Ti-Tech Case Study
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Ti-Tech
Which order do you think is best? Why and from what perspective?
Prospective Orders
Advantages
Disadvantages
Hendrick Con.
High Selling Price ($12M)
17% contribution before SG&A
Progress Payment in Labor and Material in four installments
On time payment
Has production experience
Close relationship
High labor cost (14%)
Especially need lots of welding which Ti-Tech lack of capacity
High risk of late deliveries which customer has already complained about
The threaten from one single big customer
Stone-Parker
The first opportunity from new customer
Customer has a strong position in growing market – potential growth
20% contribution before SG&A
Repel major competitor
Develop engineering capability in unusual fabrication
Relatively low welding load and labor cost
Progress payment in Material which is the highest proportion in cost
Customer concern about the quality
No experiences in such production
Risk in on time delivery
Have capacity gap in June and July – need production adjustment
Pay more attention to maintain the relationship and expand business to cover the open capacity after August 2007
Northern Paper
Opportunity to develop a line of proprietary products
License manufacture
Standard production
New capability – heat treatment with cost saving
12.25% contribution before SG&A
No progress payment, but 0.1%/day penalty payment for late delivery
No experiences
First produced by titanium
New investment in heat treatment
Cant be accurately estimated the cost and market price
Chemco
No need for welding which is the bottle neck
18% contribution before SG&A
Half year project and could be calculated into this fiscal year
“one-shot deal” no potential development
Parallel production with customer or competitor
Considering the principles:
“to make money by mobbing titanium” — The market area has potential for further development which would be different from competitors and avoid the price competition. Price is not the primary factor in the customers decision
The job is similar to what Ti-Tech built before and could consolidate the advantages in know how and production processes
Contribution before SG&A should be significant
With good payment terms
Better balance the customer proportion
Solution: Stone-Parkers order
What does each order do for the long term development of Ti-Tech?
Prospective Orders
Positive
Negative
Hendrick Con.
Good Sales performance
Strategic relationship
More rely on and influenced by single customer
Not diversify in customers and products
Threaten