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CASE

1 Columbia Industries, Inc. Columbia Industries, Inc. (CI) was established in 1948 in Vancouver, British Columbia. It quickly grew to be the largest manufacturer of code-approved products to the construction industry for the purpose of connecting, adapting, reducing, and repairing pipes used in sewer and drain waste applications. CI product line included: couplings, flex-seal couplings, large diameter repair couplings, inflatable plugs, and a broad array of specialty couplings. In. 1994, it opened a branch in Toronto and subsequently expanded internationally by opening another branch in Los Angeles, California, in 1997. The company employs over 9 50 people (5 50 people in Vancouver) and has annual sales of approximately $176 million ($102 million in Vancouver). The majority of its customers in served through a large network of specialized distributors, supply houses, and mass merchandisers. On September 16, 1999·, there would be a final meeting between the Plant Manager, the Industrial Engineer, and the Plant Engineer of the Vancouver operations. The meeting was expected to generate a sfinal recommendation to the company's general manager about the acquisition of seven new lift trucks. Lift trucks were used to move finished pallets of couplings, ceramic pipes, rubber hoses, and other production materials to and from the warehouse (see Exhibit 1). The need to purchase new lift trucks had first come to their attention when the head mechanic, who was also the plant union leader, formally submitted the complaints of the lift truck drivers concerning the safety and performance of the Hyster lift trucks. They were concerned about the stability of the lift truck when it had a full load and the mast was fully extended to reach the 260-inch top shelf in the warehouse. A driver had recently experienced a near accident when lifting a roll of ceramic pipes to the top shelf in which the back of the truck lifted momentarily off the ground. In addition, the excessive maintenance costs of the Hyster high must lift trucks had come to the attention of the Plant Engineer. Secondly, the Vancouver operation had experienced a rapid increase in sales and demands in the last few years. They were unable to address their customer's needs in a timely fashion due to limited lift trucks and plant capacity, which cost them several valuable customers.

·.

.· Copyright© 2000 Thunderbird, The Ameriam Graduate School of International Management. All rights reserved. This case was prepared by Professor John Zerio with the research assistance of Shannon Bird for the purpose of classroom discussion only, and not to indicate either effective or ineffective management. Company name has been disguised.

462

Case 1

Columbia Industries, Inc.

463

Background

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Mr. Jacques Debre, the Plant Manager, had been with the company for eighteen years. He had started his career there as an industrial engineer after graduating from college and had been promoted several times since then. For the past seven years he had been the Plant Manager at the Vancouver headquarters. Mr. Stuart West was the Industrial Engineer who was responsible for the efficient allocation of equipment and machinery, including lift trucks. He was responsible for the financial cost analysis concerning equipment justification and capaCity planning. He had been with the company the past five years. Prior to his employment at Columbia Industries, Inc., he had extensive experience as an industrial engineer in other industries, and his opinion was held in high regard. The Plant Engineer, Ms. Sandra Ogrosky, had been with the company for the last six years. She was responsible for maintaining the plant equipment and machinery and was very conc~rned with its reliability and minimal downtime for repairs. Two of her key functions were performance monitoring and productivity modeling and analysis. Therefore, the poor performance of the fork lifts had come to her attention. Due to rapid growth in recent years, it was even more critical to increase reliability · and minimize downtime.

The Task It came to the attention of the Plant Manager that seven new warehouse lift trucks were needed due to the high maintenance expense, high lift truck downtime, safety concerns, and the rapid expansion of the company. Clients, such as large homebuilders, made up the majority of CI's business, and for several years the significant population expansion had put increased demand on the homebuilders and indirectly on CI. One of the Hyster lift trucks was several years old and had broken down twice in the last three months. Consequently, the company had to delay two large orders, which cost them one of their major clients. Both of the breakdowns had been due to problems with the transmission of the lift truck. It had taken ten days to get one replacement transmission part rushed to them, and the other faulty part in the transmission had taken nearly a week. In the last three months the lift truck had cost them over $4,000. Furthermore, CI had to rebuild the transmission in another of the Hyster lift trucks six months ago, costing them close to $2,000. Since then, they had not had any other problems with that particular lift truck. Besides reliability and quick service, CI also had the requirements of maneuverability in order for the lift truck operators to safely maneuver through the narrow aisles and tight corners. And as mentioned previously, the lift truck drivers had complained to the labor union about safety problems surrounding the stability of the truck when the mast was fully extended and carried a full load of large diameter pipes. Mr. West was given the task of finding seven lift trucks that would best meet the needs of the company. However, company policy required that the initial step be to approach the purchasing department with the task of narrowing the scope of possibilities down to fiv~ brands of lift trucks. The purchasing agent examined the qualifications of low down time, safety, good service, and maneuverability. He then studied the various offerings and narrowed the decision down to five brands. At this point he

