BAYFIELD MUD COMPANY

CASE: BAYFIELD MUD COMPANY

In November 1994, John Wells, a customer service representative of Bayfield Mud Company, was summoned to the Houston warehouse of wet land Drilling, Inc., to inspect three boxcars of mud-treating agents that Bayfield Mud Company had shipped to the Houston firm. (Bayfield’s Corporate Offices and its largest plant are located in orange, Texas, which is just west of the Louisiana-Texas border.) Wet-land Drilling had filed a complaint that the 50 Pound bags of treating agents that it had just received from Bayfield were short-weight by approximately 5%.

The light-weight bags were initially detected by one of Wet-Land’s receiving clerks, who noticed that the rail road side scale tickets indicated that the net weights were significantly less on all three of the boxcars than those of identical shipments received on October 25, 1994. Bayfield’s traffic department was called to determine if lighter-weight dunnage or pallets were used on the shipments. (This might explain the lighter weights.) Bayfield indicated, however, that no changes had been made in the loading or palletizing procedures. Hence, Wet-Land randomly checked 50 of the bags and discovered that the average net weight was 47.51 pounds. They noted from past shipments that the bag net weights averaged exactly 50.0 pounds, with an acceptable standard deviation of 1.2 pounds. Consequently, they concluded that the sample indicated a significance short-weight. (Students may wish to verify this conclusion.) Bayfield, was then contacted, and Wels was sent to investigate the complaint and issued a 5% credit to Wet-Land.

Wet-Land management, however, was not completely satisfied with only the issuance of credit for the short shipment. The charts followed by their mud engineers on the drilling platforms were based on 50-pound bags of treating agents. Lighter-weight bags might result in poor chemical control during the drilling operation and might adversely affect drilling efficiency. (Mud-treating agents are used to control the pH and other chemical properties of the open during drilling operations.) This could cause severe economic consequences because of the extremely high cost of oil and natural gas well-drilling operations. Consequently, special use instructions had to accompany the delivery of these shipments to the drilling platforms. Moreover, the light-weight shipments had to be isolated in Wet-Land’s warehouse, causing extra handling and poor space utilization. Hence, Wells was informed that Wet-Land Drilling might seek e new supplier of mud-treating agents if, in the future, it received bags that deviated significantly from 50 pounds.

The quality control department at Bayfield suspected that the light-weight bags may have resulted from “growing pains” at the orange plant. Because of the earlier energy crises, oil and natural gas exploration activity had greatly increased. This increased activity, in turn, created increased demand for products produced by related industries, including drilling muds. Consequently, Bayfield had to expand from one shift (6 A.M. to 2 P.M.) to a two-shift (2 P.M. to 10 P.M.) operation in mid 1992,

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