...Executive Summary de Havilland Inc. (“de Havilland”), a high profile Canadian aircraft manufacturer, must reduce the cost of the materials for the Dash 8 airplane which comprises 65% of de Havilland’s total manufacturing cost as a result of a company directive to reduce parts pricing by 25%. The flap shrouds and equipment bay door supplier arrangements have come up for consideration and the opportunity to satisfy the new strategic sourcing policy of fewer suppliers with long term, fixed contracts, along with reductions in cost of materials, has presented itself by going out to tender. Kim Tomar, Financial Analyst (material) is evaluating 9 RFP submissions for suppliers of flap shrouds and equipment bay doors in order to make a recommendation to de Havilland’s Source Selection Board (“SSB”). Tomar’s evaluation must include a financial evaluation as well as an assessment of the supplier’s viability as a long term supplier. Marton Enterprises (“Marton”) proposes the lowest cost bid and the opportunity to reduce the bill of materials of the Dash 8 although they have not submitted their financial information. Tomar’s recommendations to the SSB include negotiating a contract with Marton and accepting the current bid pricing. Immediate savings to the bill of materials can be realized as the costs of the flap shrouds and equipment bay doors are 25% of the current supplier. Once the recommendation has been approved contract negotiations can begin with Marton. A negotiation...
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...Executive Summary De Havilland (Havilland) is Canadian aircraft manufacturer that was recently acquired by Boeing. The parent company has requested Havilland take on several initiatives including seeking 25% price reductions from suppliers, reducing the total number of suppliers and seeking more long-term fixed pricing agreements. Havilland recently received submissions for an RFQ for the supply of supply flap shrouds and equipment bay doors. The pricing received raises some concerns however, as there are large variations in pricing between the lowest price from Marton Enterprises Inc. (Marton) and the highest price from the incumbent, Dollard Plastics (Dollard). There are several viable alternatives for Havilland. They may accept the bid from Marton on the condition that it is assured Marton fully understands the scope, their facilities are sufficiently equipped, and they provide their financials. It will be in Havilland’s best interests not to pursue their policy under the Bidder Selection Board (BSB) to attempt to renegotiate the price lower since Marton already provided substantial savings. The next option for Havilland is to pursue the first option but only given Marton 80% of the work for the first year and keep the incumbent under contract for the remaining 20% of work. The third option is to cancel the RFQ, clarify with the bidders what was unclear in the specifications that resulted in such a wide variation in pricing and go out for bids again. The final option...
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...ISSUE IDENTIFIED Long Term The major concern for De Havilland is their high manufacturing cost for bill of material, which range from 60% to 65%. This presents a challenge for being price competitive in the market, therefore it is important for De Havilland to take some initiatives to discount cost for all the parts. Also, De Havilland has concern over their large portfolio of vendors that would stop them from capturing economies of scale and pass cost reduction along. The company has recognized the need to minimize the size of vendors, initiate long term contract, moreover, to simplify their purchasing cycle. Short Term The uncertainty that De Havilland is going through at this point in terms of choosing the right supplier who is going to be reliable enough to commit to a 5 year fixed contract with the company for supplying flap shrouds and equipment bay doors. ENVIRONMENTAL AND ROOT CAUSE ANALYSIS Potential Barriers Both companies has a parent company that could have major impact on their agreement. The parent companies can potentially over-turn any decision made by either de Havilland or Marton at their discretion.The reasons they could over-turn could be based on previously established relationships or political reasons. Besides the influence from parent companies being the potential barriers, there are some other roadblocks. As Marton states that their bid price is very competitive, not up for negotiation, if De Havilland continue to force their model of three...
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...Case Report- DeHavilland Inc. CASE ANALYSIS CONTENT | | MARKS AVAILBLE | EXECUTIVE SUMMARY | De Havilland had high inventory and high manufacturing cost which has been caused by the high cost of sourcing the flap shrouds and bay doors from Dollard Plastics of Montreal and the company was looking forward to an alternative supplier with a long time relationship. I found they were less of strategy and more tactical. The total parts cost of Dash 8 airplane at De Havilland represented 60-65% of their total manufacturing cost. It’s is evident that the company has recognized that and they have taken steps to solve this issue. A further indication that the company is operating at high cost is their previous failed attempt when they requested a 25% discount on all parts across the board. Dollard Plastics of Montreal is currently supplying the company with the parts needed but at about 3 times higher than Morton’s quote. The uncertainty that De Havilland was going through at this point in terms of choosing the right supplier who was going to be reliable enough to commit to a 5 year fixed contract with the company. The company wanted to move to a smaller base of vendors but should not be sore source without a backup plan. The company focused on cost reduction but cost should not be the only criteria of vendor evaluation and selection. The whole structure and process did not respect the strategic role of procurement, as well as tactical approaches that support the strategy. Such as Kim...
