Page 572 - Business Principles and Management

Chapter

Product Development 21

and Distribution

21.1 Product

21.2 Distribution
21.3 Channel Design

RE ALITY CHECK

Decisions, Decisions

lexis Converse sat at her computer in the purchasing office late into the
night. She was challenged by a crisis facing her company. A major piece
Aof manufacturing equipment had failed today and could not be repaired.
Each day that the equipment was not operational would cost the company
several thousand dollars in lost production and sales.
The machine was over 10 years old, and it had worked well for most of
the time the company owned it. In discussing its replacement with the pro-
duction manager, Alexis agreed that they should replace the machine with
the same brand. However, there were now two new models to consider.
Alexis could purchase the equipment directly from the manufacturer in Italy
or from an equipment distributor located two states away. It would take the
manufacturer eight days to deliver, whereas the distributor could have one
model available in two days and the other in four.
Alexis was concerned about installation and maintenance. She wanted to
make sure the new machine would not break down. The manufacturer had a
specialist who would travel to the plant to install the equipment and make
sure it was working. The manufacturer also included a five-year warranty
with onsite service, but the warranty added 25 percent to the cost of the
equipment. Alexis had heard that the distributor could help with the installa-
tion but did not provide an additional warranty or service. Delays or prob-
lems in installation would only add to the company’s losses.
All Alexis wanted to do was to get the equipment replaced and the com-
pany back into production. Why did these decisions have to be so difficult?

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