De Havilland Inc. Case Report

Topics: Contract, Proposal, Supply chain management Pages: 5 (1449 words) Published: November 15, 2010
De Havilland Inc. Case Report

Date of submission: February 2, 2010

Executive Summary:

Marton’s suitability as a Vendor for De Havilland must first prove that its proposal is realistic in price and does not lack any important elements to efficiently supply the flap shrouds and equipment bay doors to De Havilland. Once that is clarified, De Havilland must ensure that Marton’s is a viable entity that can perform its duties on a long term basis, provide the necessary warranties and guarantees as well as perform to the service levels De Havilland is receiving from their current supplier. In order to not jeopardize any production levels at De Havilland it is recommended that De Havilland use both, their current supplier Dollard Plastics and Marton enterprise (or any new Supplier), for the procurement of flap shrouders and equipment bay doors for a period of one year. Marton Enterprise can be slowly introduced with orders for a period of 12 months and if KPI’s are met, Marton Enterprise would then be fully accepted as a Supplier for De Havilland.

Statement of Issue:

De Havilland has a very systematic approach with its procurement process, one that prepares the negotiating team with a solid background of the marketplace and information that helps ensure the corporation leaves no stone unturned with its supplier selection process. This particular bid, on flap shrouds and equipment bay doors, received from the nine (9) different suppliers poses the question “Why is there such has a wide range in pricing between Suppliers?”. Was the Supplier’s understanding of the specifications misunderstood or are there missing attributes in producing and delivering the products. It is important to address the reasons as to why the lowest bidder is 211% (CDA currency) less expensive than the current supplier used at De Havilland. When the current supplier, Dollard Plastics was approached by De Havilland to reduce costs, they refused to do so knowingly that such refusal could lead De Havilland into raising an RFQ and Dollard Plastics could potentially risk losing the business to a competitor. If the profit margins were so large, Dollard Plastic could have offered cost savings upfront. This leads me to believe that the large gap in pricing should be further investigated by De Havilland to ensure that all the specifications were understood by Marton enterprise, as well as the other suppliers, and properly quoted in the RFQ. If the analysis proves sufficient then the next step would be to report the economic viability of the Supplier to ensure that during the term of any agreement the supply of materials and services do not create and any risks for De Havilland.


Criteria 1: Qualifying the bid proposal for important elements such as delivery, materials used, warranties and any fluctuations in pricing must be reviewed by Kim Toman with regards to Marton Enterprises. This will help reduce any potential backorders and production delays.

Criteria 2: Analysis of financial statements and viability of Marton Enterprises and its holding company Devon Holdings Inc. must prove long term financial stability in order to fulfill De Havilland’s corporate objectives of negotiating long term contracts with suppliers.

Criteria 3: Kim Toman must provide the board all the potential barriers, ethical considerations and “best alternative to any negotiated agreement” prior to negotiating with Marton Enterprises.

The substantial difference in pricing that exists between suppliers for the supply of flap shrouds and equipment bay doors should raise questions for De Havilland’s financial analyst. It is imperative to allow for more time to investigate the lowest bid received by Marton Enterprise. The ZOPA (zone of possible agreement) ranges from $902,402 CDA ($748,994 US) and $2,810,174 CDA a substantial room for negotiating. It is also indicated in the report that the sole difference between potential bidders...
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