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