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...1. Executive Summary After having full exposure to the cost structure of De Havilland’s Dash 8 airplane I immediately becameaware of their high manufacturing cost which has been caused by the high cost of sourcing the flapshrouds and bay doors from Dollard Plastics of Montreal. The latter showed no flexibility on reducingtheir prices on the above parts when the former was in search of ways to improve their productionefficiencies by reducing the cost attributed to Dash 8 airplane. Kim Tomar, the Financial Analyst at DeHavilland had realized that issue and therefore started the process of finding a new business partner whois capable of meeting a set of standards that De Havilland had developed earlier for their procurementdepartment, had started the process about year and half earlier than the expiry date with the incumbentsupplier.After receiving 9 bids to supply the needed parts, I have recommended Morton to De Havilland’sSource Selection Board (SSB) as prospective vendor for selection provided that Mortonmust pass the set of standards which I mentioned above. Based on the initial information fromthe normalized bids from all nine bidders, the lowest bid was Morton Enterprises. Their bid was18% lower than their nearest competitor, and when I compared prices of the needed components tothe prices supplied by current providers they were between 54% and 75% less expensive.However, beyond parts cost reduction we are also interested in establishing long-termco-operative contracts with...
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...In a world where being first is usually equated with being the best, celebrated management guru and author Jim Collins’ article ‘BEST BEATS FIRST’ debunks the myth of First Mover Advantage. He outlines with examples, how it is that the apparent ‘Johnny come lately’ endures in a market that swallows its very first players. The article, written in August 2000, cites many examples to show that for FMA to be applicable, there are strict conditions, which rarely hold true in reality and in the author’s words “…being first seldom proves to be a sustainable advantage and usually proves to be a liability” The author starts by pointing out how the inertia of late movers or followers is not a sustainable advantage to those who are first to build market share. This is especially true is the followers are established industry giants who move into a new market much later with their “vast pre-existing customer sets”. This often spells end-game for the pioneers who, in their complacence, have fallen prey to a more detrimental kind of inertia- Incumbent Inertia. Mr. Collins cites the example of VisiCalc, now virtually forgotten as the first major PC spreadsheet, as the late entrant Excel still reigns supreme. The author moves on to the now widely referenced example of how the PalmPilot learnt from the technical and design loopholes of the much-publicized Apple’s Newton MessagePad. The PalmPilot entered the market with a product with the script Graffiti which had none of Newton’s glitches, thus...
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...DE HAVILLAND Case Report January 20, 2015 Table of Contents Executive Summary 3 Issues Identified 3 Environmental and Root Cause 3 Alternatives and Options 4 Implementation 5 Recommendations 5 Monitor and Control 6 Conclusion 7 Executive Summary This case report addresses many factors when decisions are made in identifying and working strategically with custom designed components and assemblies. De Havilland Company especially Kim Tomar has a decision to make. A RFQ proposal by Marton Enterprises could bring cost reductions down by 60% for this particular assembly and help with streamlining BOM cost to achieve a reduction of 25%. There’s risk to using a new vendor, including delivery and trust and even if the correct SSB members are evaluating the proposals. There are discrepancies that need to be reviewed and questioned by the Operations, Logistics and Sourcing staff and hidden costs not noted on the price breakdowns ie: soft and hard tooling costs. Marton must prove to the SSB group and OLS that their proposal is solid and can manufacture and meet spec’s as identified by De Havilland Engineers. There also needs to be plan to increase capacity should there be an upswing. My recommendations include two options including a primary and secondary vendor model (mitigating risk of custom components and shortages and working with the existing vendor Dollard Plastics to looks for ways of continuous...
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...CASE 2-4 Ethics and Airbus One September, a fraud squad, led by Jean-Claude Van Espen, a Belgian magistrate, raided Airbus’s headquarters in Toulouse. “They wanted to check whether there was possible falsification of documents, bribery or other infractions as part of the sale of Airbus aircraft to Sabena,” says Van Espen’s spokesman. The team of 20 Belgian and French investigators interviewed several Airbus employees during its three-day stay in Toulouse and carted away boxes of documents. In November 1997, Sabena had approved an order for 17 Airbus A320s (narrow-bodied aircraft), which it did not need. Even more oddly, it had doubled the order at the last minute to 34, a move that helped trigger the airline’s collapse four years later. Although nominally controlled by the Belgian government, Sabena was run by the parent company of Swissair, SAirGroup, which had owned a stake of 49.5 percent since 1995 and which also went bust in 2001. A former Sabena manager, who arrived after the Airbus order was placed, says that the planes were not needed: “It was a fatal business decision.” A Belgian parliamentary commission’s recent report confirms that the Airbus order was a big cause of Sabena’s collapse. Van Espen’s separate criminal investigation is continuing. According to the report, it started in October 2001 after Philippe Doyen, then a Sabena employee, lodged a complaint. Among other things, he suggested to Van Espen that he interview Peter Gysel, a former...
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