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Supplier Selection

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Submitted By Edmonton1983
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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 the vendor. So, apart from determining who had the best price offer, I needto determine whether Morton is sufficiently stable to be relied upon in the long run. So my strategicintention here is to negotiate an agreement with Morton that will be of the greatest value possibleto De Havilland keeping in mind our goal of longer-term agreements and reducing the amount of vendorswe deal with. A

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