De Havilland Essay

Executive SummaryDe Havilland is a study player the Canadian aircraft manufacturing industry. Founded in 1928 by a British company, De Havilland has had ten-fold acquisitions by various ecesiss including the government. As of 1992, the governing was co-owned by the government of Ontario with 49% shares and Bombardier Inc. with 51%. The companys strategic goal is to keep their militant advantage by focusing on cost step-down with negotiating long-term bosoms with various v finisors to capture economies of scale as well as set a stiff cost to secure price stability. Although de Havillands existing tucker out shroud supplier was unwilling to accept the renegotiated 25% ignore to the current price, the company had more than a years inventory left with the contract expiring in 1993. De Havilland decided that it would be capture to solicit suppliers. Nine submissions were received, with the cost difference between the lowest and highest compress at $2,061,180. base on the inf ormation provided it was evident that Marton initiative had the to the highest degree attractive final cause.Issue IdentificationLong Term Strategic* fight between de Havilland and Dollard Plastics of Montreal, Quebec for flap shrouds for Series 300A airplane will be expiring at the end of 1993. * Dash 8 airplane represented 60-65 per cent of de Havillands total manufacturing costs * De Havilland buyer tried to negotiate 25% discount from Dollard, but was rejected * De Havillands BSB is trying to implement cost reduction strategy by * Partnering with smaller base of vendors to capture economies of scale * fall in to long-term contracts for a span of five years with devoted, fixed prices environmental and Root Cause AnalysisFounded in 1928 by a British company, De Havilland has become a significant sort of the Canadian aircraft manufacturing industry. As of 1992, the organization was co-owned by the government of Ontario that held 49% of the shares and Bombardier Inc. owning the remaining 51%. With multiple acquisitions by various companies and the government over the prehistorical half-century, the organization has implemented several(prenominal) activities into their operations. These activities implemented in different stages of the supply chain have successfully provided versatility in satisfying customers needs, from procurement to production. During Boeings ownership, de Havilland experienced tremendous evolution in their corporate processes. In particular the purchasing cycle is a noteworthy system developed during this time. In Exhibit 1 of the slickness study the diagram demonstrates the step-by-step procurement process the company goes through when it encounters a design change/new design, requiring sourcing of a new part that has not been previously purchased before. Parties that are involved are mainly unruffled of representatives from Finance and Material departments. The level of management involvement depended on the surface of the contract.De Havillands current issue was involveing a new vendor to ascendant flap shrouds from. Dollard Plastics, a company base in Montreal, Quebec has been supplying flap shrouds for their Series 300A airplane, but their contract was about to expire at the end of 1993. With parts costs of the De Havillands Dash 8 accounting for 60-65% of the organizations total manufacturing costs, the purchasing department attempted to collect a 25% discount from Dollard as a strategy for cost reduction. However, their request for a lower price was rejected. With the failed renegotiation, the procurement process had to move substantiate to sportder pickax board stage. In addition to the cost reduction strategy mentioned earlier, de Havillands objective was to partner with a smaller base of vendors to aim advantage of economies of scale. They would like to establish long-term cooperative contracts (i.e. five years) with fixed pricing so frequent negotiations wont be necessary.Based on the nine RFQ submissions from various vendors, Marton opening move Inc. offered the lowest prices. With the comprehensive information and additional information that Kim Tomar obtained, it was evident there was great potential drop in a long-term business federation with Marton. The difference between Dollard and Martons normalized bids total for the program was a whopping $2,061,180 ($2,810,174- $748,994), which could be a lusty saving amount de Havilland would be making. Marton has stated in their pricing proposal that their bid is a stand-alone pricing. This could mean it would be difficult for de Havilland to debate a lower price than the proposed. The vendor has to a fault stated from past history material costs typically increased 4% to 6% per year, and with that assumption which they have accounted they are willing to enter into a firm fixed price proposal with de Havilland from August 1992 to July 1997.Although Martons initial bid amount is quite attractive, de Havilland will have to take into account the initiative of Marton overstating their position in order to acquire the bid. This may become a strategic barrier that could become costly down the road. Another suit for such a significantly lower price offered by Marton could be the fact they may be compromising the lineament of the materials or servings. Lastly, it could simply plainly be that Marton operates more efficiently than other vendors, thus competent to incur higher nest egg. Whatever the case may be, de Havilland should conduct a thorough quality analysis of vendor production to determine whether Martons quality and cost levels are aligned with de Havillands expectations.Based on the criticisms of past purchasing trends, forecasts conducted by representatives from the Finance and Material department, the Bidder Selection get along with should have an idea of how much the parts should cost and if the prices submitted are realistic. De Havilland should also keep the other vendor s who offered close bids in consideration (i.e. DAS Composites and Lakesides Industries). These bids would befriend in the negotiation process in strategically obtaining a potential value. With Kim Tomars recommendation to the Source Selection Board, SSB should establish low, target and place price levels for one or more of the vendors and see which group provides the high hat offer.In terms of power relationships, it seems like it is a fairly level playing ground for some(prenominal) de Havilland and Marton. Based on the comprehensive selective information provided by Marton and the side documents obtained by Tomar it seems like Martons well-prepared proposal has gained them a high amount of seller power in the negotiation. At the like time, with the favorable bids de Havilland received from other vendors, they would be able to use those bids to helper negotiate a good deal. At the bottom line though, it depends on how much power each company has to brand name decisions or i f both would require approval from the parent companies.AlternativesAlternative1 Select Marton Enterprise as vendor based on analysis conducted for negotiation Advantages 1. low bid out of all nine bid submissions, providing substantial savings in manufacturing costs, more than the original targeted 25% discount 2. Establish a long-term contract with fixed pricing reducing the need for renegotiations 3. potential difference for long-term relationship that would greatly improve operational efficienciesDisadvantages1. Quality and service might be compromised to reap savings 2. Puts de Havilland at risk if partnership with Marton is a poor decision (poor quality, service), may cause ripple accomplishment 3. No BATNA in case negotiation does not succeed with Marton Enterprise Alternative 2 Select Marton Enterprise, DAS Composites, and/or Lakeside Industries as vendors for negotiation. Advantages1. Provides a BATNA in case negotiation with Marton Enterprise fails 2. may open up oth er opportunities with sourcing of other parts 3. Can be used as a good negotiation toolDisadvantages1. epoch consuming, may require more management involvement in the root word to make decisionRecommendationBased on the comprehensive data provided by Marton and the additional information that supports the credibility of the company, it would be best for De Havilland to select Marton Enterprise as vendor based on analysis conducted for negotiation. execution1. After all the analysis and normalization has been conducted, de Havilland should inform Marton that they have been selected as the potential flap shrouds vendor. 2. As a team from the source selection board that is made up of Finance, Materials, Engineering and higher management personnel, they should gibe with representatives from the other party to discuss the finer details of the agreement 3. They should review the proposal once again as a group and make modification of estimates 4. With a lawyer present, write out the o utline of the contract 5. Once a draft has been made, each party should review it and catalogue a time to meet again to sign the contract 6. render of flap shrouds will commenceMonitor and ControlDe Havilland should assign supply from the source selection board that is already familiar with the vendors representatives to meet with the other party for periodic meetings. These meetings will allow both groups to review the progress, discuss issues that may have arise, and perform periodic quality assurance checkups/inspections. These periodic performance reviews and audits would confirm vendor compliance based on the agreement.References* Module 2 Procurement_Candidate manual of arms 2013 1.0.pdf* Module 2 Readings Manual 2013 1.0.pdf