Recently, the quality assurance department discovered that the whistles we produced for the South America school have failed in lead testing. Currently, our whistles contain a small trace of lead that is above the U.S. legal acceptable limit for children of 7 and under. A recent order is set to be delivered to schools in South America by the end of the week. Three alternatives have been developed for options as to what to do about this situation and how it will affect the company.
Three options consist of:
1. Not reporting the event to the South American schools.
2. Destroy the product and reproduce the order to acceptable company standards.
3. Notify the customer and allow them to keep the whistles if ok with the lead level and offer a discounted rate.
Decision Process
The process for coming up with the three options started by what is currently happening. The whistle shipment is already in route to the South American schools. All three options will affect our company differently and we need to look at what is best for the company both now and in the future. The next step to make a decision is deciding options possible to fix the situation and looking at the pros and cons of each one. Finally, the decision was made by choosing the best overall solution and they were evaluated to ensure the results were what was anticipated.
Option 1
The first option is to not report the lead level to the South American schools. If we were to repair and repackage the whistle, the cost would be around $100,000. Since South America has no lead regulations, we could continue the shipment and make no reports. An advantage to this decision is it will save money and time for the company. It will also allow us to stay on production track and not make us back logged. The money made off this order will allow us to invest in future products and designs. The disadvantage to this option is that if the schools were to find out, they would be upset and probably not order with us again. With this option, we are being unethical by potential harming children. The reports state that we were just “slightly” above the legal limit for children under 7 but this could also lead to a potential legal action case if they were to find out we still shipped them without meeting our company safety standards. The financial advantage to this option is that we would stay under budget but if a lawsuit would occur, we could be in deep financial trouble due to potentially having a product harmful to children. The legal issues are that if a lawsuit occurred, it could possibly ruin the company and if other customers found out that we did this, the company could go under. Also, by not telling the schools about this issue, if a child were to become ill due to the lead levels, we could be labeled as an unethical company to the world and current market. This option could have consequences to be fatal if not reported even though South American currently has no lead regulations.
Option 2
The second option is to get the product back to destroy it and create a new order of whistles that are compliant with company standard lead levels. There should be funds available for instances like this. These funds can allow us to keep the lead filled whistles and destroy them and create a new batch to send to the South American schools. The advantage of this option is that the company will not be placed in an ethical decision and will not have to stress that the schools might eventually find out or harm a child. It will create a safe product and will meet the company’s quality assurance regulations. The disadvantage to this option is that the company will lose a lot of money due to a large bad batch of whistles. With such a significant financial loss, it will take the company a while to recover. It also will make our company behind schedule due to re manufacturing and the delay could cause others to not order due to wait time. With this option, besides the financial issues of putting us behind schedule and potentially losing business to wait times, there will be no ethical issues and no legal issues to be faced. Ethically, if word gets out we will be the company that was honest. The company will have to build back up funds from the ones lost due to the error, but this will make everyone feel better about the product and that no child might be hurt.
Option 3
Lastly, the last option is to allow the shipment to go through, notify the schools, and let them keep the whistles for a discounted rate. While the company quality assurance did notify us of the unsafe lead levels, South America has no regulations on lead levels. The schools might want to keep the order due to these regulations and we can offer them at a discounted rate so that they are happy with us and will continue business. The advantage to this option is that the customer can save money, it will decrease the amount of money we lose, and it will let us know ethically that we at least notified them of the unsafe levels of lead. The disadvantage to this option is that it might still get out to the media or others that we sold a product that had unsafe levels to children. This could reduce business and let people think that the company doesn’t care and is just trying to make money. Legally, the school would probably not file a suit against us because we reported the content of lead and they have no regulations on lead levels. The issue is that word could get out that our company still let them have the whistles knowing the lead levels were not approved by our quality department and that we continued the order knowing it has potential harmful effects to children. This could be bad for the company because other customers can find out this fact and never order again. It might make current customers feel unsafe. Financially, this will assist us in only losing small funds due to taking a complete loss on the deal. Ethically, we can know that we warned the school about the unsafe levels but we might still be frowned upon for even letting them have the product that could harm the children.
Recommendation
After reviewing the three possible alternatives, the second one would be the best by taking the products back and creating new ones that are within the company standards for lead levels. This decision was decided due to ethical and financial reasons. Ethically, it is the best option for the company to prevent any negative long term affects. Even though South America has no regulations for lead levels, the word could get out that we sold a product that was potentially unsafe. This will also allow the quality control department and all other employees the assurance that no one was or could be harmed by this product. The fact that this customer chose us over every other toy company says a lot and we do not need to ruin our reputation with them and the rest of our customers. We pride ourselves in safe, quality, and effective products. The short term effects of the financial issues will hurt us now but will give us time to regain the money without having to worry about lawsuits or angry customers down the road. The set back in the schedule due to having to remanufacture the products will make turnaround times slower for a while but the response to being honest will strengthen our business and our relationships with our customers. Social responsibility was used to assist in the decision making process because we will be benefiting the school receiving the whistles because technically, the lead levels would be acceptable to South America. It allows us to see we are doing the right thing and creating a safe environment while taking a financial fall. Social responsibility played a large role in the decision because it is what is best for the customer, employees, the kids, our company environment, and the way we are looked at as a business.