Ripley Engine Company’s Dilemma with Aerolog Inc. Case Study

Major Facts

Ripley Engine Company in Bermingham, Alabama has been in operation for approximately forty years with its core business being building of propulsion systems for aircraft, compressed, and highly powerful gas turbines for systems to generate power, as well as enormous, rougher turbine systems for industrial applications requiring more accuracy.

The reputation of Ripley as a market leader in the miniature gas turbines market was attributable to dedication to innovation coupled with R&D.

In approximately forty years of Ripley’s existence, the company had manufactured in upwards of 45,000 turbine engines with their application in various areas.

In the 90s, Ripley established undertakings to reduce the size of fabricated metallic parts of particular engines with the aim of cutting down their weight and bulkiness.

In early 1995, the supply manager in charge of R & D, Tom Kemp and a team of three professionals were tasked with recommending a list of potential suppliers that they thought qualified to be issued with a request for proposal (RFP) to supply a vital component to be used in manufacture miniature turbine aircraft engines.

The four potential suppliers included a company previously disqualified called Aerolog, Inc. that causes Tom’s dilemma on whether to slot in the shortlist for the RFP or leave out the company.

In the case of high net worth projects, a mandatory vetting procedure was applied to seek the best-placed suppliers.

• Step 1: Identifying probable suppliers to be issued with RFP.
• Step 2: Evaluation and analysis of proposals received from the suppliers.

Major Problem

The board members were dealt a rude awakening to the fact that the fabricated metal parts industry was rather small, and entailed a total of just four firms.

Furthermore, their ground-breaking research unearthed that among the four firms, one firm namely Aerolog, Inc., faced delivery mishaps and quality challenges that had led to the firms nullification as Ripley’s supplier two years ago and a legal suit against Aerolog had been lodged against Aerolog.

Ripley’s team members were in a dilemma given:

1. On the basis of the set down criteria for plant capacity, technological development, financial ability, utilization rate, and managerial capabilities, Aerolog met all the qualifications as a bidder, and so did Crum Aerospace and Reck Aerospace.
2. The Board was skeptical about Northeast Machine Works’ utility rates and the capacity of their machinery to handle large contracts even though it seemed to have better managerial capabilities.
3. Every department in Ripley was under pressure from the senior managers, R&D, marketing, engineers, quality control were all strongly against the team considering Aerolog for any business undertakings.

The main question at hand is:

Whether Ripley’s RFP list of firms should include Aerolog? What are the Pros and Cons of including Aerolog in the list?

Arguments supporting Aerolog’s inclusion to the list

1. Looking at other performance indicators of a firm such as the current ratio which represents the ratio of current assets to current liabilities, Aerolog’s ratio of 2.36 is only second to Northeast. The bigger, the better the financial status of the firm since it can comfortably cover its daily operation costs as well as repay short-term debts (Robinson, 2009).
2. The company’s debt to equity ratio is also second lowest at 0.75 meaning that less than 50% of its capital emanates from loans (Fridson & Alvarez, 2002).
3. The company also recorded the highest sales in 1998 among all the four companies meaning that it has a large customer base and thus provides customer satisfaction (Robinson, 2009). The growth in sales is also only second to Crum Aerospace at 10%.
4. The company’s managerial team is also rated at 9.4 out of 10 only coming second after Northeast with a 9.6. This means that the managers are at most times on top of situations.
5. The quality reputation of the company in the past two years is the highest at 9.5 on a scale of 10. This reflects their undertaking of continuous quality improvement and control in the recent past.

Arguments against Aerolog’s inclusion to the list

1. Aerolog faced quality and delivery challenges in the past that had led to the firm’s disqualification as Ripley’s supplier two years earlier. According to the data presented, the long term quality reputation of the firm was questionable and it is rated a mere 5 out of ten with the rest of the firms scoring 8.5 and above.
2. Aerolog’s non-performance had initiated Ripley to file a legal suit against Aerolog in 1992-93 which had completely tainted the company’s image especially with the veteran staff at the company.

Possible Solutions/Alternatives

1. The first solution would be to completely remove Aerolog from the list of firms to receive RFP based on the fact that the company had already tainted its image in the eyes of Ripley due to quality issues and delivery challenges (Porter-Roth, 2002). This decision would auger well with the different departments who are strongly against any consideration for Aerolog undertaking business with Ripley especially veterans in the company. The problem with this alternative is that according to the comparative data, Aerolog is the best-placed firm on average score since it rates either first or second in all the criteria for consideration apart from long-term quality.
2. The second alternative would be for the board members to pass on the comparative data to the different departments in form of presentations explaining to them how considering Aerolog for RFP list would be beneficial to Ripley and get feedback from them (Fria, 2005). The advantage of this alternative is that it will most probably gain the support of the newcomers who will be convinced and soften their stance and will also portray a sense of inclusivity in the Board’s process but the downside is that most of the old-timers will probably not bulge.
3. The third alternative would be for the Ripley Board to call upon the Aerolog Procurement and Quality Control departments for a vetting process so as to reassure the Board that their past weaknesses in the procurement and quality control departments have been corrected, and are willing to legally commit themselves to payment of legal damages in case of failure to deliver on the contract (Wilkinson & Lewis, 2008). This alternative is advantageous since it may serve as a platform to mend the rift between the two companies. The disadvantage is that Aerolog’s representatives may be unwilling to undertake the vetting since they may perceive it as a lack of trust.

Choice and Rationale

Bring onboard all the employees in the different departments by making them aware of the current performance of Aerolog so as to stop judging the company based on the past misdeeds. This process brings inclusivity in the Board’s undertaking and thus the employees will feel like they own the problem. According to the comparative statistics, in the past two years, Aerolog has the best quality reputation rating of 9.5 out of 10. This shows the effort they are putting into improving the quality of their products and delivery.

Action Plan

1. The Board should call upon the Aerolog Procurement and Quality Control departments for vetting on the early morning of July 22^nd with all the team members representing the various departments present to increase the scope of vetting questions.
2. The entire Board plus the company’s legal team will be present at the vetting exercise on the same day to assess Aerolog’s willingness to sign a strict contractual agreement making the company liable for damages in case of non-performance of the contract in case selected from the RFP list.
3. Some of the Board members plus the company’s ICT specialists undertake an in-house presentation at the main boardroom on the afternoon of July 23^rd to the different departmental employees to insight them on the comparative data and seek their views and opinions on the matter.
4. The Board would later on the same day July 23^rd stay till late at the boardroom analyzing the results of both the vetting exercise as well as the presentation to weigh the responses and opinions of other employees.
5. Lastly, the Board members will undertake a small secret ballot amongst themselves with the decision supported by the majority of the team members carrying the day.

References

Fria, R. T. (2005). Successful RFPs in construction: Managing the request for proposal process. New York: McGraw-Hill.

Fridson, M. S., & Alvarez, F. (2002). Financial statement analysis: A practitioner’s guide. New York: John Wiley & Sons.

Porter-Roth, B. (2002). Request for proposal: A guide to effective RFP development. Boston, MA: Addison-Wesley.

Robinson, T. R. (2009). International financial statement analysis. Hoboken, N.J: John Wiley & Sons.

Wilkinson, F. C., & Lewis, L. K. (2008). Writing RFPs for acquisitions: A guide to the request for proposal. Chicago: Acquisitions Section, Association for Library Collections & Technical Services, American Library Association.