Case Study 2: Dynamic Aircraft
MKTG 444: Supply Management
Statement of Problem
The supply manager for Dynamic Aircraft, Bill Marshall, must determine whether to place the order for electrical wire through a sole source, Advanced Wire, or follow the Dynamic Aircraft Company policy of dealing with more than one source that meet the governing specifications.
Dynamic Aircraft Company was recently awarded a multi-billion dollar contract for a new high-performance aircraft. This project requires the use of new materials in many areas of the aircraft which includes many of the types of wire used in the electrical systems ...view middle of the document...
Believing that Advanced’s wire was the highest quality obtainable, the engineers specified it on the bill of materials.
Bill Marshall bought wire and related items for the Dynamic Aircraft Company. An experienced supply manager, Mr. Marshall had a reputation for being conscientious and knowledgeable concerning the commodities that he purchased. When the requisition came to him to buy Advanced’s ceramic-coated wire, he immediately wondered why Advanced Wire had been designated as a sole source. From his experience in buying wire, he knew Advanced to be a high-cost producer. Moreover, he always attempted to follow the Dynamic Aircraft Company policy of dealing with more than one source whenever possible.
Believing that engineering may have been “sold a bill of goods” by the Advanced sales representative, Mr. Marshall decided to telephone the engineering department to learn what specifications governed the wire in question. Mr. Marshall did not want the engineer he was telephoning to think that, despite the fact that the current instance was typical of a number of similar instances, he was in any way censuring him for specifying Advanced Wire as a sole source. The engineer explained that the wire was of a special nature, designed to withstand extremely high temperatures. He also said that Advanced’s wire was the highest quality obtainable and that in his judgment, it should be purchased to fill the current need.
Mr. Marshall pointed out to the engineer that there were many thousands of types of electrical wiring. He said that all of these types were made according to some sort of specification—either military specifications, wire industry specifications, or specifications established by the purchaser. Mr. Marshall also said that a rule of the Dynamic Aircraft supply management department required a supply manager to know about any governing specifications before issuing a purchase order. After a few more minutes of conversation, the engineer said that he would attempt to locate the governing specifications and send them over to Mr. Marshall.
In the meantime, Mr. Marshall got in touch with the local representative of Advanced Wire to request samples of its ceramic-coated wire and price quotations. When the quotations were submitted, Mr. Marshall observed that once again Advanced’s prices were higher than those of the industry in general. Yet he realized that this particular wire might well be a more expensive item to manufacture as a result of its ceramic-coating feature.
Several days later, Mr. Marshall received the specifications for the wire. The specifications were of the military standard type and listed the performance requirements that the wire was to meet. They said nothing about whether the wire was to have a ceramic coating. Accordingly, Mr. Marshall solicited quotations from the other qualified suppliers and asked that samples be submitted to him that would meet the performance requirements of the specifications.