Theme / Homework
Project Management and Analysis (MBA 721)
Group Assignment I. Case Analysis (Group 9)
Case 09: Revcon Products and Welbar, Inc.
Revcon Products manufactures valves for filling and controlling the level of water in industrial tanks. It had concentrated on products for the construction industry (valves for newly-installed tanks), but now wants to move into the much larger and more lucrative replacement market. Whereas annual demand for new valves is about 100,000, it is about 1 million for replacement valves. The company envisioned a new valve, the Millennium Valve, as a way to gain a share in the tank-valve replacement market. Revcon's objective was to design and produce the Millennium Valve to be of superior quality and lower cost than the competition.
Revcon decided to outsource the development and design of the new valve. It prepared an RFP that included the following objectives and requirements:
Product objectives:
Innovative design to distinguish the Millennium Valve from the valves of competitors.
Be price-competitive but offer greater value.
Market (user) requirements:
Ease of installation
Nonclogging
Quiet operation
Maintain water level with pressure changes
Ease in setting water level
Adjustable height
Revcon sent the RFPto four design/developmentcompanies and selected Welbar, Inc., primarily basedon it having submitted the lowest bid. Welbar's proposalhad been written by its sales and marketingdepartments and revised by senior management, butreceived no input from industrial designers, engineers,or anyone else who would work on the project.Welbar had no prior experience with industrial watervalves, but the sales team saw Millennium as anopportunity to earn profits and align with a majorequipment manufacturer. The marketing departmentprepared time and cost estimates using standard tasksand work packages from proposals for old projects.
The Welbar design team assigned to the Millenniumproject was headed by Karl Fitch, a seasonedengineer, and included two industrial designers andtwo engineers. Because of prior project commitments,the team was not assembled until 5 monthsafter the proposal had been accepted, which becamethe first time anyone with technical training hadlooked at the project seriously. It also was at this timethat Welbar began to perform industry research onthe valve market by talking to contractors, plumbers,and retailers. Karl reviewed the proposal and dividedthe project into phases and small work packagesand prepared a Gantt chart. He concluded thatthe proposal had omitted several critical processesand steps, and that the requested funding was substantiallyunderestimated. He rewrote the proposal,schedule, and cost estimate.
Throughout the project the design concept,work tasks, and schedules had to be changed manytimes. Welbar engineers were frustrated at Revcon'sconstant harping about the need for both low costand functional superiority. It could be done, butRevcon also wanted a speedy, low-cost developmenteffort. During the project Welbar engineers learnedthat to design such a valve required more resourcesthan they had been budgeted. Because of all thechanges, Welbar exceeded the budgeted amountfour times and had to request additional funds fromRevcon. One big problem that the project encounteredwas when Welbar delivered a prototype toRevcon. Because the proposal had not clearly statedwhat the prototype would be, Revcon expectedmuch more. Revcon thought the prototype would bea virtually finished product with replicable components,whereas Welbar understood it to be a simpleworking model to demonstrate design and functionality.Extra time and money had to be spent to bringthe prototype up to Revcon's expectation. Revcon allottedthe additional time and money, but the completedprototype was still over budget and deliveredlate. To compensate for the delay, Welbar crammedproject stages together or executed them out of sequence.When the design stage fell behind becausethe prototype had not met expectations, Welbar wentahead and started making production-ready models.This was a waste of time and money because the finishedprototype showed that the production modelscould not be produced.
Welbar did design a truly innovative valve;however, the design required substantially new toolingat the factory and would cost Revcon 50 percentmore to produce than had been expected.
Revcon canceled the contract with Welbar. The work is estimated to be 90 percent finished, and Revcon is attempting to complete the last 10 percent. However, it looks like completing that last 10 percent will be very challenging. So far, Revcon has spent twice as much time and money on development as expected and still does not have a product to manufacture. Because of development and tooling costs, it is unlikely that the product, once development has been completed (if ever), can be priced low enough to be competitive.
Question 2:
Using the Welbar interest-holder analysis matrix based on from the above case study, identify the most appropriate management strategies in order to formulate a project proposal that meets the objectives Welbar, Revcon requirements and general criteria for evaluating the success of a project.