Reference no: EM133298272

Case Study: This case study is an amalgamation based on the experiences of two companies. The company name, dates and specific events are fictitious, but the situation corresponds to actual events.

The Company: Eldrich Inc. is the third largest manufacturer of infant baby strollers worldwide and the leading manufacturer of these products in the United States. Eldrich is headquartered in Belfonte, Pennsylvania with manufacturing plants in two other US locations. Eldrich has prospered by building a reputation for producing high quality products which it sells at premium prices. Eldrich employs 3,500 workers worldwide with 85% located in the U.S. The company prides itself on providing a progressive corporate culture featuring above market compensation and benefit packages, excellent training and development opportunities and flexible work schedules. Eldrich has been aggressive in adopting new technology particularly for manufacturing and marketing. Employees consistently rate Eldrich as an excellent place to work, have rejected attempts to unionize and characterize themselves as part of a strong tradition to fulfill the company mission of "providing the highest quality child strollers in the world."(Eldrich Inc,2017). Eldrich reported profits of $55 million and gross sales of $250 million. It has launched a new initiative to provide licensed distributors in 18 nations with Eldrich products for resale. This initiative has been in place for just one quarter but has already yielded a profit of $7 million on $30 million in sales.

The Issue: In recent weeks, Eldrich has had dozens of consumer complaints regarding their strollers. The complaints relate to an apparent manufacturing defect which can cause, under a very narrow range of conditions, the back of the stroller to collapse. At least a dozen infants have been injured because of the inadvertent collapse with four of the victims sustaining significant injuries. Media have begun airing reports regarding the incidents and the Consumer Product Safety Commission has issued a mandatory recall of the product. Eldrich has halted production of the strollers and conducted preliminary tests to discover the nature of the problem. The conclusion of internal quality control staff is that a faulty latch on the strollers produced in the last 11 months, is the cause of the failures and the consequent injuries. The supplier who fabricates the latch is denying any responsibility for the accidents and claims the defect must be caused by other factors. They have served Eldrich with legal notice to sue if Eldrich claims the injuries are due to the latch. In the 11 months since the allegedly defective latch has been utilized, Eldrich has produced 650,000 units of which 500,000 have been delivered to retailers and/or customers. The remainder of the units are in transit to Eldrich distributors worldwide.As a result of the negative publicity and the injuries sustained in the accidents, Eldrich's workers are suffering from very low morale and are questioning whether they may be responsible for injuries to those they consider it their mission to protect. They are also very concerned about their future and the future of the company since Eldritch's only product are the strollers under recall.

Eldrich must make some important decisions which can and will impact the company and its future viability. These questions include:

Question 1: How to address the status of employees until production can be resumed? In other words, should they keep everyone on payroll, layoff most employees or some other option?

Question 2: How to communicate to consumers regarding the nature of the defect and steps to be taken to correct it?

Question 3: How to determine the exact cause of the accidents, a method for correcting the defect once identified and retrofitting the manufacturing process to assure product safety ?

Question 4: How to restore employee and consumer confidence in the company?

Question 5: How to deal with the prospect of litigation from the accident victims, the CPSC, the latch supplier and others in terms of financial, ethical and reputational consequences?

Question 6: Since the product recall applies only to the US market, should Eldrich allow the units in transit to be delivered to customers?