Case Study

BUSINESS THOUGHTS AND ENVIRONMENT

Brief about the case: -

In the given report for a case study about an organisation DRW Technologies. Through the reading of
the case study the following were the points that came into light.

1. The organisation was a Defence and Aerospace manufacturing, with 21 manufacturing

plants scattered over U.S. ; The plants are engaged in manufacturing of advanced electronic
systems for the U.S. military and commercial aircraft manufacturers.
2. Due to an anticipated decline in the U.S. defence budget and increasing use of fixed-price
contracts were forcing defence industry contractors to try to lower costs, saw a decline in
the profit margins.
3. The company followed a DECENTRALISED way of management where the Head Quarter, was
responsible for strategy, human resources, corporate finance and accounting, marketing and
sales, shareholder relations, legal services, and government and public relations. The plants
operated with a high degree of autonomy where they had their own human resources and
finance and accounting departments along with product development, procurement, and
manufacturing.
4. In addition to production contracted through corporate marketing and sales, the DRW plants
produced rush or custom orders for high-priority customers such as the U.S. military’s
Special Operations Command, which represented approximately 10% of annual sales and
had been trending upward, typically were not profitable, but plant management regarded
them as a way to maintain strong relationships with loyal customers.
5. The plants along with functioning in a decentralised manner and have full autonomy (i.e.
power over the decisions made w.r.t their jurisdiction) over annual budgeting too, which
included budgeting w.r.t. the orders as procured by the central team (at Headquarters) and
the ones procured by the team in the individual plants which included had to be included in
the firm’s profit , but in the last 3 years these targets were being missed by several plants
mainly due the fact that the costs had to include the FIXED PROCE CONTRACTS the firm has
procured.
6. Even though each plant had in it’s autonomy for each plant to work on it’s own but due to
rising pressure of costs, the procurement manager starting sharing information with each
other about certain vendors, which led to having a single vendor for multiple plants.
7. The turning points came, when Dagmar Hilgard, who had been the company’s CEO for two
years, the first woman in the position and the firm’s first CEO to have a primarily finance
background, concerned over cost cuts saw an opportunity to cut costs in procurement.
8. Dagmar Hilgard with Charles Suh (who expressed reservations about Ed Claiborne ability to
adopt to DRW culture) interviewed Ed Claiborne (who previously worked in a firm that was
hierarchical with a strict chain of command) and later hired him with the approval of the board
of directors; assigning him the task to cut costs as quickly as possible.
 9. Claiborne studied the cost of material in 10 plants for previous year information obtained by
Debby Lopez, his assistant and who was employ of DRW since last 14 years. He determined
that he could lower the cost by reducing number of supplier and taking advantage of
economies of scale for some materials used at multiple DRW plants. He projected potential
cost savings of up to 50% over six years. It was an open question, however, whether national
vendors could do a better job than local suppliers of delivering material on time to multiple
DRW plants in different parts of the country.
10. He formulated the new policy which requires plant manager to clear with him contracts of
$250,000 or more two weeks before the contracts were to be signed. Policy was approved by
Hilgard (although she didn’t show any interest in knowing the details of implementation) &
He decided to inform plant procurement managers of the new policy, by email and ignored
Lopez recommendation of visiting some of the larger plants to meet the plant and
procurement managers and ask for feedback on the proposed policy.
11. While at many plants most of the procurement managers responded within the week with
short messages agreeing to follow the policy. However, over the next several weeks, no
contracts were submitted.

