Logistics Case Assignment

Little Bunny Turbines is a turbine manufacturing company that specializes in producing custom small (30 kW to 1 MW of electric power output) gas turbines. Today Little Bunny Turbines received a notice that the U.S. Department of Justice would like to discuss your recent importation of six machines that your company had fabricated for it in Taiwan, by Flag Industries. Since you have been recently hired, by the company, as a global supply chain expert and you were not involved in the procurement and importation of the machines in question, the company's lawyers have tasked you with providing a report on anything that could be perceived as having gone wrong and to also provide recommendations to prevent future problems.

You investigated and came up with the following information:

• The machines bought, are integrated into one system that will be used form a new production line, that will use advanced AI (artificial intelligence) in self-optimizing machines to automate production processes, forecast efficiency losses for better planning, and detect quality defects to facilitate predictive maintenance.
• The machines were delivered using INCO term DDP, in accordance with the purchase contract
• The total purchase price of the machines was $12 million (USD)
• Three companies had bid on the Request for Proposal (RFP) issued by your company. The bidding companies were based in India, Singapore and Taiwan.
• Your company sent an Engineer to visit and meet with each of the bidders prior to selecting the winning bidder. The engineer met with the senior managers and toured the production facilities of each bidder, spending about a full day at each site. Between employee pay, airfare, lodging, and per diem the trip cost the company about $25,000, so it was the only trip the company scheduled for this project.
• The RFP issued was detailed regarding the machining tolerances that were required, energy requirements, what was required to integrate the machines into the existing computer network, and the advanced algorithms that Little Bunny Turbines had developed to be incorporated into the system.
• Since your company had not done business in Taiwan before, it used an agency, Taiwan-US Business Limited Group, recommended by one of your suppliers. The actual contract signed was between Little Bunny Turbines and Taiwan-US Business Limited Group. The contract specified that Flag Industries would produce the machines.
• The contract specified that Little Bunny Turbines would pay $4 million (USD) when the contract was signed, $4 million (USD) when the system was assembled and demonstrated in Taiwan, and $4 million (USD) when the system was installed and accepted at Little Bunny Turbines plant in Delhi, New York.
• The contract was written in English and Mandarin Chinese (official language of Taiwan)
• The contract was very simple and straight forward. Little Bunny Turbines would pay the Taiwan-US Business Limited Group $12 million (USD) according to the payment schedule noted above, as long as the system met the technical requirements stated in the RFP, and it was installed and accepted at Little Bunny Turbines plant in Delhi, New York within 8 months of contract signing.
• When the system arrived in New York, a transformer on one of the machines had been damaged (during shipment). The technicians from Flag Industries that were setting up the system in your plant noted the damage and quickly arranged to have a replacement flown in from Malaysia. This caused only a minor delay and did not require an extension of the contract period.
• The system is functioning as expected and it has been in use for six months.

Based on the information collected there are two main areas of concern; 1) did any action or omission open the company or its personnel up to possible criminal prosecution, and 2) did any action or omission put the company in a bad position in regard to obtaining the system specified on time and for the cost expected. They are not asking you to prove that something criminal occurred, rather they want you to identify the potential areas of concern where further investigation needs to take place. Likewise, regarding placing the company in a bad position (contractual issues, management of the procurement, or such), you do not need to prove harm occurred, rather you should identify the potential areas of concern where further investigation needs to take place. You will also need to propose steps that could be taken on future procurements that would prevent or at least minimize the potential for each area of concern you have identified from occurring.

Since the lines between criminal, civil, contractual, and business practices can be difficult to discern, we will simplify them for this assignment. Placing the company in a bad position includes missing or bad contract terms and/or management/oversight of the contract. Criminal will include any action taken by a government because of an action or omission that violates a law, other than failing to comply with a contract.

For this assignment you need to:

1. Identify four concerns that place the company in a bad position.
   • Identify the concern,
   • indicate what should have been done,
   • and propose a reasonable measure that would prevent or at least mitigate a recurrence on future procurements
2. Identify four concerns resulting from any action or omission that opened the company or its personnel up to possible criminal prosecution.
   • Identify the concern,
   • list the general law or group of laws that may have been violated
   • and propose a reasonable measure that would prevent or at least mitigate a recurrence on future procurements.