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Facts & Issues
Convenience Cookware Inc., produces and sells Ever Last Ovenware that is designed to withstand going from a conventional or microwave oven to cool temperatures without shattering.
Ever Last Ovenware was not meeting their required 25% return on sales and to increase sales design engineers modified the product, making it less expensive to produce, saving 35% in variable production cost.
There were 1,500,000 ovenware pieces ordered by existing customers for the first quarter delivery, production began filling these orders immediately.
Routine quality testing revealed a defect with the product; under high cooking temperatures of 450-500 degrees would explode when placed in cool temperatures, causing serious cuts and burns to users.
Management had two options:
The first option was to delay shipment and recycle the flawed product and produce the original cookware who’s production cost is higher. Yet they would sell the original product at 10% reduction cost. Potential loosing orders and customers for the 30-day delayed shipment, an estimated one-third of orders would be lost for the year.
Option two entailed shipping the flawed cookware without notice or warning of potential dangers and “hope for the best.”
With only a .25% failure rate management decided to go with option two and ship the flawed cookware. 1,575 claims on the cookware were made none of which cause injuries and replacements were given.
After the third month Mrs. Farzam’s defective cookware exploded causing a glass fragment to struck her eye as well as second and third degree burns on her face, neck, and arms.
This was reported in newspapers and the department store began investigating causes, when they contacted Convenience Cookware manager about their product, they acted surprised, providing an altered quality report and continued with sales of the flawed cookware.
Several cases of exploding cookware arose causing serious injuries, forcing Convenience Cookware to recall...
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