De Havilland Aircraft Company

...

Advantages

- Minimize risk - having Dollard Plastics as a supplier alleviates any product issues that Marton may have in beginning

- Flexibility – There will be flexibility in the supply chain and better response time since there are more vendors

- De Havilland can save costs by using Marton while having the security of knowing that their supply will not be compromised with Dollard as a back-up

Disadvantages

- Negotiating multiple agreements is time consuming.

- Goal of cost savings will not be fully would achieved

- more complex as more vendors are involved

Alternative 3

Negotiate terms with DasComposite and Lakeside Industries who were the next lowest bidders after Morton. Outline the criteria for DasComposite and Lakeside Industries and review their product and service level. They may be a bit more expensive than Morton but could be potential candidates.

Advantages

- Improve negotiation skills for De Havilland by learning new aspects from other suppliers.

- Increased negotiations power due to forming more alternatives

- Manage and Control – De Havilland can have more control over the suppliers

- Flexibility – There will be flexibility in the supply chain and better response time

Disadvantages

- Negotiating multiple agreements is time consuming.

- Could be more complex as more vendors are involved

- Service levels could be compromised with new suppliers

Recommendations

The goal for De Havilland is to reduce costs and partner with a supplier to establish long-term agreements.

De Havilland should adopt Alternative 2 – Negotiate a contact with Marton for 80% of the work in the first year and keep Dollard Plastics under contract for the remaining 20% of work. After the full year has passed, Marton will receive 100% of the business. Even though De Havilland has one year’s inventory left, transitions usually do not go smoothly, and it would mitigate risk if Dollard help supplied a portion of the inventory for the time being.

By selecting Alternative 2, De Havilland will experience significant cost savings and be able to be more strategic as changing to Marton as a supplier creates new options and experiences. The long-term contract of five years will allow De Havilland’s committees to spend less time sending out RFX on an annual basis. Fewer vendors reduces the need for unnecessary multiple contacts, efficiency increases and with less suppliers, economies of scale can exist.

Implementation

Before signing a contract or making any commitments from the 120 day deadline, De Havilland will need to set up a meeting with Marton to clarify that they understood the specifications, requirements and terms of the bid; the reason for this is because the Marton’s pricing for the bid was quite low and that there could have been some misinterpretation. Once Marton confirms that they understand the terms of the bid, De Havilland will need to perform a facility inspection to confirm that Marton has the capability, resources, and equipment to produce the required flap shrouds and bay doors. Furthermore, financial statements must be obtained and analyzed to assess the sustainability of Marton. Once the bid has been clarified, De Havilland can award Marton as their primary supplier for flap shroud and doors.

In the first 3 month, the engineering, materials and quality assurance team from De Havilland should meet with Marton’s team; the meeting with entail the details, specifications, quality standards, etc that is expected from the product that is to be produced. During this time it will be important to outline key initiatives and develop process and functionality to connect both companies together.

Even though De Havilland has a one year supply of the flap shrouds from Dollard, transitions to new suppliers take time and first attempts to manufacture product is prone to errors; therefore, Dollard will be kept for the first year producing 20% of the required product.

In 4-8 months production from Marton will take place and product will be rigorously inspected and tested to ensure that they meet the quality standards required by De Havilland.

In 8-12 months a review of the service levels from Marton will be assessed. A meeting should be held with both parties to discuss any further capabilities to better serve either company. Any major issues should be addressed i.e accounting, transportation.

1 year mark – Dollard Plastic will be phased out and Marton will take over 100% of the production. At this point, De Havilland has experienced the capababiilty of Marton’s production and will pose no risk to shortage or nonconformity to inventory.

Monitor and Control

A manager from each company should be elected to hold a monthly meeting to ensure that any issues will be corrected immediately or within a reasonable time frame. Every quarter, reviews should be conducted on performance and recommendations on improvements should be reported. De Havilland should be looking at key performance indicators to measure how efficient the supply chain network is working. Areas in the operations such as turnaround time for orders, quality of product, inventory turnover, and supply chain disruptions should all be decreasing, while efficiencies such as gross margin and forecasting should improve.

Annual meetings should be held to review the progress of the partnership and determine if there is any need for additional improvements.