IGB CASE ANALYSIS

PRM 42 SECTION B GROUP 6

Case Analysis: DRW Technologies

Executive Summary:
Dagmar Hilgard, the first female CEO of DRW Technologies, a U.S based company
specialising in defence and aerospace technology that has 21 manufacturing plants which
have been burdened with several of its plants missing the profit contribution target due to
costs associated with fixed-price contracts and compounded by the anticipated decline in US
defence budget and predicted drop in demand of commercial aviation market, has decided to
focus on cutting costs and to that effect hired Ed Caliborne who is an experienced
procurement executive as the first corporate vice president. The manufacturing plants of
DRW Technologies had a high degree of autonomy but Ed came from a strict hierarchal
company and due to this Ed, taking data on only 10 plants for the past year from his assistant
Debby Lopez, decided to achieve lower costs by reducing supplier numbers and benefiting
from economies of scale, projecting potential cost savings of up to 50% over next six years.
He refused to listen to Lopez’s opinion of taking feedback by visiting few large plants citing
cost-saving reasons and directly took this to Dagmar, who approved of this decision by the
condition of her not being involved in its implementation. Ed thought it prudent to convey
this very critical information of the procurement policy change; that any contract of dollar-
value of $250,000 or above must be sent two weeks before to him; by writing an email to the
plant procurement managers. Ed got positive replies from the managers but even after several
weeks passing he did not receive any contracts and heard through grapevine channels that the
manufacturing plants were in full capacity and had added extra shifts.
Now the problem at hand with Ed is to make sure that his communication is effective
so that the proposed cost-saving procurement policy can be implemented. To this effect, the
proposed solution is to keep a video conferencing meeting (rich medium) that involves the
CEO Dagmar as well as all the 21 plant procurement managers along with ensuring few
prerequisites such as clear agenda and external moderator so that the meeting becomes
effective a proper two-way communication along with feedback can be received.
A contingency plan of in-person visits to the plants that have fallen behind profit
contributions for the past three years as well as the large plants have been kept. This plan,
even though does not satisfy all criteria, is still the best way to send the message to the
managers and involves a rich medium of communication.
Situation Analysis:
DRW Technologies, a U.S based defence and aerospace company with 21 manufacturing
plants across various regions in the US were in the process of change in management of how
the procurement procedure works. With an expected decline in US defence budget, drop in
demand in the aviation sector combined with the use of fixed-price contracts, the profitability
of the company came into question and Digmar Hilgard, the first women CEO of the
company, being from a finance background, wanted to cut costs and identified potential
opportunity to save money in procurement, to the effect where she hired Ed Caliborne, an
experienced procurement executive and gave him the primary task of cutting costs down
quickly. Here Digmar made the mistake of directly enforcing Ed to execute a non-routine
task, even though she knew that Ed was from a strict chain hierarchical company while DRW
and its plants had a high degree of autonomy and their way of doing things might differ.
Digmar on ignoring Charles’ observation of Ed showed that she had made a mistake of
single-way communication and had been influenced by her personal biases (confirmation
bias) in hiring Ed.
Ed was assigned Debby Lopez as an assistant as she had 14 years of experience at
DRW and knew many of the manufacturing plant employees throughout the company.
Several DRW manufacturing units had missed their target of profit contribution for the last
three years due to fixed-price contracts and for his mission of cost-cutting, Ed studied the cost
of materials in 10 plants for the previous year and determined that lower costs could be
achieved by reducing supplier numbers and benefiting from economies of scale, projecting
potential cost savings of up to 50% over next six years. Here Ed made an error of not utilising
the whole information for three years when profits were down and instead only focused on
last year’s data, thereby compromising the validity of his decision.
Ed decided a policy of requiring plant procurement managers to clear contracts of
$250,000 or more two weeks before signing them and in a meeting with Digmar discussed it,
to which Digmar approved but decided not to be involved in its detailed implementation.
Here Digmar made an error of skimping over the gravity of the situation by refusing
involvement as this was a non-routine change in management practice and Ed, being from a
strict hierarchical corporation would have difficulty in implementing it. Ed then decided to
cut travel expenses and inform of this momentous decision the procurement manages by
