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Corwin Corporation By June 2003, Corwin Corporation had grown into a $950 million-per-year cor- poration with an international reputation for manufacturing low-cost, high-quality rubber components. Corwin maintained more than a dozen different product lines, all of which were sold as off-the-shelf items in department stores, hardware stores, and automotive parts distributors. The name “Corwin” was now synonymous with “quality.” This provided management with the luxury of having products that had extremely long life cycles. Organizationally, Corwin had maintained the same structure for more than 15 years. (See Figure I.) The top management of Corwin Corporation was highly conservative and believed in using a marketing approach to ind new markets for existing product lines rather than exploring for new products. Under this philoso- phy, Corwin maintained a small R&D group whose mission was simply to evalu- ate state-of-the-art technology and its application to existing product lines. Corwin’s reputation was so good that it continually received inquiries about the manufacturing of specialty products. Unfortunately, the conservative nature of Cor- win’s management created a “don’t rock the boat” atmosphere opposed to taking any type of risks. A management policy was established to evaluate all specialty- product requests. The policy required answering yes to the following questions: ● Will the specialty product provide the same proit margin (20 percent) as existing product lines? ● Is there a chance for follow-on contracts? 229 230 PROJECT MANAGEMENT CASE STUDIES President VP Marketing Gene Frimel VP Engineering Dr. Royce VP Manufacturing Market Support Contracts Project Management R&D Dr. Reddy Engineering Support Dick Potts Dan West Figure I Organizational chart for Corwin Corporation ● Can the specialty product be developed into a product line? ● Can the specialty product be produced with minimum disruption to exist- ing product lines and manufacturing operations? These stringent requirements forced Corwin not to bid on more than 90 per- cent of all specialty-product inquiries. Corwin Corporation was a marketing-driven organization, although manu- facturing often had different ideas. Almost all decisions were made by marketing with the exception of product pricing and estimating, which was a joint undertak- ing between manufacturing and marketing. Engineering was considered as merely a support group to marketing and manufacturing. For specialty products, the project managers would always come out of mar- keting, even during the R&D phase of development. The company’s approach was that if the specialty product should mature into a full product line, then there should be a product line manager assigned right at the onset. THE PETERS COMPANY PROJECT In 2000, Corwin accepted a specialty-product assignment from Peters Company because of the potential for follow-on work. In 2001, 2002, and again in 2003, proitable follow-on contracts were received, and a good working relationship developed, despite Peters’ reputation for being a dificult customer to work with. On December 7, 2002, Gene Frimel, the vice president of marketing at Cor- win, received a rather unusual phone call from Dr. Frank Delia, the marketing vice president at Peters Company. Frank Delia: “Gene, I have a rather strange problem on my hands. Our R&D group has $250,000 committed for research toward development of a new rubber Corwin Corporation 231 product material, and we simply do not have the available personnel or talent to undertake the project. We have to go outside. We’d like your company to do the work. Our testing and R&D facilities are already overburdened.” Gene Frimel: “Well, as you know, Frank, we are not a research group, even though we’ve done this once before for you. And furthermore, I would never be able to sell our management on such an undertaking. Let some other company do the R&D work and then we’ll take over on the production end.” Delia: “Let me explain our position on this. We’ve been burned several times in the past. Projects like this generate several patents, and the R&D company almost always requires that our contracts give it royalties or irst refusal for manu- facturing rights.” Frimel: “I understand your problem, but it’s not within our capabilities. This project, if undertaken, could disrupt parts of our organization. We’re already oper- ating lean in engineering.” Delia: “Look, Gene! The bottom line is this: We have complete conidence in your manufacturing ability to such a point that we’re willing to commit to a ive- year production contract if the product can be developed. That makes it extremely proitable for you.” Frimel: “You’ve just gotten me interested. What additional details can you give me?” Delia: “All I can give you is a rough set of performance speciications that we’d like to meet. Obviously, some trade-offs are possible.” Frimel: “When can you get the speciication sheet to me?” Delia: “You’ll have it tomorrow morning. I’ll ship it overnight express.” Frimel: “Good! I’ll have my people look at it, but we won’t be able to get you an answer until after the irst of the year. As you know, our plant is closed down for the last two weeks in December, and most of our people have already left for extended vacations.” Delia: “That’s not acceptable! My management wants a signed, sealed, and delivered contract by the end of this month. If this is not done, corporate will reduce our budget for 2003 by $250,000, thinking that we’ve bitten off more than we can chew. Actually, I need your answer within 48 hours so that I’ll have some time to ind another source.” Frimel: “You know, Frank, today is December 7, Pearl Harbor Day. Why do I feel as though the sky is about to fall in?” Delia: “Don’t worry, Gene! I’m not going to drop any bombs on you. Just remember, all that we have available is $250,000, and the contract must be a irm-ixed-price effort. We anticipate a six-month project with $125,000 paid on contract signing and the balance at project termination.” Frimel: “I still have that ominous feeling, but I’ll talk to my people. You’ll hear from us with a go or no-go decision within 48 hours. I’m scheduled to go on a Caribbean cruise, and my wife and I are leaving this evening. One of my people will get back to you on this matter.” 232 PROJECT MANAGEMENT CASE STUDIES Gene Frimel had a problem. All bid and no-bid decisions were made by a four-man committee composed of the president and the three vice presidents. The president and the vice president for manufacturing were on vacation. Frimel met with Dr. Royce, the vice president of engineering, and explained the situation. Royce: “You know, Gene, I totally support projects like this because it would help our technical people grow intellectually. Unfortunately, my vote never appears to carry any weight.” Frimel: “The proitability potential as well as the development of good cus- tomer relations makes this attractive, but I’m not sure we want to accept such a risk. A failure could easily destroy our good working relationship with Peters Company.” Royce: “I’d have to look at the speciication sheets before assessing the risks, but I would like to give it a shot.” Frimel: “I’ll try to reach our president by phone.” By late afternoon, Frimel was fortunate enough to be able to contact the pres- ident and received a reluctant authorization to proceed. The problem now was how to prepare a proposal within the next two or three days and be ready to make an oral presentation to Peters Company. Frimel: “The boss gave his blessing, Royce, and the ball is in your hands. I’m leaving for vacation, and you’ll have total responsibility for the proposal and pres- entation. Delia wants the presentation this weekend. You should have his specii- cation sheets tomorrow morning.” Royce: “Our R&D director, Dr. Reddy, left for vacation this morning. I wish he were here to help me price out the work and select the project manager. I assume that, in this case, the project manager will come out of engineering rather than marketing.” Frimel: “Yes, I agree. Marketing should not have any role in this effort. It’s your baby all the way. And as for the pricing effort, you know our bid will be for $250,000. Just work backward to justify the numbers. I’ll assign one of our contracting people to assist you in the pricing. I hope I can ind someone who has experience in this type of effort. I’ll call Delia and tell him we’ll bid it with an unsolicited proposal.” Royce selected Dan West, one of the R&D scientists, to act as the project leader. Royce had severe reservations about doing this without the R&D director, Dr. Reddy, being actively involved. But with Reddy on vacation, Royce had to make an immediate decision. Corwin Corporation 233 Table I Proposal cost summaries Direct labor and support $ 30,000 Testing (30 tests at $2,000 each) 60,000 Overhead at 100% 90,000 Materials 30,000 General and administrative (G&A), 10% 21,000 Total $ 231,000 Proit 19,000 Total $ 250,000 On the following morning, the speciication sheets arrived and Royce, West, and Dick Potts, a contracts man, began preparing the proposal. West prepared the direct labor man-hours, and Royce provided the costing data and pricing rates.