vigard_manufacturing_company (Case Study)
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Strayer University, Washington *
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Dec 6, 2023
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VIGARD MANUFACTURING COMPANY Mr. Jesse Krause, supply manager of the Vigard Manufacturing Company, was faced with the problem of
selecting a source to prepare a technical manual for a winder that the company was planning to sell
nationally. The Vigard Manufacturing Company was formed four years ago by Edward Vigard, an engineer
who had previously been employed by a large electronics manufacturer in the New Jersey area. Mr.
Vigard’s company concentrated on the production of a special type of wound magnet that had wide
application in military and commercial electronics equipment. The company had grown from two
employees to a present work force of seventy-five. In addition to Mr. Vigard and Mr. Krause, the
management of the company included a sales manager and a production manager. The president, Mr.
Vigard, handled design and engineering matters. The magnets that the company produced were wound on a machine that Mr. Vigard had designed.
The machine consisted of a specially designed casting, a high-speed motor, and a small core around which
the finely spun copper wire was wound in order to produce the magnet. Mr. Vigard had fabricated a
number of these winders for use by his company. Successful production of the magnets required proper
operation of the winders and this, in turn, depended on continual servicing to maintain required speeds
and accuracy. Last year Mr. Vigard and his management group decided to manufacture the winders for sale to
electronics, aircraft, missile, and instrumentation firms, many of which produced their own magnets on
equipment that Mr. Vigard believed was inferior to his own winder. Cost analyses and projections
indicated to Mr. Vigard that sales of the winders might constitute a substantial new source of volume and
profit. When a decision to produce the winder had been reached, Mr. Vigard invested a substantial portion
of the company’s funds in the castings and other components needed to manufacture the winders. As
production proceeded, the sales manager prepared for marketing the new product. First, he undertook
exploratory discussions with potential customers in the immediate area of the Vigard plant. Second, he
negotiated an agreement with a sales representative to handle sales in the western part of the United
States. Third, he initiated an advertising campaign, by means of direct mail and announcements in trade
papers, stating that the winders would be ready for delivery on June 1 that year. The Vigard Manufacturing Company proceeded satisfactorily with the manufacture of the
winders. Although the sales manager found that there was a substantial amount of interest in the new
product, he learned that the winders could not be sold unless they were accompanied by an illustrated
operation and maintenance manual. For example, the western sales representative informed him that the
manual was not only essential to the user but also needed for demonstrating the winder. Moreover, an
eastern customer had placed an order for several of the winders contingent on their being delivered with a
suitable manual. These contingent orders were of great importance to the Vigard Company because the
cost of the manufacturing program had required an additional bank loan and had seriously depleted the
company’s working capital. Accordingly, Mr. Vigard and his associates prepared the technical descriptions that the manual
would contain. Mr. Krause, the supply manager, was directed to locate a source that could prepare
approximately 180 illustrations and technical drawings and have the manual ready for the printer on the
first of May so that it would be available for the June 1 deadline. Although he had never before had occasion to place artwork contracts, Mr. Krause found that he
was able to locate a number of potential sources through the use of the “yellow pages and the telephone.
The companies that he located were of two general types: (1) commercial art companies that prepared
mail order catalogs and (2) art companies that specialized in the preparation of technical manuals. He
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found that most of the commercial art companies showed little interest in the work because they were
busy preparing catalogs and promotional pamphlets for their regular clients. Two large concerns that
specialized in the preparation of technical manuals seemed anxious to obtain the work. In addition to these two broad classes of companies, Bullock Art, a small organization that was
attempting to expand, gave promise of being able to handle the work. This company consisted of Mr.
Bullock and a group of freelance artists he employed whenever he obtained a contract requiring their help.
Mr. Bullock had been employed as a freelance artist by several companies, which, upon telephone
inquiries by Mr. Krause, reported favorably on the quality of Mr. Bullock’s work. In addition, he taught
commercial art at a well-known trade school and had developed his own production methods, which
appeared to be superior to those used by most other art concerns. Mr. Krause’s preliminary survey indicated that four companies were interested in undertaking the
work: Bullock Art; Webster, Inc., and Hershey Associates (the two concerns specializing in the production
of technical manuals): and The Catalogue Corporation, a large commercial art concern. Mr. Krause
decided to visit each of these companies. Webster, Inc., the first company visited, was the largest art concern in the city, employing
approximately 150 artists and book designers. The company had excellent facilities, including the latest
art and layout equipment and its own photographic laboratories. The operations of the company appeared
to be efficiently organized and well managed. Although the company was then operating at capacity, Mr.
Krause learned that approximately 80 percent of its business had been with one large manufacturer that
had recently informed the Webster management that it was shifting its technical manual and work to
another firm. The general manager of the company estimated that he could complete Mr. Krause’s work
on schedule. He stated further that the company would undertake the work on an hourly basis with a
guarantee that the total time would not exceed a specified number of hours. He informed Mr. Krause that
he could submit a definite quotation within forty-eight hours. Hershey Associates was visited next. Although considerably smaller than Webster, Inc., the
company had been doing the same general type of work. After examining samples of the company’s
previous work, Mr. Krause concluded that Hershey Associates was qualified to prepare the artwork for the
manual, and invited the company to submit a quotation. Mr. Krause then called on The Catalogue Corporation. Although this company was well known as
a publisher of mail order catalogs, it had never produced a technical manual. The company representative
saw no problem in meeting Mr. Krause’s requirements, however, He said that if any specialized talent was
required, he would have no difficulty in obtaining needed personnel inasmuch as several qualified people
had called on him that week in search of employment. In view of these assertions and the general
reputation of the company, Mr. Krause asked The Catalogue Corporation to submit a quotation. The pressure of other work prevented Mr. Krause from visiting Bullock Art. However, Mr.