email despite Lopez recommending that he visit some large plants, meet the plant and
procurement managers for their feedback and finalise on the decision. She also informed him
of the busy schedule that plants will be operating in for the next six months due to backlog
orders. Here Ed made the mistake of not taking the feedback from Lopez while implementing
the decision (one-way communication) while also making the mistake of using a lean method
of communication (email) for communicating non-routine critical information which had
reduced impact and could be easily misunderstood resulting of plant managers using
automatic processing of that information and as a result Ed did not receive any contracts over
the next several weeks.
Another issue at hand was the language Ed in the email written to the plant
procurement managers. He did not use any greeting/salutation and the tone of his message
was curt and authoritative which may have had a negative effect on the way the procurement
managers took his message. It can also create potential ego problems as the procurement
managers were used to a certain degree of autonomy.
Statement of Objective:
The immediate objective of Ed Caliborne would be to implement measures of cost-cutting so
that the company remains profitable despite the slowing aviation economy and decreased US
defence budget.
Problem Statement:
The problem at hand for Ed Caliborne is “How to effectively communicate and implement
the change in procurement policy so that it can have its intended result of cost savings.”
Criteria for decision making (In descending order of priority)
The selected alternative should
1. Involve two-way communication with feedback.
2. Use a rich channel of communication for a better explanation of the problem due to its
non-routine and complex nature.
3. Should include every stakeholder in the communication process with the proper flow
of information.
4. Should not be expensive both in monetary and in time usage.
Alternatives available:
The alternatives available to Ed are:
1. To email, the procurement managers again reminding them to submit the contracts.
2. To schedule a visit to the large plants as well as plants that fell behind profit
contribution for the past three years and have a face-to-face discussion with the plant
and procurement managers.
3. To schedule an online video conferencing meet that includes Ed, the CEO as well as
the respective plant and procurement managers of all the 21 manufacturing plants for
discussion on the new procurement policy.
Evaluation of Alternatives
Alternative 1: This method will not give Ed the proper feedback and will not be suitable for
implementing such a complex non-routine issue. Even though it satisfies criteria 4, it is not in
line with criteria 1, 2 and 3 which are of higher priority. Hence, this alternative is rejected.
Alternative 2: This alternative takes into consideration using a rich channel of communication
(face-to-face meetings) while also ensuring feedback, it misses out on criteria 3 and 4. Hence
it is kept as the contingency plan.
Alternative 3: This alternative satisfies all the decision criteria and will not only involve
feedback, be high enough in channel richness, involve all the stakeholders, but will also be
cheaper to implement. Hence this alternative is chosen for the primary action plan. Here an
assumption is made that sufficient IT infrastructure is available.
Action Plan:
Ed should first approach Digmar and ensure that she listens to him about this issue. Ed should
focus on the importance of proper communication and bring Digmar on the same page. Then
he should set up a videoconference meeting with all the 21 plant procurement managers
where both he and Digmar are present. Before setting up the conference Ed should make sure
that

 Agendas of the meet are properly and explicitly decided and shared with everyone.
 Introduction by all of the members present to familiarize them with Ed.
 Include Lopez as the external moderator in the meet.
 Ensuring beforehand that sufficient IT and technological issues are fixed and that the
plant managers can properly use the video features.
This will ensure that procurement managers are less hostile to Ed and will also ensure that
critical feedback is taken while also keeping the plant procurement managers in the decision-
making process. From the feedback received, Ed should make appropriate changes and then
send the modified policy to the plant procurement managers while also sending them the
Minutes of the Meeting.
Contingency Plan
As a backup plan, Ed can keep the option of visiting the plant procurement managers of the
large plants and the plants that have not been able to meet the target for the last three years.
He should also take his assistant Lopez along with him as she is an old employee and is
familiar with many of the plant employees. This method will ensure that at least user
feedback is received and a rich channel of communication is used. The rest of the plant
procurement managers can be informed by email, but Ed must ensure to use the proper tone
of language.
Group Members: Rohit Mukherjee P42097 Shivam Kumar Chaurasia P42107
Gaurav Mittal P42070 Shreya Singh P42109
Sangeeta Kumari P42100 Iram Ansari P42076