Question $4(1$ point$)$

RAS Technologies

This case is important because supply managers must be able to understand alternatives and decide on appropriate action when dealing with supplier quality issues.

Read the following case on RAS Technologies and then answer the questions that follow.

RAS Technologies

Victoria Barclay, president of RAS Technologies, sat in her Fremont, California office, reviewing an email from Jamie Adams, regional distribution manager for a division of Girard Corporation $($Girard$),$ received on October $28.$ Girard supplied RAS Technologies with a sensor that had been the cause of a recent product recall of the RAS$-200$G electronic volume corrector. Test results from an independent third$-$party lab indicated that the sensor failed under conditions of extreme heat and humidity. However, Jamie$$s email refuted the conclusions from the test results and denied any responsibility for the recall. It was now late in the afternoon of Monday, November $4,$ and Victoria was preparing a meeting the following morning at $9$:$00$ a$.$m$.$ to discuss how to address the problem with Girard.

RAS TECHNOLOGIES

Based in Fremont, California, RAS Technologies provided technology solutions for companies in the energy sector. Its products included oil and natural gas measurement devices and control technology, communications systems, and related software. The company was founded in $1974$ by a group of three engineers and held more than $50$ patents. Company sales surpassed $$50$ million for the first time in the most recent fiscal year.

One of RAS Technologies$$ main product lines was the RAS$-200$ series of electronic gas volume correctors. These devices were used for measuring the volume of natural gas that passed through a meter corrected to operating base conditions, adjusting for parameters such as gas pressure and temperature. The correctors were powered by lithium batteries and connected to the communication network of the gas company that enabled transmission gas volume data in the pipeline.

RAS Technologies operated a $100,000-$square$-$foot plant for product assembly and distribution, employing approximately $150$ hourly workers. Operations for machining, plastic injection molding, subassemblies and wire harnesses, and printed circuit boards were outsourced to local suppliers.

Victoria Barclay was a graduate of Stanford University School of Engineering, and had been with the company for more than $15$ years, working in product development and sales before being promoted to president and CEO, a position she had held for four years.

PRODUCT RECALL

Three years prior, RAS Technologies received an order from a Chinese company, Guangxi Gas Corporation $($Guangxi Gas$),$ for $1,600$ RAS$-200$G correctors. Approximately $330$ units were delivered that year, with the balance shipped the following year.

On May $16,$ Victoria received an email from Mr$.$ Zhong Chen, vice president at Guangxi Gas, indicating that several of the RAS$-200$G correctors had failed in the field and the company was missing critical data about gas volumes shipped through its network. In the email, Mr$.$ Chen demanded that RAS Technologies replace the $1,600$ RAS$-200$G correctors and compensate Guangxi Gas for all costs, including lost gas revenues.

Henry Zhao, the sales representative for RAS Technologies in Southeast Asia, and Jon Kormos, quality assurance manager, were sent to investigate the problem. They confirmed that $11$ RAS$-200$G correctors had failed in the field. They were able to recover lost data on gas volumes using the mechanical back$-$up feature on the units, thereby avoiding problems related to lost gas revenues for Guangxi Gas.

Victoria also sent the five versions of the RAS$-200$ series meters $($RAS$-200$A$,$ RAS$-200$G$,$ RAS$-201$A$,$ RAS$-201$G$,$ and RAS$-202$A$)$ to a third$-$party lab, Bekker Engineering, to conduct accuracy verification tests. Findings indicated that four of the five meters, including the RAS$-200$G$,$ failed when exposed to temperatures of $50$ degrees Celsius $(122$ degrees Fahrenheit$)$ and $90$ percent humidity. The root cause of the problem was determined to be the $21$C stainless steel pressure sensor supplied by Girard Corporation. The cost of the sensor was $$70\mathrm{.}62.$ The total number of RAS$-200$ series meters shipped by customer location for the previous five years is provided in Exhibit $1.$

Although the standard RAS Technologies general warranty was for one year, Victoria agreed with Mr$.$ Chen to replace all $1,600$ correctors at Guangxi Gas, which included a different sensor that was determined to have higher performance characteristics at elevated temperatures and humidity. The average manufacturing cost of a corrector was $$350.$ In exchange for replacement of the correctors, Guangxi Gas was to remove all existing product from the field and return them to RAS Technologies.

GIRARD CORPORATION

Girard Corporation was a Fortune $100$ company with divisions in aerospace, building technologies, and sensing technology solutions for the energy sector.