The Information Due to the Customer
I
XYZ orders 5000 custom made parts from ABC for one of its
products. When the order is originally made ABC indicates it
will charge $75 per part. This cost is based in part on the
cost of materials. After the agreement is completed, but before
production of the part begins, ABC engineer Christine Carsten
determines that a much less expensive metal alloy can be used
while only slightly compromising the integrity of the part.
Using the less expensive alloy would cut ABC's costs by $18 a
part.
Christine brings this to the attention of ABC's Vernon
Waller, who authorized the sales agreement with XYZ. Vernon
asks, "How would anyone know the difference?" Christine
replies, "Probably no one would unless they were looking for a
difference and did a fair amount of testing. In most cases the
performance will be virtually the same -- although some parts
might not last quite as long." Vernon says, "Great, Christine,
you've just made a bundle for ABC." Puzzled, Christine replies,
"But shouldn't you tell XYZ about the change?" "Why?" Vernon
asks, "The basic idea is to satisfy the customer with good
quality parts, and you've just said we will. So what's the
problem?"
The problem, Christine thinks to herself, is that the
customer isn't getting what was promised. Further, even if XYZ
would be satisfied with the different part, shouldn't it be
given the opportunity to decide if it finds the change
acceptable -- and to benefit from lowered cost?
Should Christine share her further thoughts with Vernon, or
should she simply drop the matter?
II
Christine shares her further thoughts with Vernon. He
replies, "I just don't agree, Christine. This is business, not
engineering. XYZ will be a satisfied customer, and we'll be a
satisfied supplier. We're not in the business of giving away
money, you know."
Is there any reason for Christine to press further?
Do you agree that Vernon is just doing "good business"?
III
Christine decides there is nothing further for her to do.
The less expensive part is produced. As the shipment is
prepared to be sent to XYZ, Christine is asked to sign a report
verifying that the specifications for the part have been met.
As she looks over the details she notices that the original
composition of the metal is listed rather than the cheaper
alloy. Should she sign the report anyway?
IV
Christine refuses to sign the report. However, Vernon
persuades her fellow engineer, John Richards, to sign it. What
should Christine do now?