464 Case 1

Columbia Industries, Inc.

contacted the various companies and requested that each company send a salesman to meet with Mr. West and give him a quote.

The Presentations

~

The quotations were formally requested on June 1, 1999. The Yale quotation arrived first on June 6, 1999 (see E~hibit 2). The Yale distributorship sold a wide array of products from storage equipment to safety equipment and had just included lift trucks in their product line three months ago. Columbia Industries, Inc., frequently bought products from this company and had been very satisfied with the distributor's service. The salesman met with Mr. West and explained the features of the lift trucks. He then promised to send a demonstrator lift truck to CI. A week later the lift truck arrived. The lift truck operators liked the performance of the truck, but were uncertain concerning the function of several of the Fault Monitor Indicator Lights. It took them about one hour to ascertain how to operate the truck due to the difference in the Yale truck and the Hyster trucks they were used to working with; however, eventually they became confident in their ability to operate the machine and. were impressed by its capabilities. The Yale salesman called Mr. West once a week from then on to see if ompany had made a decision yet. l'he Ko~atsu proposal arrived the same day as the Yale proposal (see Exhibit 3). ever, a few days prior to the arrival, the Komatsu salesperson had spent considertime presenting the Komatsu lift truck features and advantages to Mr. West. He then asked which other companies Mr. West was considering, and proceeded to list the faults of his competitors and their products. When Mr. West requested ademonstrator truck, the Komatsu salesperson ·appeared hesitant and replied that he would "see about it." Mter the proposal arrived, cr did not hear from the salesperson again. The third quotation arrived on June 7 from Caterpillar, Inc (see Exhibit 4). The salesman gave a thorough presentation to Mr. West and asked him to explain what features the company was looking for in a lift truck. He then sent the demonstration truck to the plant three days later. He arrived with the truck and met the lift truck ~iv­ ers. He quickly showed them how to operate the truck and answered their questions concerning the performance of the truck. At this point the lift truck mechanic arrived to examine the features of the truck. He and the Caterpillar salesman candidly began discussing the mechanics of the lift truck. The mechanic was surprised about the depth of knowledge the salesman had of the lift truck until he discovered the salesman used to be a lift truck mechanic-several years ago. The Caterpillar salesman then met with Mr. West, Mr. Debre, and Ms. Ogrosky and explained in detail how the characteristics of the Caterpillar lift truck would benefit them and how it met all of their criteria. He reminded them that Caterpillar parts were easily available and that the service facility was only a few miles away. From that meeting on, he called Mr. West every two weeks and sent him recent articles about the Caterpillar lift trucks. The fourth quotation received was from Hysteron June 9 (see Exhibit 5). Prior to this, the Hyster salesman met with Mr. West. Mr. Debre, and Ms. Ogrosky. He gave a very impressive presentation about the Hyster brand and the lift truck features. Ms. Sparrow then asked him about the features of the Hyster transmission and explained the problems the plant had With them. The salesman said he might be able to "get a· deal" for the plant due to the previous problems they'd had with the Hyster lift trucks. The Hyster salesperson called every week from that point on.

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Columbia Industries, Inc.

