Question: Excel Electronics Company a privately held enterprise has a subcontract

Excel Electronics Company, a privately held enterprise, has a subcontract from a large aerospace company in Chicago. Although Excel was a low bidder, the aerospace company was reluctant to award the business to the company because it was a newcomer to this kind of activity. Consequently, Excel assured the aerospace company of its financial strength by submitting its audited financial statements. Moreover, Excel agreed to a pay a penalty of $5,000 per day for each day of late delivery for whatever cause.
Amy Greer, the Excel purchasing agent, is responsible for acquiring materials and parts in time to meet production schedules. She placed an order with an Excel supplier for a critical manufactured component. The supplier, who had a reliable record for meeting schedules, gave Greer an acceptable delivery date. Greer checked up several times and was assured that the component would arrive at Excel on schedule.
On the date specified by the supplier for shipment to Excel, Greer was informed that the component had been damaged during final inspection. It was delivered 10 days late. Greer had allowed 4 extra days for possible delays, but Excel was 6 days late in delivering to the aerospace company and so had to pay a penalty of $30,000.
What department should bear the penalty? Why?

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  • CreatedNovember 19, 2014
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