Case

Shell Case Fabricators

The case presents a common scenario: a small vendor dealing with a large company. For SCF it
becomes a tradeoff decision: current return or future return. For Air Connection Links (ACL)
the tradeoff decision is time to market, a new exterior design, and a two percent product
performance improvement. The case does not present a clear path. However, the case requires
at least two major areas for discussion:

1. The immediate decision of accept or reject ACL’s request.

2. Future vendor/owner relationship and project change control process.

SCF faces a very common dilemma of being a vendor tied to a big company. Their BATNA is
relatively weak. Most students will seek compromise by getting back to ACL with some backup
data on a new, realistic estimate. The driver for this approach frequently is the late date for what
is basically a design change. This is a very reasonable approach, but it is not the only approach.
Can they resolve the issue and create a more positive, lasting win-win relationship?

Discussion Items

1. How good is the change control system of SCF? (Good, but design freeze agreement?)
2. What are the major challenges facing SCF?
3. How important is SCF’s business to SCF? Is SCF in a strong or weak BATNA?
4. What is your assessment of ACL’s management?
5. How important is the two percent performance improvement to ACL?
6. How can SCF better manage the vendor relationship?
7. Who designs the hardware? The shell casing?
8. How long does it take to set up for a new design? (No information available)
9. Is it too late to think of a “partnering arrangement?” Is it too late to make Sabin a part of the
project team at SCF?
10. Given the trend to use outside contractors, what kind of collaborative training would help
SCF and ACL reduce the kind of situation they are now facing?

When the discussion gets down to dealing with how hard to push, a discussion can ensue on the
implications for each company. For example, if SCF holds tight on their estimate, what are the
internal and external implications for future business and projects? If ACL gets tough, what are
the implications for future projects with SCF? Will either company want to go down the
confrontational path? Regardless of the approach taken, the impact and outcomes should be
covered in detail.

The Nature of Student Analysis Comments

1. How long does it take to set up the new design for the dome modem? Ask ACL if they are
willing to accept the risks that go along with the change?
2. ACL acts as a bully who is unrealistic.
3. It seems too late to start a new design with the time to market risk. The later the change is
addressed, the greater the cost, duration, and risk.
4. SCF is in a very weak BATNA position.
5. SCF should present a justification for no change by listing risks inherent in a new design and
time to market.
6. If the new design fails, what happens to the January 15 deadline?
7. Some form of a partnering relationship is needed for collaboration and negotiation.

All of this student analysis can lead to the second driver of the case: improving the change
control process. Although SCF has a project control process in place, tighter control on changes
is needed. As an exercise, creating a list of proposed change process adjustments is not difficult
for a class of creative students. In this SCF project a great deal of discussion will center on
having a clear “freeze” date.

One knowledgeable student of MS Sharepoint suggested SCF as an excellent

example where tracing and distributing change control from intiation to
authorization would enhance the agreement between SCF and ACL. Using
Sharepoint to trace each step of a change request and its distribution to all
parties can minimize misunderstandings.

Students will always move to developing a more collaborative relationship that involves closer
working relationships. Some form of a partnering relationship (even without reading an earlier
chapter) is a common thread of suggestions.

Possible Options for Songsee’s Senior Exec’s

Below: Abridged options outline of one team

Accept Option:

Alternative 1: Accept €100,000 and €291,000 loss. Negotiate for strong future change control
process in future. Develop a partnering arrangement that strives for win-win approach.
Alternative 2: Conditional acceptance—share cost (e.g., €300,000 change cost) and risks.
Negotiate for strong future change control process in future.

Reject Option: (if you are willing live with consequences)

Reject and substantiate position: the costs are there and need to be covered to meet the launch
date. Speak to problems of design change in SFC design and production departments. Talk to
risks of missing launch date for ACL. Recognize need for change, but also stress the need for
adhering to change control process and freeze dates.

Debriefing can include several topics. The embedded key concepts from the case are tradeoffs,
project risks, change control, project manager control and authority, negotiation, partnering,
conflict resolution, outsourcing relationships, and strategic management.
Take Away

This case is a classic outsourcing situation of failure to establish relationship expectations and
processes up front that assume win-win for both parties. A change control system both parties
respect would help to avoid situations exposed in this case study. Failure to do so results in
situations similar to Shell Case Fabricators.