Explore BrainMass

Toys Inc. Sales Trouble: Quality control costs: A good idea?

Toys, Inc. is a 20-year-old company engaged in the manufacture and sale of toys and board games. The company has built a reputation on quality and innovation. Although the company is one of the leaders in its field, sales have leveled off in recent years. For the most recent six-month period, sales actually declined compared with the same period last year. The production manager, Ed Murphy, attributed the lack of sales growth to "the economy." He was prompted to undertake a number of belt-tightening moves that included cuts in production costs and layoffs in the design and product development departments. Although profits are still flat, he believes that within the next six months, the results of his decision will be reflected increased profits.

The vice president of sales, Joe Martin, has been concerned with customer complaints about the company's Realistic line of working-model factories, farms, and service station. The moving parts on certain models have become disengaged and fail to operate or operate erratically. His assistant, Keith McNally, has proposed a trade-in program by which customers could replace malfunctioning models with new ones. McNally believes that this will demonstrate goodwill and appease dissatisfied customers. He also proposes rebuilding the trade-ins and selling them at discount prices in the company's retail outlet store.

He doesn't think that this will take away from sales of new models. Under McNally's program, no new staff would be needed. Regular workers would perform needed repairs during periods of seasonal slowdowns, thus keeping production level. When Steve Bukowski, a production assistant, heard Keith's proposal, he said that a better option would be to increase inspection of finished models before they were shipped. "With 100 per cent inspection, we can weed out any defective models and avoid the problem entirely.

Take the role of a consultant who has been called in for advice by the company president, Marybeth Corbella. What do you recommend? (no references)

Solution Preview

Here you go!

I recommend that you inspect rather than have a policy of permitting customer trade in. The two basic reasons are that quantitative measures cannot capture the full impact of sub-par products and prevention is cheaper than remedial work.

First, customer reputation is an intangible without a specific dollar impact. While we can compare the cost of repairing and ...

Solution Summary

Response is 229 words (no references) in everyday language suitable for a novice to intermediate.