Mid-semester Examination-UB Quality Management Page
Case - Handles and Hinges Ltd
H&H was established in Birmingham, England, in 1984 by two young entrepreneurs, Dave Philips and Chris Agnew, both experienced in the hardware trade.
The business specialized in the ‘designer’ market for polished metal (brass or
stainless steel) door handles, cupboard knobs, furniture fittings (mostly used in shop/office furniture) and hinges. By 1996, sales had grown to about £5 million per year. This
success was based on H&H’s reputation for high
-quality, unique designs of both traditional and modern products, many of which were selected and specified by architects for large and prestigious projects such as new office developments in
. Dave, the Chief Executive Officer, with responsibility for sales, believed that most orders from construction companies were placed with H&H because they assumed they had no other choice once the H&H products had been specified. Larger companies would sometimes suggest to the architect that similar products were available at less than half the price. This advice was invariably
ignored as the architect would be attracted by H&H’s designs and quality, and would be reluctant to risk ‘spoiling’ multi
-million pound projects for the sake of saving a few thousand pounds. Dave outlines the characteristics of the changing marketplace:
„Because of the recession in the construction industry, particularly in office
building, we have, since 1990, expanded our direct sales to large UK hardware retail companies, which now account for about 40 per cent of our sales value, but only about 15 per cent of our gross profit. This segment is much more price-sensitive, so we must be able to manufacture good-quality, simple, standard products at low costs comparable to those of our competitors. Some of the reduced costs have been achieved by using thinner and cheaper materials similar to those used in our
competitors‟ products. We have just received our first consignment of brass
sheet from Poland with a saving of over 10 per cent in this case. We also had to re-organize to reduce our processing costs. Chris has done a great job of changing all production to modern batch methods. However, I am concerned that we are often late delivering to our UK retail customers, and this makes it difficult to keep good relationships and to get repeat orders. Fast delivery of relatively small quantities is
required in the “retail segment”, whereas the construction/contractors marke
t allows very long production lead times. Dependable delivery is crucial to avoid completion delays, for which we have been held financially accountable on some occasions!
„When customers complain about delivery or about faulty products, we try to
compensate them in some way to keep their business
for example, by credit notes or discounts on the next order. Our representatives each spend about one day a week dealing with the consequences of late deliveries, but on the positive side, a meeting with a client is an opportunity to get the next order. The hardware retail companies often require very quick delivery, which is often only achieved by switching production to the item which is required first.