AN APPROACH FOR USING STRUCTURED PROBLEM SOLVING TECHNIQUES FOR MAKING EFFECTIVE BUSINESS DECISION

PRESENTED BY GUNJAN SHAHANISH PILLAI

SITUATION ANALYSIS

DASHMAN Company was a large concern which produced equipments for the armed forces of the United States.

It had over 20 Plants, located in the central part of US.

Absence of coordinated purchase policy within the firm.

Each plant acted at a separate individual unit.

It became evident in late 1940 that the company felt they might face difficulty in procurement of essential raw materials.

To deal with this situation, Mr. Manson, President of the firm, appointed Mr.. Post as Vice President (Purchase) and assigned Mr. Larson who has worked with the firm for many years as his assistant.

SITUATION ANALYSIS CONTINUE…The appointment of Mr. Post was announced through

formal channels in the firm.

Mr. Post’s first decision was to centralize the company’s purchase procedure.

For this, he made proposal for getting all the purchase contracts in excess $ 10,000 approved by head office one week in advance of the signing date.

This proposal was approved by the company’s board of directors.

On the time, when the peak purchase period three weeks away, Mr.. Post drafted a letter giving the directions to all the plant executives.

Mr. Larson suggested personal visits would be more effective than written communication.

Mr. Post dismissed the idea and had the letters sent to the plants with his signatures.

Most of the plant executives responded positively to the letter.

There were no notices from any plant executives regarding negotiation of contract in the next six weeks.

Executives visiting the plants reported for the plants being busy with the usual routing for that time of the year.

SITUATION ANALYSIS CONTINUE…

ARRIVING AT PROBLEM

No co-ordination in purchasing procedure in all plant units.

Lack of authorized control over the purchase decisions of individual units to have adequate supply of raw materials.

DECISION CRITERIA

Any purchase contract in excess with one limit should get approval from head office six weeks in advance.

Preserving plant autonomy & company culture.Timely purchase & availability.Centralized purchase process among plants

overlooked by head office.Best possible price for raw materials.Keeping head office aware of all the purchase

contracts signed at individual plants.

ARRIVING AT ALTERNATIVES

Developing strategy or planning to make purchase on centralized level.

One authorized control personnel can organize, for centralized purchasing process.

Inviting views and suggestions from individual plant executives for centralizing the purchase process.

Creating a separate purchase department for the company with all the decision powers and control on the purchase process of individual units.

EVALUATING ALTERNATIVES

Developing strategy or planning to make purchase on centralized level. – Implementation and success of the strategy will be a time consuming process

One authorized control personnel can organize, for centralized purchasing process. - Individual unit executives may not accept to give up their power of decision making to a new personnel appointed as their rights would be restricted.

EVALUATING ALTERNATIVES

Inviting views and suggestions from individual plant executives for centralizing the purchase process. – All plant executives will have their views which may be contradictory to each other and there may be possibility of ending up with no solution for the problem.

Creating a separate purchase department for the company with all the decision powers and control on the purchase process of individual units. – This has to be thought out in a proper manner and communicated to all the concerns and approved. Also there should not be any ego clashes created due to the development in the firm.

SOLUTION Creating a separate purchase department for

the company with all the decision powers and control on the purchase process of individual units.

ACTIONMr. Manson should personally introduce the new

Purchase head to all the plant executives to make them comfortable with appointment of Mr. Post.

Mr. Post should call a meeting of all the plant executives and announce the proposal with the benefits, for their suggestions, thus making them a part of the decision making process.

The proposal of centralized system will be unanimously accepted by all the plant executives as they had been a part of the decision making process and followed henceforth.