[SOLVED] Slaveless Industrial Services (SIS) had become one

Slaveless Industrial Services (SIS) had become one of Europe’s most respected suppliers of die-cast zinc, aluminum and magnesium parts to hundreds of companies in many industries, especially automotive and defense. The company cast and engineered precision components by combining the most modern production technologies with precise tooling and craftsmanship. Slaveless Industrial Services (SIS) began life as a classic family firm under Erik Paulsen, who opened a small manufacturing and die-casting business in his home town of Slaveless, a town in east Denmark, about 100 km south-west of Copenhagen. He had successfully leveraged his skills and passion for craftsmanship over many years, while serving a variety of different industrial and agricultural customers. His son Anders had spent nearly ten years working as a production engineer for a large automotive parts supplier in the UK, but eventually returned to Slaveless to take over the family firm. Exploiting his experience in mass manufacturing, Anders spent years building the firm into a larger-scale industrial component manufacturer, but retained his father’s commitment to quality and customer service. After 20 years, he sold the firm to a UK-owned industrial conglomerate and within ten years it had doubled in size again and now employed in the region of 600 people and had a turnover approaching 200 million.
Throughout this period, the firm had continued to target its products into niche industrial markets where its emphasis upon product quality and dependability meant it was less vulnerable to price and cost pressures. However, in 2009, in the midst of difficult economic times and widespread industrial restructuring, it had been encouraged to bid for higher-volume, lower-margin work. This process was not very successful but eventually culminated in a tender for the design and production of a core metallic element of a child’s toy (a ‘transforming’ robot).Interestingly, the client firm, Alden Toys, was also a major customer for other businesses owned by SIS’s corporate parent. It was adopting a preferred supplier policy and intended to have only one or two purchase points for specific elements in its global toy business. It had a high degree of trust in the parent organization and on visiting the SIS site was impressed by the firm’s depth of experience and commitment to quality. In 2010, it selected SIS to complete the design and begin trial production.
‘Some of us were really excited by the prospect . . . but you have to be a little worried when volumes are much greater than anything you’ve done before. I guess the risk seemed okay because in the basic process steps, in the type of product if you like, we were making something
that felt very similar to what we’d been doing for many years.’ (SIS operations manager)‘Well obviously we didn’t know anything about the toy market but then again we didn’t really know all that much about the auto industry or the defense sector or any of ourtraditional customers before we started serving them. Our key competitive advantage, our capabilities, call it what you will, they are all about keeping the customer happy, about meeting and sometimes exceeding specification.’ (SIS marketing director)The designers had received an outline product specification from Alden Toys during the bid process and some further technical detail afterwards. Upon receipt of this final brief, a team of engineers and managers confirmed that the product could and would be manufactured using an up-scaled version of current production processes. The key operational challenge appeared to be accessing sufficient (but not too much) capacity. Fortunately, for a variety of reasons, the parent company was very supportive of the project and promised to underwrite any sensible capital expenditure plans. Although this opinion of the nature of the production challenge was widely accepted throughout the firm (and shared by Alden Toys and SIS’s parent group) it was left to one specific senior engineer to actually sign both the final bid and technical completion documentation. By early 2011, the firm had begun a trial period of full-volume production. Unfortunately, as would become clear later, during this design validation process SIS had effectively sanctioned a production method that would prove to be entirely inappropriate for the toy market, but it was not until 12 months later that any indication of problems began to emerge.
Throughout both North America and Europe, individual customers began to claim that their children had been ‘poisoned’ while playing with the end product. The threat of litigation was quickly levelled at Alden Toys and the whole issue rapidly became a ‘full-blown’ child health scare. A range of pressure groups and legal damage specialists supported and acted to aggregate the individual claims.
Although similar accusations had been made before, the litigants and their supporters focused in on the recent changes made to the production process at SIS and in particular the role of Alden Toys in managing its suppliers.‘. . . it’s all very well claiming that you trust your suppliers but you simply cannot have the same level of control over another firm in another country. I am afraid that this all comes down to simple economics, that Alden Toys put its profits before children’s health. Talk about trust . . . parents trusted this firm to look out for them and their families and have every right to be angry that boardroom greed was more important!’ (Legal spokesperson for US litigants, being interviewed on a UK TV consumer rights show)Under intense media pressure, Alden Toys rapidly convened a high-profile investigation into the source of the contamination. It quickly revealed that an ‘unauthorized’ chemical had been employed in an apparently trivial metal cleaning and preparation element of the SIS production process. Although when interviewed by the US media, theparent firm’s legal director emphasized there was ‘no causal link established or any admission of liability by either party’, Alden Toys immediately withdrew its order and began to signal an intent to bring legal action against SIS and its parent. This action brought an immediate end to production in this part of the operation, and the inspection (and subsequent official and legal visits) had a crippling impact upon the productivity of the whole site. The competitive impact of the failure was extremely significant. After over a year of production, the new product accounted for more than a third (39 per cent) of the factory’s output. In addition to major cash-ƃow implications, the various investigations took up lots of managerial time and the reputation of the firm was seriously affected. As the site operationsmanager explained, even its traditional customers expressed concerns. ‘It’s amazing, but people we had been supplying for thirty or forty years were calling me up and asking “[Manager’s name] what’s going on?” and that they were worried about what all this might mean for them . . . these are completely different markets!’

Questions
1. What operational risks did SIS face when deciding to become a strategic supplier for Alden Toys!
2. What control problems did it encounter in implementing this strategy (pre- and post-investigation)!

Question: Slaveless Industrial Services (SIS) had become one