465

The last quotation was from Toyota (see Exhibit 6). The salesman had been out of town so he and Mr. West were not able to meet until June 21. The salesman was very knowledgeable about lift trucks and his company. Originally, Mr. West had been very interested in this brand because he had read about the reliability and performance features of this lift truck. However, when Mr. West requested that a demonstration lift truck be sent to the plant, the salesman had seemed unsure and told Mr. West he would have to "check on it." A week later a demonstration Toyota lift truck arrived. The salesman was unable to get the lift truck Mr. West had requested, but sent one that was close to the required specifications. The lift truck operators were impressed with the performance and easy handling of the truck, but the lift truck operators were unable to test lifting the pipes to the maximum height needed because the lift on this model only expanded 112 mches, instead of the required 260 inches. The salesman called a few days later to see what Mr. West had thought of the lift truck, and then called him every two weeks to check on the progress of the decision. On August 20, Mr. West and Ms. Ogrosky planned a meeting with the lift truck operators and the mechanic for CI to get their opinions about the performance of the various trucks. Following is a summary of their discussion: • The lift truck operators were impressed with the performance of the Yale lift truck. It had a tight turning radius and was very responsive. However, they were still a little uncertain about all the features the truck offered and exactly how to use them. The operators were particularly pleased with the stability and safety of the truck when they tested it with the mast fully extended and with a full load. The mechanic seemed confident about his abi)ities to make repairs to the tru~k should it eventually need any. • Komatsu did not send a demonstration truck. • The Caterpillar lift truck was very maneuverable and had advanced features. The operators were excited about trying out the various features and enhancements and seemed confident about their abilities to operate the lift truck. The Caterpillar lift truck was tested with the mast fully extended with

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• The lift truck operators were pleased with the maneuverability of the Hyster trucks and were confident about their abilities to operate them. However, they were still concerned about the stabillty and safety of the trucks when there was a full load with the mast fully extended. Due to his prior experience repairing the Hyster trucks, the mechanic was confident about his abilities to make repairs to it. He was impressed with the new transmission Hyster now used and believed that it would be much more reliable than the previous one. • The Toyota lift truck handled like the Hyster lift truck and the lift truck operators were very satisfied with its maneuverability and features. Due to the fact that Toyota sent a different model to CI, the drivers were unable to test the stability of the truck when the mast was fully extended with a full load. However, the mechanic felt that the lift truck would hold up under those conditions.

466 Case 1

Columbia Industries, Inc. · Mr. West and Ms. Ogrosky met on September 3rd to decide which lift truck to recommend to Mr. Debre. They created a chart to better compare the lift truck characteristics and to facilitate their decision-making process (see Exhibit 7). It was crucial to back their decision up with hard data and, they knew that Mr. Debre might be hesitant to purchase a new lift truck from a brand with which they had no previous experience. Ifhe was not convinced the decision was a correct one, they would have to re-evaluate all of the options.

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LIFT TRUCK AND WAREHOUSE

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EXHIBIT 2

Colum~ia

Industries, Inc.

467

I

June 6, 1999 Columbia Industries, Inc. P.O. Box 120 Vancouver, British Columbia Attention: Mr. Stuart West Dear Mr. West: Thank you for the opportunity to extend our bus.iness partnership with you. We are sure you will be excited about the special services and prices that we can offer you, due to the quantity of products we send to you and your proximity to our location. We are giving you the quote for the Yale GC050ZG and the trade-in price for your Hyster lift truck. Our Yale truck is only $18,990 and we can offer you $2,110 for your trade-in. Let me remind you that we are able to get any parts you may need overnight to you and that we are available for any questions or problems you encounter. Due to our close business relationship with your company, we will also extend your warranty free of charge from 12 months or 2,500 hours to 18 months or 3,750 hours. Let me know if you have any questions. I am looking forward to talking further about this opportunity. Signed Yale Salesman

EXHIBIT 3

June 6, 1999 Columbia Industries, Inc. P.O. Box 120 Vancouver, British Columbia Attention: Mr. Stuart West Dear Mr. West: I enjoyed our discussion the other day and am sure that Komatsu will be the best choice for you. We surpass all of our competitors and also offer a more competitive price. I recommend the Komatsu FG255HT-12 for the uses we discussed. This model is only $18,400, which includes a one-year, or 2,250-hour warranty. We are not able to send you a demonstration truck because our lift trucks are in such high demand, but I am sure this model would meet all your criteria and would surpass all the offerings our competitors could offer you. I am looking forward to talking to you soon. Signed Komatsu Salesperson

468 Case 1

Columbia Industries, Inc.

