Case Analysis: DRW Technologies

Executive Summary:
Dagmar Hilgard, the first female CEO of DRW Technologies, a U.S.-based company
that specialises in defence and aerospace technology and has 21 manufacturing facilities,
has chosen to concentrate on cost-cutting because several of those facilities have missed
the profit contribution target due to costs associated with fixed-price contracts, which have
been made worse by the anticipated reduction in the US defence budget and anticipated
drop in demand for the commercial aviation market. The manufacturing facilities of DRW
Technologies had a high degree of autonomy, but Ed came from a strict hierarchal
company. As a result, Ed decided to reduce costs by reducing the number of suppliers and
taking advantage of economies of scale, projecting potential cost savings of up to 50% over
the next six years while only using data from 10 plants for the previous year from his
assistant Debby Lopez. He disregarded Lopez's advice to gather feedback by visiting a few
large factories, citing the need for cost savings, and instead brought this up directly to
Dagmar, who agreed with the idea with the condition that she not be engaged in its
execution.
By sending an email to the plant procurement managers, Ed felt it was prudent to tell them
of the change in the procurement policy and the requirement that any contract with a value
of $250,000 or more be sent to him two weeks in advance. The managers gave Ed
encouraging responses, but even after a few weeks had passed, he had still not received any
contracts. He also learned from rumour mills that the manufacturing factories were
operating at full capacity and had added extra shifts.
Ed's current challenge is to ensure that his communication is efficient so that the suggested
cost-saving procurement policy can be put into practise. In order to address this, the
suggested solution is to hold a video conference meeting (rich medium) with the CEO
Dagmar and each of the 21 plant procurement managers. A few requirements, such as a
clear agenda and an external moderator, are also made to ensure that the meeting is
successful and that feedback can be obtained.

Situation Analysis:
The management of the procurement process was being changed by DRW Technologies, a
defence and aerospace corporation with 21 manufacturing facilities spread across the US.
Digmar Hilgard, the company's first female CEO, who comes from a financial background,
wanted to cut costs and saw a potential opportunity to save money in procurement. As a
result, she hired Ed Caliborne, an experienced procurement executive, and gave him the
primary task of identifying potential cost savings in the US defence budget, drop in demand
in the aviation sector, as well as the use of fixed-price contracts.
Even though she was aware that Ed came from a corporation with rigorous chain hierarchies
whereas DRW and its plants had a great degree of autonomy and their methods of doing
things would differ, Digmar made the mistake of explicitly ordering Ed to complete a non-
routine assignment in this situation. Digmar committed the mistake of one-way
communication and was swayed by her personal biases (confirmation bias) in employing Ed,
as seen by her decision to disregard Charles' view of Ed.
Ed was given Debby Lopez as his assistant since she had 14 years of DRW experience and
was familiar with many of the workers at the company's production plants. Due to fixed-
price contracts, a number of DRW manufacturing units had fallen short of their profit
contribution goals for the previous three years. As part of his cost-cutting mission, Ed looked
at the cost of materials in 10 plants for the previous year and concluded that lower costs
could be achieved by reducing the number of suppliers and taking advantage of economies
of scale, with potential cost savings of up to 50% over the following six years. When profits
were down for three years, Ed made the mistake of focusing exclusively on data from the
previous year, which undermined the reliability of his judgement. In a meeting with Digmar,
Ed settled on a policy requiring plant procurement managers to approve contracts worth
$250,000 or more two weeks before signing them.
Digmar agreed but chose not to be engaged in its specific execution. Given that this was a
non-standard change in management procedure and Ed was from a rigorous hierarchical
business, Digmar erred by downplaying the seriousness of the situation by declining to
become involved. Despite Lopez's advice that he visit certain large factories, meet the plant
and procurement managers for their input, and then finalise the decision, Ed ultimately
decided to save travel costs and notify the procurement managers by email of this
important decision. She also let him know how hectic things would be at the plants for the
ensuing six months as a result of the backlog of orders. Here, Ed made the error of
implementing the decision without considering Lopez's feedback (one-way communication).
He also made the error of communicating non-routine critical information via email, which
had a reduced impact and could be easily misunderstood, leading to plant managers using
automatic processing of that information.
As a result, Ed did not receive any contracts over the course of the following few weeks. Ed's
use of terminology in the email he sent to the plant procurement managers was another
problem. The procurement managers may not have interpreted his communication
positively because he did not utilise a hello or salutation and his message was brusque and
authoritarian. Due to the procurement managers' history of autonomy, it may also lead to
possible ego issues.

Statement of Objective:
According to the understanding, Ed Caliborne's immediate goal should be to execute
cost-cutting initiatives to keep the business viable despite the sluggish aviation industry and
reduced US defence funding.

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)
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. Reminding the procurement managers by emailing them to submit the contracts.
2. To plan a visit to the large factories and plants that haven't contributed enough
profit in the last three years, and to meet with the plant and procurement managers
in person.
3. To arrange a meeting through online video conferencing with Ed, the CEO, and the
corresponding plant and procurement managers of each of the 21 manufacturing
facilities to discuss 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 speak with Digmar and make sure she pays attention to what he has to say.
Ed needs to emphasise the value of effective communication and get Digmar on the same
page. He should next schedule a videoconference meeting with each of the 21 plant
procurement managers, in which Digmar and he will both be present. The agendas for the
meeting should be clearly and openly decided and shared with everyone before Ed sets up
the conference.
  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.
Keeping the plant procurement managers involved in the decision-making process will
ensure that they are less antagonistic toward Ed and that any critical feedback is taken into
account. Ed should make the necessary adjustments in response to the input and then
submit the revised policy and meeting minutes to the plant procurement managers.

Contingency Plan
As a fallback, Ed can continue to have the choice of meeting with the plant procurement
managers of the larger plants and the plants that haven't been successful in meeting the
goal for the previous three years. Lopez, his assistant, should go with him as well because
she has worked there for a while and knows a lot of the people. This approach will
guarantee at least user feedback and the utilisation of a robust communication route. Ed
can send an email with the information to the other plant procurement managers, but he
must use the appropriate terminology.

Group 4
Akshada Shinde -p43130
Harshit Jain -p43145
Kanchan Malakar -p43148
Neha Rani -p43159
Yaqoob Iqbal Siddique-p43182