among the available alternatives of the suppliers will be selected.

Do you agree or disagree with A-CAT’s decision, during this vendor selection process, to limit the number of potential vendors to four in order to simplify the process?  Explain your answer.

Yes I agree with A-CAT’s decision, during this vendor selection process, to limit the number of potential vendors to four in order to simplify the process.

The business of A-CAT is limited to the remote location of vidharbha region, Gondia. Also the business trend of A-CAT shows that the customers are satisfied with the price of the product of A-CAT. And most of the customers of A-CAT are located in rural region. Thus, A-CAT is having a limited business and expanding the reach for more vendors will make the process of procurement of transformer more complex and in such situation more time will be required for selecting the vendor and it will be costlier process as it may involve comparing more number of suppliers through the use of various tools.

Introduction of large number of vendors will further slow down the decision making process which may introduce the opportunity cost as far as investment of time for selecting the supplier is concerned. This will also increase more conflict among the team members of the various departments. The system and criteria of selection will become more complex making the process least effective.

Hence, limiting the number of potential vendors to four in order to simplify the process is a wise decision of A-CAT.