As part of the fourth simulation, we are faced with the problem of ordering smelly (and therefore unusable) pouches from a cheaper vendor or switching to a more expensive vendor whose pouches don't have that issue. While this isn't close to a description of the full simulation or the problems it touched upon, it made me wonder at what point is it worth it to a company to switch to a more expensive alternative? In a scenario like this, the company could run a bunch of tests on the CamTech (smelly) pouches to diagnose and potentially fix the smell, but after a point, it would start to get costly. For one, this company is running tests that should probably be the responsibility of the vendor, CamTech, but it's also delaying the launch of their updated product. However, going with the second, more expensive vendor is going to add up as that high price needs to continue to be paid every time more pouches need to be ordered. How much time and money should this company sink into trying to salvage the use of CamTech as a pouch vendor before giving up and switching to the second company? Whose responsibility is it to fix the pouch odor?
The decision is usually driven by the overall risk and the long-term cost instead of the unit price. Although it may seem reasonable to spend time investigating and finding a solution to a defect with a low-cost supplier, the effort should discontinue once the company realizes that there is a problem with the supplier's process. Continuing beyond the point where there is an increase in timelines and testing costs is lucrative. Compliance, safety, or even reputational costs could be introduced with a bad supplier when it could have been avoided. It is critical to avoid the sunk cost fallacy in this case, where prior investments in time justify continued commitment even when there are clear indications that the issue isn't solvable. In practice, the supplier would be responsible for correcting defects in their product; however, the company that purchases it is accountable for ensuring that anything marketed or released to the public meets quality and safety standards. There is a point where transitioning is more reliable yet more expensive. Overall, choosing a reliable and consistent supplier is the most cost-effective decision in the long term. Therefore, before the risks outweigh the savings, it is crucial to consider how businesses should determine that tipping point and how that plan should be executed?
The sunk cost fallacy is one of the biggest cognitive traps that companies can fall for in situations like this. PMs can have tendencies to justify more additional rounds of testing to justify the money already spent, even when the company has spent weeks and potentially thousands of extra dollars investigating something which does not lead to any valuable advancements in investment. The prior investment should not be the driving decision at all in this circumstances, but often times can be if overlooked.
For what a company should determine the tipping point to be, I think that it has to start with establishing clear, predefined decision criteria before the actual investigations begin. If the company sets upfront that they're willing to spend X dollars and Y weeks on root cause analysis, then pivoting to a new investigation or even a new method comes a lot easier compared to the same situation without any of the establishments mentioned.
When it comes to the point on responsibility, the only push back that I have is that yes, CamTech should own the corrective action, as the odor is an issue with their manufacturing, but in a regulated space such as medical devices, the purchasing company has an obligation to qualify and surveil the suppliers where they obtain their materials. So CamTech is responsible for their product that they sold, but the purchasing company (I.E. our company in the simulation) is responsible for determining if they can complete it in an acceptable timeframe.
In terms of the amount of time and money the company should sink into salvaging the pouches, I think it is ultimately not worth it to invest too much of either resource into the pouch. The pouch is comparatively a lower cost item then the other components of the project, and though 10,000 units were ordered, this isn't a unrecoverable dent in the budget. Trying to diagnose the issue and find a way to make the old pouches work may be a unsustainable venture and waste time and money that can be used in other areas of the product. It also should be stated that the pouches have a uncured solvent producing the smell on them which can be harmful to the consumer begging the question of whether the pouches should even be salvaged in the first place. In most cases, it would be better to bite the bullet and eat the initial cost of replacing all the pouches from a reputable vendor for the long term stability of the project. In terms of who is responsible for the pouches, it really depends on whether or not consumer protection laws are applicable to the purchase from CamTech. Under most cases, CamTech would be responsible for covering and replacing the defective pouches, however being an international company complicates the way in which this can be enforced. At the end of the day, it likely would fall upon main company in the simulation to fix the pouch odor via replacement.
One thing I haven’t seen mentioned yet is that this issue could have been avoided earlier if the team had set clear acceptance criteria for the pouches before ordering. Since odor wasn’t treated as a measurable quality factor, it wasn’t properly tested upfront. Even something simple like an odor scale or VOC limit could have caught this before committing to 10,000 units. I also think this highlights a gap in the validation process. The team went from approving samples straight to full production, without a proper pilot batch or additional testing. Even though the change seemed minor, it still affected something the patient interacts with, so it probably needed more structured testing before scaling up.
Another angle is the risk and safety side, not just cost. Even if the pouch isn’t the main device, having high levels of residual solvent could still raise concerns, especially in a medical setting. At that point, the decision shouldn’t just be about whether it’s cheaper to fix or replace, but whether the product is actually acceptable to use. Overall, this feels less like just a supplier issue and more like a process gap, where better upfront testing and clearer quality criteria could have prevented the situation entirely.