De Havilland Case Report

In: Business and Management

Submitted By msmsmi
Words 819
Pages 4
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 price point for negotiation and overplay their hands hoping that Marton would lower their prices even more, this would make Marton to walk away. also, Marton has put a 120 days acceptance period into the bid, to limit the time De Havilland could use to test run with other bider. This put a lot pressure to De Havilland as their long purchasing cycle may be challenged to get this deal down…...

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