Read the case study “Teloxy Engineering (A)”and answer the corresponding questions on the same page.(Atleast 300 words)
TELOXY ENGINEERING (A)
Teloxy Engineering has received a one-time contract to design and build 10,000 units of a new product. During the proposal process, management felt that the new product could be designed and manufactured at a low cost. One of the ingredients necessary to build the product was asmall component that could be purchased for $60 in the marketplace, including quantity dis-counts. Accordingly, management budgeted $650,000 for the purchasing and handling of 10,000 components plus scrap. During the design stage, your engineering team informs you that the final design will require a somewhat higher-grade component that sells for $72 with quantity discounts. The new price is substantially higher than you had budgeted for. This will create a cost over run. You meet with your manufacturing team to see if they can manufacture the component at a cheaper price than buying it from the outside. Your manufacturing team informs you that they can produce a maximum of 10,000 units, just enough to fulfill your contract. The setup cost will be $100,000 and the raw material cost is $40 per component. Since Teloxy has never manu-factured this product before, manufacturing expects the following defects:Percent defective010203040Probability of1020302515occurrenceAll defective parts must be removed and repaired at a cost of $120 per part.1.Using expected value, is it economically better to make or buy the component?2.Strategically thinking, why might management opt for other than the most economical choice?
TELOXY ENGINEERING (B)
Your manufacturing team informs you that they have found a way to increase the size of the manufacturing run from 10,000 to 18,000 units in increments of 2000 units. However, the setup cost will be $150,000 rather than $100,000 for all production runs greater than 10,000 units and defects will cost the same $120 for removal and repair.
1.Calculate the economic feasibility of make or buy.
2.Should the probability of defects change if we produce 18,000 units as opposed to10,000 units?
3.Would your answer to question 1 change if Teloxy management believes that follow-on contracts will be forthcoming? What would happen if the probability of defects changes to 15 percent, 25 percent, 40 percent, 15 percent, and 5 percent due to learning-curve efficiencies
Read the case study “Communication Failures” starting on page 329 and answer the questions on page 332.
Herb had been with the company for more than eight years and had worked
on various R&D and product enhancement projects for external clients. He
had a Ph.D. in engineering and had developed a reputation as a subject matter expert. Because
of his specialized skills, he worked by himself most of the time and interfaced with the various
project teams only during project team meetings. All of that was about to change.
Herb’s company had just won a two-year contract from one of its best customers. The
first year of the contract would be R&D and the second year would be manufacturing. The
company made the decision that the best person qualified to be the project manager was Herb
because of his knowledge of R&D and manufacturing. Unfortunately, Herb had never taken
any courses in project management, and because of his limited involvement with previous
project teams, there were risks in assigning him as the project manager. But management
believed he could do the job.
Herb’s team consisted of fourteen people, most of whom would be full
time for at least the first year of the project. The four people that Herb
would be interfacing with on a daily basis were Alice, Bob, Betty, and Frank.
● Alice was a seasoned veteran who worked with Herb in R&D. Alice had been with
the company longer than Herb and would coordinate the efforts of the R&D personnel.
● Bob also had been with the company longer that Herb and had spent his career in
engineering. Bob would coordinate the engineering efforts and drafting.
● Betty was relatively new to the company. She would be responsible for all reports,
records management, and procurements.
● Frank, a five-year employee with the company, was a manufacturing engineer.
Unlike Alice, Bob, and Betty, Frank would be part time on the project until it was
time to prepare the manufacturing plans.
For the first two months of the program, work seemed to be progressing as planned.
Everyone understood their role on the project and there were no critical issues.
Herb held weekly teams meetings every Friday from 2:00 to 3:00 p.m.
Unfortunately the next team meeting would fall on Friday the 13th, and
that bothered Herb because he was somewhat superstitious. He was considering canceling the
team meeting just for that week but decided against it.
