De Havilland Case Study

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Executive Summary Memorandum To: Source Selection Board De Havilland Inc. From: Kim Tomar Financial Analyst, Material Subject: Marton Enterprises Inc. as a Supplier for Flap Shrouds and Equipment Bay Doors. Our company has three mandates to get up to 25% discount on all parts that are on the bill of materials, to reduce our vendor base so as to gain from economies of scale and to sign five year, long term contracts with vendors. In light of this we had tried to get a price reduction from our current supplier of flap shrouds and bay doors, Dollard Plastics of Montreal, to no avail. Following an RFQ we received bids from 9 different suppliers with just as many varied prices of the final product. Out of all, Marton…show more content…
Marton has also provided a very detailed and comprehensive cost breakdown. However, Marton has not provided its financial statement, which entails an issue of trust. Boeing, the previous owner of De Havilland, prior to Bombardier and The Govt. of Ontario, has had a relationship with Marton. Boeing may see De Havilland as a competitor and may work towards dissuading Marton form supplying to De Havilland. This internal purchasing cycle of De Havilland can pose a hurdle in the decision as Marton has clearly indicated 120 days for accepting its bid. The purchasing cycle is long and can impact the decision of choosing a Marton as a supplier within the indicated time. Environmental and Root Cause Analysis Marton has been recommended as a supplier as its bid against the RFQ has been the most competitive and is directly aligned with De Havilland’s recent policy on savings. Marton has done it by sticking to what was asked of in the RFQ. Marton has indicated in its bid that the price is a non-negotiable…show more content…
They can simply walk away from the deal if we do not honor their price or time. This would have no effect in Marton’s position, as it would be the same as it was before Marton sent us their bid. Based on their BATNA’s getting a deal done between De Havilland and Marton would be a win for both parties, and walking away would be a loss for both parties. It would be a greater loss for De Havilland, as it would have to spend more time, effort and money on identifying a suitable supplier. Recommendation I recommend that De Havilland sign a five-year contract with Marton. In addition, I would recommend that De Havilland change its negotiation process to make the bids against RFQ more conducive to competitive bidding. As has been observed in this case, the bids are quite disparate as far as pricing is concerned, given the fact that the parts used in and the process followed to construct the flap shrouds and equipment bay doors are fairly standard. Implementation Marton as Vendor Since Marton has indicated a highly competitive price, the motive of the negotiation team should be to negotiate terms of delivery and commitment. This is really important, as De Havilland needs to safeguard its interest against competitive insecurity from Boeing, which also happens to be one of Marton’s
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