Case Study: De Havilland Written Case Study

Presented by
Haihong Wu

Table of Contents

Executive Summary……………………………………………………………….. 3

Issue Identification…………………………………………………………………. 3

Environmental and Root Cause Analysis…………………...…………………… 4

Alternatives………………………………………………………………….……… 5

Recommendation and Implementation……………………….............................6

Controls….…………………………………………………………..……………… 7

Executive Summary
In need of reducing production cost and increase efficiency, De Havilland has requested price reduction from its current flap shroud and bay door supplier but got rejected. The BSB team in the company therefore sent out RFQs to 9 suppliers and when the quotes came back, Marton Enterprise Inc. hold the lowest offer with 75% deduction of the current material cost. It was seemed to be of De Havilland’s best interest to have Marton as their long-term supplier and to replace the current one. There are uncertainties remained that needs the SSB team to solve and make the final decision which company they will select as their suppliers. To make the agreement, both parties need to meet and negotiate. As for De Havilland, they had to find out the Marton’s real financial situation as well as their production capabilities and any information that could impair the success of the negotiation.

Issues Identification
As the financial analysis of material, Kim Tomar realize that the material costs for Dash 8 airplane has represented 60%-65% of the total manufacturing cost. It is of the company’s and stakeholders best interest to lower their material cost and increase efficiency. However, the company’s current flap shroud and bay door supplier, Dollar Plastic from Montreal, has refused to lower their cost by at least 25% while Marton, a new supplier who submitted the bid, offered almost 75% discount of the current cost. However, De Havilland has to make sure once Marton Enterprise Inc. becomes their major supplier for the shroud and bay door, they are capable to fulfill orders.
In addition, De Havilland has planned to build a long-term relationship with its suppliers and reduce negotiation cost, but if the company has locked down one suppliers as their long-term partner, they might have to take this supply chain risk if the selected supplier does not perform well enough.

Environmental and Root Cause Analysis
Found in 1928, De Havilland has been in the industry for over 65 years and has been bought out for several times. The benefit of this is, that it has developed its products over the years and so far it has been successful to be one of the biggest aircraft manufacturer in Canada. Currently the company is owned 51% by Bombardier and 49% by the government of Ontario. Continuously being the major internal supplier for Bombardier, De Havilland is pursuing the regional airline sector. And it has been investing in developing new prototype, the Dash 8. Overall the company’s operation has been very successful and has a lot of potentials to grow.
Previously owned by Boeing has brought the company some management change. Specifically the company has rules to follow which helps the company to clarify internal duties and process. One of the example is the full supply cycle. It’s very logical and effective. After being purchased by Bombardier, De Havilland is still adopting these policies in their day-to-day operation.
In De Havilland’s supply cycle system, BSB (Bidder Selection Board) and the SSB (Source Selection Board) play a crucial role in analyzing the bidders’ financial situation and capabilities as a supplier.
When Dallar Plastic rejected the negotiation of pricing on the flap shroud and bay door, according to De Havilland’s supply cycle system, BSB had to started gather information and sent out RFQ (Request for Quotation). When all 9 bidders came back with their quotes, it turned out that while Dollar Plastic hold the original price which was the highest among the bidders, Marton