Lawford Electric Company Case
On January 13, 1978, Mr. Robert Allen, a field sales engineer of Lawford Electric Company learned from a phone call with Mr. George Gibson, purchasing agent of Bayfield Milling Company that Bayfield was interested in purchasing a drive system for a new shearing line. The cost of the new shearing line that Bayfield recently ordered from Magna Machinery Corporation was about $2 million and the drive system was going to cost roughly another $900 thousand dollars. The shearing line recently ordered by Bayfield would add new capability and value to Bayfield’s mill operation.
Per Gibson, the preliminary bids on the drive system for the shearing line were due on July 14, 1978. Final bids were due on December 29, 1978 and decision on which company had won the bid to be announced on February 2, 1979, approximately about a year from the time of Mr. Allen’s initial phone conversation with Mr. Gibson. This drive system was an $871,000 order and it was not an ordinary size order considering that Bayfield’s annual sales from Lawford occasionally totaled as much as only $50,000. Mr. Gibson also specified to Mr. Allen that no supplier sales personnel including staff and management were to contact Bayfield engineering personnel to discuss product specification. Instead, all supplier personnel were to work through Mr. Gibson, although contact was permitted with operations personnel. However, Gibson did give the name of the Megna engineer to contact for details of the new line. Mr. Allen also learned that the decision makers for the purchase of the drive system for the new shearing line would be made by Gibson, Lorenz, chief engineer; Mainwaring, plant superintendent; and Vogel, operations vice president – also not be contacted in person.
On February 2, 1978, Mr. Allen learned from his meeting with Gibson and lunch with Mainwaring and his assistant, Hughes, there was an issue with drive system specs, and nobody in operations and engineering knew what was needed. This was a real and serious issue. Allen also learned that system reliability was an important issue. On March 14, 1978, Mr. Fred Webster, Lawford regional sales manager, bought lunch for Allen, Lorenz, Mainwaring, Gibson and Hughes. After the magnificent lunch at country club, Allen spoke with Gibson and the uncertainty as to what was needed in the drive system surfaced again. The features of the drive system seemed to be not an issue and as important. On May 19, 1978, even though, Allen didn’t have enough input of the drive system specs; he spent the day with Pollack, Lawford’s system design engineer, working on tentative bid. Based on Pollack’s idea and Allen’s input, they put together a complete derive system bid. The bid would offer one year warranty and services contract. Webster approved the bid of $895,000 and Allen mailed out the bid later that week. On July 17, 1978, Mr. Gibson called Mr. Allen and said a letter was mailed to invite Lawford to bid on the final specification. Three other firms, A G Corporation, Kennedy Electric, and Hamilton Electric were also invited to participate in the final bid. The Kennedy Product line was very similar to Lawford’s but their reputation for quality and service was not good, A G Corporation could offer more capacity in its regulator system than any of the other companies. The additional capacity would be substantial additional cost to Bayfield. The additional capacity was crucial because Allen later on learned from the final specs the need of significant amount of additional capacity in the regulator system. This was a surprise to Allen which could be a huge problem. As far as the third company, Hamilton equipment Allen considered over-priced. Since July 17, 1978 until December 27, 1978 Allen continued to communicate with Gibson, Lorenz, and Hughes who replaced Mainwaring whether over lunch, in person or by phone. Allen continued to work with Lorenz and Hughes about Lawford’s...
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