Revcon Products manufactures valves for filling and controlling the level of water in industrial…

Revcon Products manufactures valves for filling and controlling the level of water in industrial…

Revcon Products manufactures valves for filling and controlling the
level of water in industrial tanks. It had concentrated on products for the
construction industry (valves for newly-installed tanks), but now wants to move
into the much larger and more lucrative replacement market. Whereas annual
demand for new valves is about 100,000, it is about 1 million for replacement
valves. The company envisioned a new valve, the Millennium Valve, as a way to
gain a share in the tank-valve replacement market. Revcon’s objective was to
design and produce the Millenium Valve to be of superior quality
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Revcon Products manufactures valves for filling and controlling the
level of water in industrial tanks. It had concentrated on products for the
construction industry (valves for newly-installed tanks), but now wants to move
into the much larger and more lucrative replacement market. Whereas annual
demand for new valves is about 100,000, it is about 1 million for replacement
valves. The company envisioned a new valve, the Millennium Valve, as a way to
gain a share in the tank-valve replacement market. Revcon’s objective was to
design and produce the Millenium Valve to be of superior quality and lower cost
than the competition. Revcon decided to outsource the development and design of
the new valve. It prepared an RFP that included the following objectives and
requirements: Product objectives: Innovative design to distinguish the
Millennium Valve from the valves of competitors. Be price-competitive but offer
greater value. Market (user) requirements: Ease of installation Nonblogging
Quiet operation Maintain water level with pressure changes Ease in setting
water level Adjustable height Revcon sent the RFPto four design/development
companies and selected Welbar, Inc., primarily based on it having submitted the
lowest bid. Welbar’s proposal had been written by its sales and marketing
departments and revised by senior management, but received no input from
industrial designers, engineers, or anyone else who would work on the project.
Welbar had no prior experience with industrial water valves, but the sales team
saw Millennium as an opportunity to earn profits and align with a major
equipment manufacturer. The marketing department prepared time and cost
estimates using standard tasks and work packages from proposals for old
projects. The Welbar design team assigned to the Millennium project was headed
by Karl Fitch, a seasoned engineer, and included two industrial designers and
two engineers. Because of prior project commitments, the team was not assembled
until 5 months after the proposal had been accepted, which became the first
time anyone with technical training had looked at the project seriously. It
also was at this time that Welbar began to perform industry research on the
valve market by talking to contractors, plumbers, and retailers. Karl reviewed
the proposal and divided the project into phases and small work packages and
prepared a Gantt chart. He concluded that the proposal had omitted several
critical processes and steps, and that the requested funding was substantially
underestimated. He rewrote the proposal, schedule, and cost estimate.
Throughout the project the design concept, work tasks, and schedules had to be
changed many times. Welbar engineers were frustrated at Revcon’s constant
harping about the need for both low cost and functional superiority. It could
be done, but Revcon also wanted a speedy, low-cost development effort. During
the project Welbar engineers learned that to design such a valve required more
resources than they had been budgeted. Because of all the changes, Welbar
exceeded the budgeted amount four times and had to request additional funds
from Revcon. One big problem that the project encountered was when Welbar
delivered a prototype to Revcon. Because the proposal had not clearly stated
what the prototype would be, Revcon expected much more. Revcon thought the
prototype would be a virtually finished product with replicable components,
whereas Welbar understood it to be a simple working model to demonstrate design
and functionality. Extra time and money had to be spent to bring the prototype
up to Revcon’s expectation. Revcon allotted the additional time and money, but
the completed prototype was still over budget and delivered late. To compensate
for the delay, Welbar crammed project stages together or executed them out of
sequence. When the design stage fell behind because the prototype had not met
expectations, Welbar went ahead and started making production-ready models.
This was a waste of time and money because the finished prototype showed that
the production models could not be produced. Welbar did design a truly
innovative valve; however, the design required substantially new tooling at the
factory and would cost Revcon 50 percent more to produce than had been
expected. Revcon cancelled the contract with Welbar. The work is estimated to
be 90 percent finished, and Revcon is attempting to complete the last 10 percent.
However, it looks like completing that last 10 percent will be very
challenging. So far, Revcon has spent twice as much time and money on
development as expected and still does not have a product to manufacture.
Because of development and tooling costs, it is unlikely that the product, once
development has been completed (if ever), can be priced low enough to be
competitive.

1. What happened to this project? Prepare a list of the factors that
contributed to Revcon’s failure to obtain the product they wanted. For each
factor, discuss what might have been done differently.

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