Harimann International Case Solution

2. Decision Problem

Pioneer asked from Hermann International to provide a sample of six different types of garments along with the preliminary order for these products. Dhawan was very excited to receive this order because in addition to being very profitable, the completion of order in time would greatly strengthen the mutual business relationship of the two companies. Furthermore, the timing of the order was such that it enabled Dhawan to offer work to employees during off season. But, owing to limiter production capacity of the company and the difficulty in hiring the embroidery firm, Dhawan began to analyze if it was worthwhile for the company to accept the order.

3. Evaluation

In order to evaluate the proposal under the latest circumstances, Dhawan has to find out if the costs relevant to the project are less than the benefits or not. If Dhawan follows parallel manufacturing process instead of the sequential manufacturing, then the chances of missing the deadline increase from 20% to 40%. Therefore, profits should be calculated for both the scenarios to find out the expected benefit from accepting the order. The calculations show that if Dhawan misses the deadline and hence the receipts and the corresponding government incentives decrease, the loss from the order amounts to INR 180,530. On the other hand, if everything goes well and In-house manufacturing and embroidery takes place in time, the expected profit from the order comes out to be INR 315,238. By assigning the weight ages to the scenarios, the expected profit from accepting the proposal comes out to be around INR 116,931. In doing all this analysis, it should be considered that the initial investment of INR 188,400 by Dhawan has also been taken into account in the costs of manufacturing; therefore, these costs are not relevant to the decision. Therefore, under these circumstances; Dhawan should not accept the order unless a considerable extension is given in the deadline. Although, by rejecting the order from the costumer will hurt the reputation and business relationship of Harimann International, the reputational loss and the monetary loss resulting from the failure to meet the deadline would be very high. The risk of not meeting the deadline on the part of Embroidery firm and other risks outside the influence of the company are too high and cannot be ignored. Also, it would be the first time for the management and Dhawan to monitor the parallel manufacturing process and hence, chances of failure may be too high.