Ti-Tech Case

Ti-Tech

Ti-Tech currently has an acute shortage of capacity and increasing customer dissatisfaction with late deliveries. They need to decide which of the four potential orders the company should accept and how the company should bid on them.

• Ti-Tech has 16% of total market

• Titanium industry is growing by 15% to 20% during the foreseeable future

• Company objective is to have cost of goods average 80%, with 85% the upper limit

• 2005 company established policy allowing a maximum of 20% of its business to reside with one company

• Over-time is possible however; it will be difficult because orders are already backlogged. It is also expensive (150%), may bother productivity and quality, and no place to store work in progress.

Hendrick Construction

Pros: Cons:

• Ti-Tech’s largest customer

• Claims to have a close relationship

• World’s leading engineering contractors

• Does little titanium work, Ti-Tech specializes in titanium

• Largest of four orders, $12 million

• Willing to pay 80% of direct “material and labor as applied”

• Involves a payment process, one/two payments will come in 2007 fiscal year

• Always makes payments on time

• Predicted to be 16% of sales in 2007, falls within policy of 20% • Does some in-house fabrication of super-alloys and titanium

• Trained staff of field welders and supervisors

• Rumors for the past four years are that they may set up a fabricating facility (executives are unwilling to discuss, relationship may not be as strong as Ti-Tech perceives)

• Unsatisfied with previous deliveries, may change manufacturer if continues or in-house

• Ti-Tech would have to begin this project now to be completed on time; shortage of capacity is already an issue

Stone-Parker

Pros: Cons:

• Four year relationship with Ti-Tech

• Strong position in a growing market

• Opportunity exists to take competition’s market share, competition’s quality is not high enough

• Develop the capability for unusual fabrication • Not sure if they have capacity