Dehavilland Case Study

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need to ensure the production of the Dash 8 is profitable. The negotiation team is now faced with the challenge of which potential supplier they see future promise in. Do they focus their energy on Morton or keep their options open entertaining the proposals from DAS Composites and Lakeside Industries?

Alternatives and/or Options

1. Negotiations with Morton begin immediately pursuing an acceptable agreement.

Pros:

- Manufacturing costs decrease by accepting a partnership with Morton.

- A long-term relationship begins with a supplier and decreases the number of vendors de Havilland must deal with.

- Production costs grow stable with a fixed contract from Morton.

Cons:

-Bargaining power decrease for de Havilland when Morton knows they are the only supplier in play.

- Quality and service promised by Morton may not be delivered.

- Increases de Havilland’s supply chain risk by limiting themselves to one supplier of the flab shrouds and bay doors.

2. Begin negotiations with Morton, DAS Composites and Lakeside Industries simultaneously and weigh the options and proceed accordingly.

Pros:

- De Havilland’s options are kept open if Marton is unsuccessful convincing SSB of their long-term viability.

- Negotiation skills increase at de Havilland while dealing with complex, multiple deals at once.

- A better result for de Havilland could occur by increasing their bargaining power because all three vendors realize they are negotiating for the same business at the same time.

Cons:

- Manufacturing costs could remain high for de Havilland if many more factors come into play besides price reduction. They may have no choice but to accept an agreement from a vendor that offers higher prices than Morton.

- Trust issues arise between all parties due to de Havilland negotiating with them simultaneously.

- All three vendors pull out due to ethical violations they feel de Havilland has committed by negotiating with them at the same time trying to gouge them on a price deal.

- To reach an agreement would take longer by weighing three options instead of one.

Recommendation

De Havilland must begin negotiations with Morton exclusively and immediately. They must cut their production costs dramatically and Morton will allow them to do that. This also gives de Havilland the opportunity to develop a long-lasting relationship with Morton while increasing manufacturing cost stability utilizing economies of scale and decreasing the number of suppliers they do business with.

In preparation for negotiations, de Havilland must collect Morton’s financials from Devon Holdings and view the facility in which the flap shrouds and bay doors are produced. The quality of materials used in production should be examined by de Havilland as well. Once this information is gathered and proven acceptable, negotiations will formally begin.

Implementation

By leveraging the favorable bids they received from DAS Composites and Lakeside Industries, de Havilland negotiation team enters into talks with Morton Enterprises. Since price is not up for discussion issues such as quality control, timeline summaries, and customer support should be at the forefront. It is imperative that the final agreement hold considerations of a long-lasting beneficial relationship for both parties. Each issue that is resolved and agreed upon will mean advancing to the next step closer to a settlement.

The parties from Morton who hold the most bargaining power will become evident and if any interests exist besides venturing into the Canadian marketplace they will appear and reacted to by de Havilland. Again, keeping in mind that an agreement with Morton is important to firmly profit de Havilland in slashing their immediate manufacturing costs for the Dash 8 and developing long-term cost savings by retaining one supplier. Once talks cease and all interested parties are satisfied, the negotiation process concludes. An agreement will then be signed and a scheduled date of production will be set. The production date will coincide with depleting the remaining inventory from Dollard.

Monitor and Control

Once the supply of Morton’s flap shrouds and bay doors are transported to de Havilland, frequent budget reports will be reviewed. These will simply outline the manufacturing costs savings de Havilland should be expecting. If any discrepancies exist, corrective action will be taken. If a review of the agreement is necessary to reinforce de Havilland’s expectations from Morton in regards to the price summary, then an evaluation will commence to get Morton back on track.

A representative from each company will meet quarterly to evaluate the progress and troubleshoot any issues that arise and correct