De Havilland Inc.

WRITTEN CASE REPORT:

DE HAVILLAND INC.

February 3, 2010

Executive Summary

My decision is that Tomar should recommend Marton to DeHavilland’s Source Selection Board provided that the penalties associated with cancelling the contract with the current vendor, Dollard Plastics are smaller than the difference between the normalized price offered by Lakeside Industries and that offered by Marton, and that results to the quality analysis of Marton’s production, physical inspection of their facilities, and review of their financial statements are satisfactory. Otherwise, Tomar should recommend Lakeside Industries and negotiate with them to start the contract when that with Dollard Plastics expires.

Statement of Issues

Tomar’s confusion over whether or not to recommend Marton Enterprises Inc. to DeHavilland’s Source Selection Board is the main issue. Marton offered the lowest prices for flap shrouds and equipment bay doors among the nine vendors who responded to DeHavilland’s Request for Quotation. However, beyond parts cost reduction, DeHavilland was also interested in establishing long-term co-operative contracts with suppliers. Thus, apart from determining whether the prices for the parts were realistic, Tomar had also to determine whether Marton was sufficiently stable to be relied upon in the long run.

Tomar’s recommendation was urgent. Despite the fact that current inventory levels of flap shrouds and equipment bay doors would be sufficient for more than a year of production, the time necessary to establish a new vendor was also long, which meant that a recommendation to DeHavilland’s Source Selection Board had to be made as soon as possible.

Criteria

A good decision for Tomar would allow DeHavilland to reduce the cost of parts and the transaction costs of working with vendors under no contract.

Analysis

DeHavilland’s Best Alternative To a Negotiated Agreement (BATNA) with Marton would be to select Lakeside Industries, try to negotiate a mutually...