At 9:00 a.m., on Friday the 13th, Herb met with his project sponsor as he always did in the
past. Two days before, Herb casually talked to his sponsor in the hallway and the sponsor told Herb
that on Friday the sponsor would like to discuss the cash flow projections for the next six months
and have a discussion on ways to reduce some of the expenditures. The sponsor had seen some
expenditures that bothered him. As soon as Herb entered the sponsor’s office, the sponsor said:
It looks like you have no report with you. I specifically recall asking you for a report on the cash
Herb was somewhat displeased over this. Herb specifically recalled that this was to be a
discussion only and no report was requested. But Herb knew that “rank has its privileges” and
questioning the sponsor’s communication skills would be wrong. Obviously, this was not a
good start to Friday the 13th.
At 10:00 a.m., Alice came into Herb’s office and he could see from the expression on her
face that she was somewhat distraught. Alice then spoke:
Herb, last Monday I told you that the company was considering me for promotion and the
announcements would be made this morning. Well, I did not get promoted. How come you
never wrote a letter of recommendation for me?
Herb remembered the conversation vividly. Alice did say that she was being considered for
promotion but never asked him to write a letter of recommendation. Did Alice expect Herb to
read between the lines and try to figure out what she really meant?
Herb expressed his sincere apologies for what happened. Unfortunately, this did not make
Alice feel any better as she stormed out of Herb’s office. Obviously, Herb’s day was getting
worse and it was Friday the 13th.
330 MANAGEMENT FUNCTIONS
The Team Is Formed
Friday the 13th
No sooner had Alice exited the doorway to Herb’s office when Bob entered. Herb could
tell that Bob had a problem. Bob then stated:
In one of our team meetings last month, you stated that you had personally contacted some of my
engineering technicians and told them to perform this week’s tests at 70°F, 90°F and 110°F. You
and I know that the specifications called for testing at 60°F, 80°F and 100°F. That’s the way it was
always done and you were asking them to perform the tests at different intervals than the specifications
Well, it seems that the engineering technicians forgot the conversation you had with them and
did the tests according to the specification criteria. I assumed that you had followed up your conversation
with them with a memo, but that was not the case. It seems that they forgot.
When dealing with my engineering technicians, the standard rule is, “if it’s not in writing, then
it hasn’t been said.” From now on, I would recommend that you let me provide the direction to my
engineering technicians. My responsibility is engineering and all requests of my engineering personnel
should go through me.
Yes, Friday the 13th had become a very bad day for Herb. What else could go wrong, Herb
thought? It was now 11:30 a.m. and almost time for lunch. Herb was considering locking his
office door so that nobody could find him and then disconnecting his phone. But in walked
Betty and Frank, and once again he could tell by the expressions on their faces that they had a
problem. Frank spoke first:
I just received confirmation from procurement that they purchased certain materials which
we will need when we begin manufacturing. We are a year away from beginning manufacturing
and, if the final design changes in the slightest, we will be stuck with costly raw
materials that cannot be used. Also, my manufacturing budget did not have the cash flow
for early procurement. I should be involved in all procurement decisions involving manufacturing.
I might have been able to get it cheaper that Betty did. So, how was this decision
made without me?
Before Herb could say anything, Betty spoke up:
Last month, Herb, you asked me to look into the cost of procuring these materials. I found a
great price at one of the vendors and made the decision to purchase them. I thought that this was
what you wanted me to do. This is how we did it in the last company I worked for.
Herb then remarked:
I just wanted you to determine what the cost would be, not to make the final procurement decision,
which is not your responsibility.
Friday the 13th was becoming possibly the worst day in Herb’s life. Herb decided not to
take any further chances. As soon as Betty and Frank left, Herb immediately sent out e-mails
to all of the team members canceling the team meeting scheduled for 2:00 to 3:00 p.m. that
Case Studies 331
1. How important are communication skills in project management?
2. Was Herb the right person to be assigned as the project manager?
3. There were communications issues with Alice, Bob, Betty, and Frank. For each
communication issue, where was the breakdown in communications: encoding,
decoding, feedback, and so on?
