De Havilland Inc Environmental and Root Cause Analysis

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Table of Contents

Executive Summary        

Issue Identification        

Environmental and Root Cause Analysis        

Alternatives and Options        

Recommendation        

Implementation        

Monitor and Control        

Executive Summary

De Havilland Inc., a high profile Canadian aircraft manufacturing, has decided to find a new supplier for its Flap Shrouds and Equipment Bay Doors.  The bill of material costs of De Havilland’s Dash 8 airplane are approximately 60 to 65 % 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.  As a result of a policy instituted by Boeing, De Havilland has been requested to get a 25% discount on all parts supplied from all vendors.  The Dollard Plastics 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 De Havilland had developed earlier for their procurement department.  De Havilland started the process of looking for another supplier of the flaps and bay doors about year and half earlier than the expiry date with the incumbent supplier, Dollar Plastics.

After receiving 9 bids to supply the needed parts, I have recommended Marton Enterprises Inc. to De Havilland’s Source Selection Board (SSB) as prospective vendor.  Marton must pass the set of standards mentioned above in order to make this relationship viable.  From the normalized bid process, Marton Enterprises Inc. was the lowest bid of the 9 bids submitted for the flaps and bay doors.  The bid they submitted was18% lower than their nearest competitor. When prices were compared for the needed components to the prices supplied by current providers they were between 54% and 75% less expensive. With reduced cost on parts is a defined goal we are also interested in establishing long-term co-operative contracts with the vendor. The price of the lowest bid submitted by Marton was substantial, but De Havilland needs to determine whether they will offer long term stability in the long run. The strategic intention here is to negotiate an agreement with Marton that will be create the greatest value possible to De Havilland keeping in mind our goal of longer-term agreements and reducing the amount of vendors we deal with. A good decision from SSB will allow De Havilland to achieve this objective.