Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 30

Risk Aversion; Strategy John Holt is the production supervisor for ITEXX, a manufacturer of plastic parts with customers in the automobile and consumer products industries. On a Tuesday morning, one of ITEXX’s sales managers has just asked John to reschedule his manufacturing jobs for the rest of the week to accommodate a special order from a new customer. The catch is that getting the customer requires fast turn-around on the order and would mean not only delaying the current production schedule, but in addition running the production equipment all three shifts for the remainder of the week. This would make it impossible to complete the regularly scheduled maintenance on the equipment that John had planned for midweek. The sales manager is keen on getting the new customer, which could mean an important increase in overall sales and output at the plant. However, John is worried not only about the delay of the current jobs, but the chance that the delay in maintenance will cause one of the machines to fail, which would back up the orders in the plant for at least a week, meaning a substantial delay for the new order as well as those currently scheduled.

Required Explain how you think John should resolve this problem. What would be a good policy for handling issues like this in the future?