I

EXH

June 7, 1999

Jum

Columbia Industries, Inc. P.O. Box 120 Vancouver, British Columbia Attention: Mr. Stuart West

Cob P.O Van Atte

Dear Mr. West:

De a

After analyzing all of your requirements for a warehouse forklift, I am sure the Caterpillar FGC25KHO will fulfill all of your criteria. This forklift has consistently ranked as one of the top two forklifts in its class for performance and durability. You should receive a recent article that I copied for you in the next week, which gives a detailed comparison of the warehouse forklifts in this class.

Tha the • that

EXHIBIT 4

Unfortunately, we will not be able to give you a trade-in on your Hyster lift trucks, but I have enclosed the names and numbers of several companies in your area that should be able to help give you a fair price for your Hyster lift trucks. Our Caterpillar lift truck sells for $19,550 with a 12-month or 3,000-hour warranty. The warranty can be extended if CI has this requirement. I am looking· forward to talking with you soon. Signed Caterpillar Salesperson

EXHIBIT 5

June 9, 1999 Columbia Industries, Inc. P.O. Box 120 Vancouver, British Columbia Attention: Mr. Stuart West Dear Mr. West: I enjoyed talking to you the other day and have come up with a good solution to your problems. First, I am sure that the Hyster H50 XM will give you all the capabilities that you need. It is similar to the models you have now, but the transmission has been replaced with a more durable one. The price for the new Hyster forklift is $18,220. As you will see (from the demonstration model), it is one of the least expensive forklifts of this class on the market. We can add to this value by extending the warranty period to 36 months or 5000 hours at no charge to you. Furthermore, we are also able to give you a very competitive trade-in price on your other Hyster truck. We will offer you a trade-in of$2,000. I am glad I have the chance to work with you and am sure you will see the competitive offer we were able to extend to you. Signed Hyster Salesperson

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Case 1 EXHIBIT 6

Columbia Industries, Inc.

469

I

June 23, 1999 Columbia Industries, Inc. P.O. Box 120 Vancouver, British Columbia Attention: Mr. Stuart West Dear Mr. West:

25Kfts in n the losed a fair

Thank you for taking the time out of your busy schedule to spend such a lengthy tiine discussing all of the criteria you have for a new warehouse lift truck. I have given it considerable thought and am certain that the Toyota 5 F~ 25 will fulfill all of your needs.

As you know, Toyota has obtained an incredible image as the industry leader in service and performance. We will ensure your complete satisfaction with our products and will have a quick response time should you ever experience any problems with your lift truck.

yean The Toyota 5 FG 25 is $19,220. In addition, we have included a 20-month or 4,500-hour warranty. We are unable to give you a trade-in on your Hyster lift truck, but I am sure the Hyster dealer near you might be able to help you with it. We are sending you a similar model to the Toyota 5 FG 25 due to its availability. I am sure it will provide the performance you are looking for. I am looking forward to getting feedback from you about · our lift truck and will talk to you in the next few weeks. Signed Toyota Salesman

First, :o the ), it is 1ding truck. were

Columbia Industries, Inc.

470 Case 1 EXHIBIT 7

I

Description

Caterpillar FGC25K-HO

Yale GCOSOZG

Toyota 5FG25

Komatsu FG255HT-12

Hyster HSOXNI

Capacity

5000 lbs.

5000 lbs.

5000 lbs.

5000 lbs

5000 lbs.

0/A Width

41.5"

42"

45.5"

41.7"

45.5"

Turning Radius

79"

78.7"

78.1"

77.6"

87.4"

84.5"

85"

85.5"

Lowered Height

85"

84"

Total Lift

262"

265"

265"

265.5"

263"

112 fhp

133 fhp

122 fhp

120 thp

118 fhp

Lifting Speed: Empty Loaded

104 fhp

117 fhp

108 thp

106 fl:tp '

104 fhp

Travel Speed

10.5 mph

10.9 mph

11 mph

10.3 mph

11.0 mph

Engine

Mitsubishi 4G64

General Motors

52 NetHP

Komatsu

Mazda 2.0 L

Transmission

Powershift

Powershift

Powershift

Toraflow

Powershift

Steering

Power

Power

Power

Power

Power

Delivery

TBA

TBA

TBA

TBA

TBA

Subtotal

$20,900

$19,390

$21,100

$18,400

$18,220

Minus Trade-In

$2,110

Freight

$100

$100

$17,380

$21,200

Total

$20,900

$2,000 $100 $18,400

$16,320

!