Bullock telephoned to ask if he might visit the Vigard Manufacturing Company to analyze the job and
submit a quotation. He stated that if he were given an opportunity to study the work, he was confident he
could demonstrate his ability to handle the contract within the time limit and at a lower cost than his
competitors. Although Mr. Krause did not believe that an additional quotation was necessary, he agreed to
let Mr. Bullock analyze the work and submit a quotation. The following day the general manager of Webster, Inc., called on Mr. Krause to present his
quotation. The quotation stipulated a rate of $17.60 per hour with a maximum guarantee of $72,000. The
quotation was contingent, however, on weekly progress payments based on the number of hours spent on
the contract. In submitting the quotation, the general manager stated that the hourly rate should be
considered as the significant figure, since the maximum guarantee provided a margin of safety for
contingencies. Mr. Krause took exception to this statement, pointing out that a company employing more
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highly skilled personnel might complete the job in fewer hours and at a lower total cost, even though it
had a higher hourly rate. He concluded, therefore, that the maximum guarantee was the more important
figure. In addition, Mr. Krause stated that although the artwork would not necessarily be awarded to the
lowest bidder, it was going to be placed on a competitive basis, and he advised the Webster general
manager to eliminate any ‘water’ that might be in his bid. After making a few computations on a scratch
pad, the general manager stated that he could reduce the maximum guarantee to $48,000. Thereupon Mr.
Krause told him to prepare a new quotation and to submit it as soon as possible. The following morning,
the general manager returned with a new quotation containing the same hourly rate but with a new
maximum guarantee of only $22,500. When Mr. Krause remarked, “There must have been enough ‘water’
in the previous quotation to float the manual,” the general manager replied that he expected to lose money
if he received the contract. He said that in view of this, he was unwilling to assume the burden of
financing the work. Mr. Krause explained that this was an important issue to him and that his award of the
contract might well hinge on this provision. The general manager pointed out that his company typically
received weekly progress payments and that without them he was not willing to accept the contract. Mr.
Krause then stated that he would make his decision and place the contract within forty-eight hours. In the meantime, Mr. Bullock had visited the Vigard Company and had spent several hours
analyzing the work and preparing his quotation. In the course of analysis, Mr. Bullock made a number of
suggestions that not only improved the style of the manual but simplified the production of the artwork.
For example, Mr. Bullock suggested that certain expensive airbrush operations could be replaced by
relatively inexpensive screening techniques. He also demonstrated that through more careful “eye
control” many of the sketches could be improved: This would result from a rearrangement of details so
that they were placed at a point in the illustration where the eye naturally fell first. He stated that if he
were given the contract, he would improve the layout and general appearance of the manual and eliminate
difficult production problems. Mr. Bullock examined the rough sketches for the manual and discussed
them briefly with Mr. Vigard and the sales manager. When Mr. Krause discussed Mr. Bullock’s
qualifications with these two officers of the company, they both expressed the opinion that he possessed
an unusual ability and seemed to be well qualified to undertake the work. Bullock Art’s quotation specified an hourly rate of $18 and a maximum guarantee of $21,060. Mr.
Bullock explained in detail how he had prepared the quotation and how the production shortcuts he had
developed would enable him to make a fair profit on the contract. Although Mr. Krause was convinced
that Mr. Bullock had a better understanding of the job to be done than any other bidder, he questioned his
ability to acquire an organization and get it in operation in time to meet the required production schedule.
Mr. Bullock countered by saying that this was the normal manner in which he worked and that he was
confident that he could get the personnel and equipment needed on a moment’s notice. He stated further
that if he needed additional funds to finance the work, he could borrow the money from his brother-in-
law. In the event that he fell behind schedule, he could work nights and weekends. During the day, the quotations of the other two companies were received. The Catalogue
Corporation offered to take the contract at an hourly rate of $21.00 and a maximum guarantee of $32,130.
The quotation of Hershey Associates stipulated an hourly rate of $18.90 and a maximum guarantee of
$33,750. Although Bullock Art submitted the low quotation, Mr. Krause was somewhat reluctant to place
the contract with the company. He did not question Mr. Bullock’s personal ability, but he doubted that Mr.
Bullock could expand his organization fast enough to meet the desired production schedule. On March 22,
because of this doubt, Mr. Krause decided to visit Bullock Art. His visit disclosed that Bullock Art did not
possess adequate space in which to do the work. However, Mr. Bullock showed him an unoccupied
basement in a building down the street that could be rented, cleaned up, and put to use if needed. 230
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After his visit to Bullock Art, Mr. Krause wondered if the potential savings of an award to
Bullock justified the risks that were involved. He needed to place the contract immediately in order to
allow sufficient time for the completion of the artwork and delivery of the manual to the printer by May 1.
Unless the manual reached the printer by this date, it would not be available on the first of June, the day
on which the winders had been promised for delivery. 231