Kenmold completed the R&D CAD models of the new components for a prototype pool bike in December, but halted work as the customer payment was not received. Also, molds that were at the competitor's facility were needed to manufacture parts, but were not received due to legal issues between the former partners. This meant that Kenmold would have to design and build new tooling for component manufacture that wasn't in the original contract. An addendum to the original contract was created and prices were adjusted accordingly. The whole process was on hold for a year before the customers decided to retool with Kenmold. Kenmold began work on the new molds in January of 2005.

The customers visited Kenmold in March of 2005 to see the prototype bike, review design changes, and inform Kenmold of the need for samples for a show in May. Kenmold had to rush the manufacture of the two main body molds in order to meet the show deadline, but the increased tooling cost of US$60,000 due to technological upgrades was not formally agreed to by all parties due to lack of time. Kenmold also did not get final confirmation on design changes by the customer which were needed to finalize designs and lock in material costs. It was a hectic time for everyone on the project. The customer needed the samples for the US show and time was short. they had to find a way to prevent the issues of the Pool Bike Project from repeating themselves.

Analysis of the Problems

Looking at this case, we can see that the client was primarily interested in saving money; immediate cost savings were the main impetus for the relationship with Kenmold. However, this approach led to some problems which resulted in lost time and money. As referenced in the case, the client lost two years and significant money with another Chinese factory in Qingdao.

Thus, if you decide to use outsourcing as a method of time and cost savings in a new product development you should understand the industry you move into very well. Choosing the right company is very essential in outsourcing.

The interview with the chief executive of Kenmold unveiled some problems:

·the lack of investor`s knowledge of the manufacturing sector
·different cultural backgrounds
·different business cultures the lack of information on the clients and suppliers low levels of communication
manufacturer didn't receive the full sum of money and the client didn't receive the mold. Further distrust was caused when the client tried to pay by bank check, instead of transferring cash immediately.

In outsourcing, as it was said above, choosing the right company is a key success factor. But on the international market it is difficult to understand which company is worth your interest. First of all, it is difficult to get detailed information about many companies. As an outsider, in both the industry and country, you are unaware of the best sources of information. The best way to solve this problem could be an interpreter, someone who knows the industry and country which you are trying to evaluate. The same could go for the supplier company. It's difficult to find information about the financial status of a prospective customer, but it is necessary to make the decision about whether to participate in a business relationship or not.

One of the main reasons why this project might be deemed a failure is that there were not only cultural differences that contributed to the problem, but that an inefficient communication between these two companies made it impossible to have immediate feedback between Kenmold and the client. If Kenmold managers needed information from the customer, there were times when they couldn't get in touch with them not due to any fault of Kenmold's, but due to a refusal of the client to reply in time.