DEFINING PROBLEMS
1. Company’s willingness to supply and prioritize defence product even though it accounted for
only 10 percent of sale and also non-profitable This statement is further supported by fact
that there is decline in US defence budget and increasing used of fixed price contracts for
defence industry contractors to try to lower cost and hence decreasing profit margin and in
case of DRW it was running behind the schedule already for last three years.
2. Plant executives instead of searching for problem through evaluation of data and information
they assumed the situation This statement is supported by fact that they had a general feeling
pointed toward temporary circumstances, predominantly external, as a cause of the
shortfalls.
3. Decentralization and Autonomy of plant results in lack of communication between different
part of organization (may be due to superiority complexion) This statement is supported by
fact that each plant prepared its own annual budget.
4. CEO decision of hiring Ed and ignoring the doubt of CFO about cultural adaptability of Ed in
DRW. This statement is supported by fact that Ed had been working for a firm which was
hierarchical with a strict chain of command whereas DRW follows policy of decentralization
and autonomy; also CFO shows reservation on selection of Ed due to uncertainty whether he
can adapt in culture or not.
5. CEO decision to ignore the details of implementation of policy.
6. Ed failed to observe the big picture and ground reality by framing the policy without meeting
with plant procurement managers and ignoring advice of experienced employ of company
Debby Lopez about meeting with manager and asking for feedback on proposed policy ; and
lack of interaction between Ed and procurement plant manager supported by fact that Ed sent
Email instead of meeting formally with manager before after framing the policy and ignored
facts about current work scenario and work load on each plant
ANSWERING PROBLEMS
1. Company must follow an alternative path and instead of prioritizing the defence order it
should prioritize sector which is giving it better profit margin that is aerospace sector Also
company must avoid taking fixed contract deals at least for time until it become suffice to bear
the cost even if it goes down. Proper analysis of situation should be done before taking any
decision about whether to accept the contracts or not
2. Decentralization should be allowed with certain degree of constraint Finances must be
disclosed and budget must be proposed single handed and then it must be divided among
plants on basis of certain indicator such as plant size production, capacity type of product
manufactured, geographical area, common suppliers and hence supplier can be downsized
allowing DRW to take advantage of economies of scale for some materials used at multiple
DRW plants
3. The whole scenario could have been avoided if Hilgard would have given thought about why
CFO of the company is showing reservation on hiring of Ed. On first day assigning the task of
cost cutting CEO must have given Ed time to adopt in culture of DRW
4. CEO must had known details of implementation; could have shared her insight over the
drafted policy about which was formulated from study of incomplete data and without
consulting the affected party and outcomes of the policy; would have asked Ed to interact
with people to understand the ground situation before going ahead.
5. Ed’s failure to analyse data of how the company was running and regardless of how the
company he came from or how DRW worked he should have analysed with respect to the fact
of why the orders were running three year behind the schedule so to understand the trend of
company over the time he must had studied previous three years data to understand
production trend.
6. Ed must consult with affected plant manager about the problems they are facing at ground
level and about requirement to tackle those problem as well as to run plant effectively; focus
on the motivation level of employee who are working hard to meet the deadline; should not
only focus on financial but also on behavioural part. Ed must give thought about words of
Debby Lopez (one of the experienced employee of DRW as she understands culture of DRW
and its people better than Ed) about taking feedback on policy framed and should start taking
feedback and should meeting plant manager formally instead of having conversation on mail
7. Ed must understand that there is a lot of issues that may arise if the procurement of materials
over time by national venders before cutting the local supplier, should consult with
procurement managers and should look for alternatives such as clustering demand for same
supplies of different plant and discuss it with local supplier whether they can provide such
large orders as well as must calculate cost cutting in economy of scale.
8. The communication gap that was created by Ed, by not personally meeting with either
manager, he also failed to analyse a monopolised power game that may be played by the
managers in order to raise profits for their respective plants by creating a lobby with other
plant managers to create a pool of associates and not informing the head office about the
orders and hence lowering the profit sharing with the head office.
9. Being in executive level and close to the CEO, he had taken upon him the power of his position
and not able to analyse the ripple effect his decision to overtake the other plant managers in
an already messed up situation of power created by the decentralised authority. The
communication could have been more on corporate level rather than orders from a higher
authority. This should have been forecasted by the CEO if she wold have read Ed’s report and
being 2 years into the DRW system she would have known the consequences.