De Havilland Inc. Case Report
Havilland, a high profile Canadian aircraft manufacturing, has decided to find a new supplier for two of its parts. Since they account for a high percentage of the total cost, it is crucial to find a supplier with a reasonable quote. In order to eliminate extra costs of negations and contract renewals, the company needs to develop a long term relationship with the chosen vendor. This also benefits Havilland to take advantage of economy of scale. The main issue is to evaluate the suitability of the chosen vendor by the Bidder Selection Board which is Marton Enterprise. This company has been chosen against 8 other vendors. The criteria for the selection is not identified by the board but assumed to be based on the quoted price. My objective in the report is to perform data analysis along with quality analysis in order to evaluate the viability of Marton to become a long term partner with Havilland. In this case I will analysis the case as the following steps: - Identify the major issues
- Comparison of Marton with two other lowest vendors
- Cost analysis based on the BOM
- Financial analysis
- Recommendation for formulating a long term partnership
I believe that by following my recommendations, Havilland will be successful in finding the right partner which can add value to its supply chain. This will not only based on better pricing but also the quality of the products and the service along with the trust both companies have in each other.
Table of Content
- Cover Page
- Executive Summary
- Issues with Impact Analysis
- Quantative Analysis
- Qualatative Analysis
- Recommendation & Implementation
- Monitor and Control
Issues with Impact Analysis
The price of the parts supplied by the current supplier were high for the Havilland as the bill of materials of a Dash 8 plane accounted for 60%-65% of total manufacturing cost. The negotiation for obtaining 25% discount from the vendor (Dollard) was not successful. Thus a new vendor with a better price needs to be chosen from a new pool of bidders. From the 9 Bidders, Marton Enterprises is selected by Bidder Selection Board to be evaluated. The main issue is to assess the suitability of Marton Enterprises as a long term vendor.
Marton Enterprises has to be assessed in order to find out if it is suitable to become a long term vendor. The cost of materials and the final quoted price have to be studied to see if they are set low to win the bidding. On the other hand, there are no contracts for the supplier of flap shrouds for series 100 and no contract for the supplier of bay doors. This indicates a weak business relationship as the sellers may think that Havilland is not their primary customer since Havilland could switch to any vendor at any time.
Based the review of past purchasing trends, the BSB has forecasted the following order quantities:
Flap Shrouds: -S-100 152 s/s Bay Doors: S-100,S-300 104 s/s
-S-300 125 s/s
Marton has given the lowest quoted price of $748’994. There are two more companies that could be categorized under a low price category as their prices are 19% higher. Comparing DAS Composites and Marton, it can be said that the major difference is the unit price for flap shrouds 300A and the additional non-recurring cost of $111’351. The unit price difference can be further investigated by requesting DAS for their bill of materials. The non-recurring cost is not an issue if it is found out that the material they use for their tool to produce the bay doors have good quality and durability. Thus from the current information that is available, I would confirm Marton over DAS.
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