XYZ orders 5000 custom made parts from ABC for one of its products.
When the order is originally made ABC indicates it will charge $75 per part. This cost is
based in part on the cost of materials. After the agreement is completed, but before
production of the part begins, ABC engineer Christine Carsten determines that a much less
expensive metal alloy can be used while only slightly compromising the integrity of the
part. Using the less expensive alloy would cut ABC's costs by $18 a part.
Christine brings this to the attention of ABC's Vernon Waller, who
authorized the sales agreement with XYZ. Vernon asks, "How would anyone know the
difference?" Christine replies, "Probably no one would unless they were looking
for a difference and did a fair amount of testing. In most cases the performance will be
virtually the same -- although some parts might not last quite as long." Vernon says,
"Great, Christine, you've just made a bundle for ABC." Puzzled, Christine
replies, "But shouldn't you tell XYZ about the change?" "Why?" Vernon
asks, "The basic idea is to satisfy the customer with good quality parts, and you've
just said we will. So what's the problem?"
The problem, Christine thinks to herself, is that the customer isn't
getting what was promised. Further, even if XYZ would be satisfied with the different
part, shouldn't it be given the opportunity to decide if it finds the change acceptable --
and to benefit from lowered cost?
Should Christine share her further thoughts with Vernon, or should she
simply drop the matter?