Read the case study “McRoy Aerospace” on page 332 and answer questions 4 and 5 on page 333.
read the case study and answer the below questions
McRoy Aerospace was a highly profitable company building cargo planes and refueling
tankers for the armed forces. It had been doing this for more than fifty years and was
highly successful. But because of a downturn in the government’s spending on these
types of planes, McRoy decided to enter the commercial aviation aircraft business,
specifically wide-body planes that would seat up to 400 passengers, and compete head
on with Boeing and Airbus Industries.
During the design phase, McRoy found that the majority of the commercial airlines
would consider purchasing its plane provided that the costs were lower than the other
aircraft manufacturers. While the actual purchase price of the plane was a consideration
for the buyers, the greater interest was in the life-cycle cost of maintaining the
operational readiness of the aircraft, specifically the maintenance costs.
Operations and support costs were a considerable expense and maintenance
requirements were regulated by the government for safety reasons. The airlines make
money when the planes are in the air rather than sitting in a maintenance hangar. Each
maintenance depot maintained an inventory of spare parts so that, if a part did not
function properly, the part could be removed and replaced with a new part. The
damaged part would be sent to the manufacturer for repairs or replacement. Inventory
costs could be significant but were considered a necessary expense to keep the planes
One of the issues facing McRoy was the mechanisms for the eight doors on the aircraft.
Each pair of doors had their own mechanisms which appeared to be restricted by their
location in the plane. If McRoy could come up with a single design mechanism for all
four pairs of doors, it would significantly lower the inventory costs for the airlines as well
as the necessity to train mechanics on one set of mechanisms rather than four. On the
cargo planes and refueling tankers, each pair of doors had a unique mechanism. For
commercial aircrafts, finding one design for all doors would be challenging.
Mark Wilson, One of the department managers at McRoy’s design center, assigned
Jack, the best person he could think of to work on this extremely challenging project. If
anyone could accomplish it, it was Jack. If Jack could not do it, Mark sincerely believed
it could not be done.
The successful completion of this project would be seen as a value-added opportunity for
McRoy’s customers and could make a tremendous difference from a cost and efficiency
standpoint. McRoy would be seen as an industry leader in life-cycle costing, and this
could make the difference in getting buyers to purchase commercial planes from McRoy
The project was to design an opening/closing mechanism that was the same for all of the
doors. Until now, each door could have a different set of open/close mechanisms, which
made the design, manufacturing, maintenance, and installation processes more complex,
cumbersome, and costly.
Without a doubt, Jack was the best—and probably the only—person to make this happen
even though the equipment engineers and designers all agreed that it could not be done.
Mark put all of his cards on the table when he presented the challenge to Jack. He told
him wholeheartedly that his only hope was for Jack to take on this project and explore it
from every possible, out-of-the-box angle he could think of. But Jack said right off the
bat that this may not be possible. Mark was not happy hearing Jack say this right away,
but he knew Jack would do his best.
Jack spent two months looking at the problem and simply could not come up with the
solution needed. Jack decided to inform Mark that a solution was not possible. Both Jack
and Mark were disappointed that a solution could not be found.
“I know you’re the best, Jack,” stated Mark. “I can’t imagine anyone else even coming
close to solving this critical problem. I know you put forth your best effort and the
problem was just too much of a challenge. Thanks for trying. But if I had to choose one
of your co-workers to take another look at this project, who might have even half a
chance of making it happen? Who would you suggest? I just want to make sure that we
have left no stone unturned,” he said rather glumly.
Mark’s words caught Jack by surprise. Jack thought for a moment and you could
practically see the wheels turning in his mind. Was Jack thinking about who could take
this project on and waste more time trying to find a solution? No, Jack’s wheels were
turning on the subject of the challenging problem itself. A glimmer of an idea whisked
through his brain and he said, “Can you give me a few days to think about some things,
Mark?” he asked pensively.
Mark had to keep the little glimmer of a smile from erupting full force on his face. “Sure,
Jack,” he said. “Like I said before, if anyone can do it, it’s you. Take all the time you
A few weeks later, the problem was solved and Jack’s reputation rose to even higher
heights than before.
1.. What should Mark have done if Jack still was not able to resolve the problem?
2.. Would it make sense for Mark to assign this problem to someone else now, after
Jack could not solve the problem the second time around?
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