Dehavilland Inc Case Study

De Havilland Inc.

Case Study

By John Smith

Executive Summary

It is my recommendation that we select Marton Enterprises Inc. as the long term supplier of the flap shrouds and equipment bay doors for the Dash 8 aircraft family and try and have our negotiating team secure a 5 year contract for the supply of these parts. In addition to being the low bidder of the part they currently make a similar part for the Boeing Company which means they should be familiar with the manufacturing process and costing of the part. They are a division of Devon Holdings which is a profitable company that has other contracts in the aviation industry. Their bid is low but as they have indicated they have allowed for cost increases in both the material and labor costs for the life of the contract. The profit margin of 10% seems to be in line with their parent companies profit margins in the aviation industry for the years of 1988, 1989, and 1990.

Issue Identification

We are trying to combine the purchase of two parts previously purchased from different vendors into a single order and one contract to reduce our costs, through economies of scale, and secure long-term pricing. Our current supplier for the flap shrouds, Dollard Plastics, has rejected our attempts at securing a price reduction and signing a long-term fixed price agreement. In addition the supplier of the equipment bay doors, Lakeside Industries also does not have a contract or long-term price agreement in place. As a result we have solicited 8 additional bids for these parts, to be purchased as a set, and need to evaluate whether the low-bidder in this case would be a suitable supplier. I need to evaluate the price as well as the financial status of Marton Enterprises Inc. to determine whether or not it would be mutually beneficial for De Havilland to enter into a long term agreement with them to supply the necessary components for the Dash 8 family of aircraft. After normalization of the bids Marton...