Reference no: EM133674722

BACKGROUND - HYPOTHETICAL SCENARIO

Suppose that at some future time, global R&D investments in the automotive industry have led to a stunning technological breakthrough in battery technology, with latest generation batteries now capable of delivering enormously increased reservoirs of power at substantially reduced cost, size, and weight, compared to current norms. Suppose further, that global conflicts have so severely impacted the world's oil and gas economy that the price of diesel fuel has tripled in the past year and that economists are projecting yet greater escalation. Oil and Gas supply chains are so severely disrupted that diesel shortages are a regular occurrence worldwide. In recent months it has proven almost impossible to predict where and when these shortages will strike.

BUSINESS SETTING

You are employed as a mid-level manager by the firm which is the world's largest manufacturer of intermodal shipping containers. You firm's business model is to build and retain ownership of containers, while leasing them to shipping/logistics firms worldwide. The department which you lead is responsible for all issues associated with container technology and performance. Your department's small, internal R&D team, which reports to you, has just concluded a highly successful project proving the feasibility of adapting new battery technology as a cheap and efficient alternative to the conventional diesel gen-sets now in use on refrigerated units.

The annual strategic plan which has just been delivered by your firm's executives to the company's operating departments (including yours) recognizes the instability and huge inflationary impacts affecting diesel fuels and further pushes the company's agenda of attaining carbon-neutral status. One strategic target is to ensure that as many as possible of your firm's fleet of refrigerated containers (reefers account for 25% of your worldwide inventory) are upgraded at the earliest possible time to provide energy redundancy.

OPTIONS

As output from a series of "think-tank" meetings with your staff, in consequence of receiving the updated strategic plan, you are faced with five conflicting proposals as to how to proceed to align your department's actions with the company's goals. Simple descriptions of each of these five proposals follow.

Proposal #1: The "Make" Option
Establish a mobile team of technicians within your department to rotate worldwide through high volume ports, intercepting as many of your company-owned containers as possible while en route, and making in situ modifications. Simultaneously, make design changes in your production department so that all new containers go into use already equipped with battery technology.

Proposal #2: The "Buy" Option
This is a buy versus make variation of Proposal #1. Establish a contract with a reputable mechanical contractor firm which would supply the technicians from their widely distributed global locations to provide services to you at high volume ports, intercepting as many of your company-owned containers as possible while en route, and making in situ modifications. Simultaneously, make design changes in your production department so that all new containers go into use already equipped with battery technology.

Proposal #3: The "Transfer the Risk" Option
In this option, it is proposed that your legal department distribute updated contractual terms and conditions regarding leased containers to all of your customers, via which your company absolves itself of responsibility for ensuring energy redundancy in reefer containers. All risk of power failure is transferred to the user. No action is taken by your firm to retrofit containers. Simultaneously, make design changes in your production department so that all new containers go into use already equipped with battery technology.

Proposal #4: The "Push Back" Option
This proposal recommends preparation of an intentionally-biased (know the desired outcome before conducting the analysis) financial analysis intended to demonstrate the total financial impossibility of accomplishing the goals set by your company's executive team as contained in the Strategic Plan. This proposal goes on to argue that the only sensible approach is to outfit new containers with energy redundancy and to make no changes whatsoever to existing inventory. If this is the chosen proposal, you will be the individual responsible for delivering the decision to your company's executive committee.
Proposal #5: The "Radical" Option
In this option, a radical alteration to your company's basic operating premise is proposed. This proposal argues that the only viable solution to solving energy issues in an unstable world is to move from a leasing to a sales model for all of your reefer containers, thereby transferring ownership of the containers and responsibility for energy entirely to the users. All existing clients would be given opportunity to buy their leased containers at fair market value "as is - where is", or return them to you for resale. New containers, equipped with energy redundancy would only be sold, never leased to users.

YOUR DISCUSSION FORUM ASSIGNMENT

Applying at least two of the many project selection methodologies which we discussed and illustrated in Week #3(A), decide how you would proceed and clearly explain how you would apply those chosen methods, and after applying those methods, what decision(s) you would expect to reach. Which proposal or combination of proposals would you choose to implement? If you conclude that none of these proposals can be implemented, describe an alternative solution to satisfying your company's strategic initiatives, and be prepared to defend it in front of your firm's executive committee.