MEMORANDUM

Date: September 22, 2017

TO: David Wallace, President

Dunder Mifflin, Inc.

FROM: Michael Scott, Regional Manager

Dunder Mifflin, Scranton

SUBJECT: Incident Report - Order to Wayne Enterprises

Action Required: Your approval needed by 9/30/2017

Dear Mr. Wallace,

It has come to my attention that there was an issue with our order to Wayne Enterprises. This incident was

revealed during our quality control inspection and I am notifying you of the issue as well as possible

solutions in this report.

Sincerely,

Michael Scott, Regional Manager

Dunder Mifflin, Scranton

Introduction

This report serves to detail an incident occurring on September 20, 2017. The aforementioned incident

involves the completion of an order to Wayne Enterprises for one million reams of weather-resistant copy

paper. For this particular order, our Scranton warehouse had to purchase weather-resistant coating to be

adhered to the copy paper in our production machines. These machines do have the hardware to adhere
weather-resistant coating to paper however, our Scranton branch machines have never been used to do so

in the past. This report will detail a narrative of the incident involving our machines, the challenges of this

incident, three solutions to this issue, cost analysis of each solution, and recommendations for how to

proceed. To prepare this report I spoke to the warehouse staff that identified this issue as well as our

quality control and accounting departments to provide the necessary information in regards to cost

analysis and possible solutions. Much work remains, and we solicit your suggestions on how to proceed

in solving this matter.

Narrative of the Incident

On September 20th, 2017 the Dunder Mifflin Scranton branch received a quarterly warehouse quality

control inspection. During this check, the warehouse employee performing the inspection marked on the

quality report that the weather-resistant coating to be applied to one million reams of paper for an order to

Wayne Enterprises was not adhering to paper with our current machines. Upon closer inspection, we have

gathered the cause to be faulty or broken hardware in our machines that does not allow for coating to be

applied to paper. Without this adherence, our order to Wayne Enterprises will not be able to be completed

until further action is taken.

Challenges of this Situation

This situation poses a challenge as we have learned that our regular paper making machines are not able

to provide weather-resistant copy paper due to faulty and dated hardware. Our quarterly budget does not

allow for the purchase of new machines however, the current ones in use are unable to properly adhere

the weather-resistant coating.

Possible Solutions

1. Calling in a specialist to identify the problem and purchase new hardware. We have a local

Scranton paper technician company on contract that comes in and makes any necessary repairs to

our warehouse machines after every other quality control check. For this solution, we would have
 to call our outside technician company to come for an extra visit as they are not scheduled to

come until our next quality control inspection per our contract. Because of this, we will have to

pay the local technician companys flat rate which is marked up from our contract rate. They will

be able to arrive within the week to identify the issue and necessary hardware. However, we will

have to wait until their company is able to order whichever part is necessary and have them return

for another visit to install the hardware. This will amount to a total of two visits as well as the

cost of the part ordered from their company. With this solution we should estimate to see a

working machine anywhere from two to four weeks.

2. Improving our current machines and purchasing new hardware. For this solution we will have our

regional warehouse technician come in and install the necessary hardware. However, we share a

regional warehouse technician with the Utica branch and he is based out of their warehouse.

Because of this, he will have to arrive at the end of the business week and be paid overtime.

However, because he is an internal technician we will be able to forward him our warehouses

quality control report of our papermaking machines and he can identify the necessary hardware to

be purchased. This will save time so we can order the hardware before he arrives and he will be

able to install it the same day he arrives. With this solution we should estimate to see a working

machine anywhere from one to two weeks.

3. Purchasing new machines. For this solution we would need to purchase the newest model of our

paper making machine that includes hardware for weather-resistant coating adherence. Our

current machines are suitable, but are dated and lack much of the modern hardware that would

allow us to print a more diverse assortment of paper products. This solution would however be

the most costly and lengthy solution. With this solution we estimate to see a working machine

anywhere from two to five weeks.

Cost Analysis
1. For solution one we would have to pay for both labor and parts. Our usual rate for calling in our

paper-making machine technician is a $200 per visit however, that is our established contract rate

with the specialist company as we hire them after every other quarterly check. Because this

appointment is not a part of that contract we will have to pay their typical one-time visit

appointment rate which is $300. We will have to pay roughly $600 for labor as we will need to

pay them for their first inspection appointment, and then a second appointment to install

hardware. Darryl Philbin, our head warehouse employee, has a rough idea of the parts that need

replacement and he estimates it to be somewhere around $2,000 to $3,400 to replace these

essential parts. However, the paper machine technician company will order these so he estimates

that service charge will put us anywhere from $2,270 to $3,800. Together, this solution is

estimated to be around $2,870 to $4,400.

2. For solution two we will have our regional warehouse technician survey these parts. Because they

are based in our Utica branch we will have to pay them overtime to an estimated $150. We will

however, save almost $500 hiring him rather than the local technician. We also will be able to

have him identify the most cost-efficient replacement parts in the area with an estimate from

$2,000 to $3,400. We also will save money with this method because we will be able to order the

parts directly to our warehouse and have him install it within the week. Together, this solution is

estimated to be around $2,150 to $3,550.

3. For solution three we will have our accounting department work in conjunction with our head

warehouse employee to identify the most cost efficient and qualified paper making machine to

order. We have it estimated for this new machine to cost around $12,000 to $17,000. This is a

large margin and our machine repairs budget for this quarter only has us able to pay $9,800 of

this, so the rest of this money will need to be supplemented by our corporate branch or be

deducted from the revenue of our Wayne Enterprises order. This is the most costly solution,

however none of the money from this solution will be spent on labor and this option will make
 the Scranton branch able to sell much larger quantities of regular and weather-resistant copy

paper. Together, this solution is estimated to be around $12,000 to $17,000.

Recommendations

1. Choosing the option that will improve Dunder Mifflin Scrantons paper product range.

a. Solutions two and three will be the most likely to provide our Scranton branch with the

technology necessary to provide a more diverse range of paper products in the future.

b. While solution one will allow us to complete our order to Wayne Enterprises, it is

unlikely that we will be able to use our dated machines and hardware to supply weather-

resistant paper long term.

2. Choose the most long term cost-efficient solution.

a. Solution one is estimated to total around $2,870 to $4,400 but will not allow us to

complete bulk quantity orders of weather-resistant paper or diverse paper products in the

future.

b. Solution two is estimated to total somewhere around $2,150 to $3,550 and will allow for

us to utilize our current machines to produce weather-resistant paper in the future.

c. Solution three is estimated to total somewhere around $12,000 to $17,000 and will cost

us the most of all three options. However, it will be able to provide us with a more

diversified product range of quality paper products in the future.

3. Fund internally. It is my recommendation that we utilize solution two or three. Both of these

solutions would allow us to fund the repair or replacement internally, whereas solution one may

utilize less time and money from Dunder Mifflin we will be using internal funds to pay outside

businesses for internal repairs.

I look forward to hearing back from you on this matter.