De Havillan

EXECUTIVE SUMMARY

The De Havilland has established itself as a major player in the Canadian aircraft manufacturing industry which had been founded in Britain early last century by a parent company. After having full exposure to the cost structure of De Havilland’s Dash 8 airplane I immediately became aware of their high manufacturing cost which has been caused by the high cost of sourcing the flap shrouds and bay doors from Dollard Plastics of Montreal. The latter showed no flexibility on reducing their prices on the above parts when the former was in search of ways to improve their production efficiencies by reducing the cost attributed to Dash 8 airplane. Kim Tomar, the Financial Analyst at De Havilland had realized that issue and therefore started the process of finding a new business partner who is capable of meeting a set of standards that De Havilland had developed earlier for their procurement department, had started the process about year and half earlier than the expiry date with the incumbent supplier.

After receiving 9 bids to supply the needed parts, I have recommended Morton to De Havilland’s Source Selection Board (SSB) as prospective vendor for selection provided that Morton must pass the set of standards which I mentioned above. Based on the initial information from the normalized bids from all nine bidders, the lowest was Morton Enterprises. Their bid was 18% lower than their nearest competitor, and when I compared prices of the needed components to the price supplied by current providers they were between 54% and 75% less Expensive. However, beyond parts cost reduction we are also interested in establishing long term co-operative contracts with the vendor. So, apart from determining who had the best price offer, I need to determine whether Morton is sufficiently stable to be relied upon in the long run. So my strategy intention here is to negotiate an agreement with Morton that will be of the greatest value possible to De Havilland keeping in...