W. Gale Cutler's Commentary on "Conflicts within a Manufacturing Firm"
A modern corporation, particularly one with several
manufacturing divisions and internal capabilities to produce
parts and tools it needs to manufacture a finished product, is
a very complex organization. A major corporation can literally
be thought of as a series of individual companies bound
together by the management of the corporation. It is healthy in
such an organization for internal competition to occur in
bidding to make tools, parts, dies, etc. for other portions of
the company. In such competitive bidding, honest quotes can
only be obtained if internal departments/divisions are treated
exactly the same as outside sources also asked to quote.
In Part I of this case, Purchasing should refuse to disclose
outside quotes to the internal tool and die department.
Disclosure of outside quotes violates the relationship a
purchasing department should have with outside vendors and will
give the internal tool and die department an unfair advantage.
It will be impossible to get a fair and impartial quote from
the internal tool and die department if they are provided the
quotes from outside vendors. A truly competitive situation will
provide the best situation for the company as a whole.
In Part II, the outside vendors have a justifiable complaint
when they discover they are competing with an internal tool and
die department that has full access to their quotes. With this
kind of information available the internal department will
undoubtedly deliver a quote low enough to win the job but this
in no way assures they will produce the best quality tools and
dies for the price. An honestly derived bid from the internal
tool and die department is actually a very good check on the
accuracy and validity of bids acquired externally.
In Part III, the tool and die department head has a definite
misconception when he pleads that the "company should not
compete with itself." Internal competition goes on in many
major corporations and helps assure that they work effectively
and efficiently to produce the best product at the best price.
If the tool and die department has the goals and objectives of
T&D in mind they will want tools and dies produced by the
organization that will do it best, considering quality and
price, whether than organization is outside the company or
internal to the company.
An internal department, propped by access to privileged
information, can actually prove a detriment by "rigging" quotes
to get internal business it would not get otherwise. Frequently
the internal department will overrun the cost of producing the
item on which it has bid and the overrun reduces company profit
in final accounting.
Cite this page:
"W. Gale Cutler's Commentary on "Conflicts within a Manufacturing Firm""
Online Ethics Center for Engineering
National Academy of Engineering
Accessed: Wednesday, May 22, 2013