Sample Case StudyDecision Essay #2 CASE: Whistler Corporation 1

Writing Task: Recommend a decision to Stott, tell him why its the best option, and draft
an action plan.

DECISION OPTONS:
Charles Stott must make a decision that will shape the future of Whistler
Corporation. The company is losing $6 million a year and cannot sustain these losses
and remain in business. Stott is considering three alternatives:
1) Reengineer domestic production.
2) Move all production offshore. (Recommended Decision)
3) Transfer only low-end products offshore. (Eliminate)

DECISION CRITERIA:
To make his decision, Stott should use two criteria:
1) The strategic importance of radar detectors to Whistler.
2) A manufacturing solution best suited to that importance.

CRITIQUE OF OPTIONS:

Partial Outsourcing

Stott should eliminate the third option. It sustains Whistlers flawed manufacturing
process and therefore process and therefore isnt the best solution under any
circumstances.
The problems in Whistlers plants are the result of a long series of events. When the
radar detector market exploded in the late 1980s, Whistler introduced many new
products and increased production capacity quickly. It didnt consider the need to make
changes in manufacturing as production increased and the number of products grew.
Manufacturing was ill prepared for the market changes and suffered increasing work-in-
progress and longer throughput times. Whistlers batch and kit process had worked fine
in the early stages of the market when demand, the number of products, and volumes
were low, and there was little pressure on costs. However, the process wasnt suitable
for high demand combined with variable volumes and a growing number of SKUs.
Additional factors compounded the drawbacks of the batch process. Increased process
complexity pushed up inspection overhead and WIP costs. Volatility of demand in the
mass market caused sudden schedule changes, longer TPT, and skyrocketing WIP
costs. Whistlers habitual response to production problems has been to improvise
capacity increases and accept the resulting cost increases.
In the end, Whistlers costs are 33 percent higher than those of offshore plants, a
severe competitive disadvantage. Moving more of the volume to Korea would narrow the
difference only slightly and leave the domestic manufacturing problems untouched.

Process Reengineering

Stott has to decide between the two remaining options.

First, he needs to consider how important radar detectors are to Whistler. Demand,
prices, and profitability are all declining. There is nothing to suggest that the decline
isnt permanent. Competition is now based on price, which means the company with the
Sample Case StudyDecision Essay #2 CASE: Whistler Corporation 2

lowest costs wins, and Whistler is clearly not winning. Most of Whistlers competitors
have moved production offshore.
Reengineering the companys domestic manufacturing has numerous advantages. It
would finally address the issues that have piled up over the years and could fix many of
the most important ones. Breaking up production into steps and introducing a JIT
system are likely to decrease WIP and TPT. Quality measures will ensure timely
responses to production problems.
Reengineering should improve financial results as well. The exhibit shows that if
MPL is implemented and the Fitchburg plant is closed, the company can expect a 26
percent reduction in unit cost. As the plant personnel gain experience in the revamped
system, costs might well decline further. However, MPL results may not be scalable
across the entire company. Even with the benefits of the MPL, however, Whistlers
domestic production cost per unit is still 11 percent higher than that of Asian vendors.
It is certain that the domestic plants will ever be able to compete on cost with
offshore vendors. Therefore, reengineering isnt a good option for Whistler.

PROOF OF RECOMMENDED OPTION:

Total Outsourcing

Whistlers long-term competitive advantage resides in design and engineering. The

best decision will enable the company to concentrate on its core strengths and free up
resources for expend new product development. Whistler needs to follow the lead of its
competitors and achieve the lowest possible unit cost through outsourcing.
RECOMMENDED DECISION (Position Statement): The second option is therefore the
preferred decision because it satisfies both criteria.

MAJOR DISADVANTAGES OF RECOMMENDATION:

Disadvantages

The decision does have some disadvantages. Whistler will be entrusting an entire
function to an outside organization. An unreliable partner could create a crisis worse
than the one the company is experiencing now. The biggest disadvantage, though, is
the closing of the domestic plants and the human cost that will inflict. The closings and
layoffs are bound to be traumatic for the plant personnel and also for the remaining
employees. The resulting decline in morale could hurt productivity and commitment
when they are urgently needed.
The risk of the partnership can be minimized by thorough due diligence. The leading
candidate could be Whistlers current outsourcing partner since they have a good
relationship, and the vendor is already familiar with Whistler and its products. The
negative effects of the plant closings cant be eliminated, but they can be contained.
Laid-off workers should be provided with every transition resource the company can
afford. One of the resources should be retraining workers for available jobs. The
remaining Whistler employees should be thoroughly briefed on the reasons for the plant
closures and assured that the painful actions offer the best chance for the companys
long-term survival and the preservation of jobs.
Sample Case StudyDecision Essay #2 CASE: Whistler Corporation 3

Action Plan

Goal: transfer production to an appropriate vendor as soon as possible, with a target of

one year to begin transfers and two years to complete them.

Short-Term steps
Establish a rock-solid consensus among senior executives and agree on transition
dates and process. Form a multidisciplinary team to vet vendors and mage the
transition.
Develop as soon as possible a plan for assisting laid-off workers. Its critical to have
this in place when the decision is announced. Communicate the decision to employees
as soon as the assistance package is settled. The message should be honest, to the
point, and sincere.
Meet with the current partner and potential vendors and work up a short list of
prospects. Start with the current Korean partner but take a serious look at other
companies to avoid relying on one vendor. Selection should be based on high quality
production, on time performance, and a history of being easy to work with.
Select partner and agree on process details and schedules and run the first transfer
as a test. Modify plans and schedules as needed.

Medium-Term Steps
Start outplacement services for the first round of layoffs. Make changes based on the
learning from these early efforts.
Finish the transfer. Establish a close technical and project coordination relationship
with the partner.

Long-Term Steps
The suppler is a partner, not a vendor, and Whistler should commit to maintaining a
healthy long-term relationship.

Risks and Countermeasures

The transfer process could bread down and leave Whistler worse off than it is now.
Whistler and the vendor can test the process and change it as necessary by making the
initial transfers one product at a time. All but one of Whistlers competitors have moved
manufacturing offshore, so there are precedents for smooth transfers.
A second risk, opposition to the decision within the company and turmoil set off by
the layoffs, is worse because it is difficult to prevent. Senior management should
constantly repeat two messages: for employees who will be retained, they should
highlight the necessity of outsourcing to survive and the bright prospects for competing
on the companys real strengths; for employees who will be let go, they should stress
that they sincerely regret having to lay off anyone and that Whistler will do everything it
can to help them find new jobs.