Individual Case - London Specialty Engines.

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Individual Case - London Specialty Engines

What factors might have caused the variations in the quotes?

The factors that might have caused variations in quotes include high technology equipments and difference in labour (cheap or premium) used. It is because the high technology equipments cost more than traditional and the skilled or unskilled labour varies the quality and costing.

What factors might have caused the variations between the two quotes and Mr. Brown's estimated price?

Comparing Brown's estimate to St.Thomas and Clinton quotation reveals that the variation might have been due to the subcontracting parts that reduces inventory storage costs and labour burden and the other is tooling costs that might alter as the type and quality of dye used by the companies to cast the valve

What conclusions can we draw from the reliability and usefulness of internal cost estimates (those made by the Supply Supervisor)?

The internal estimate is reliable as the consultation bias is not involved and is concerned to an experienced member in stamping. It is important to include the quotations of expert of stamping in consideration while preparing an internal estimate to review with un biased view.  

What conclusions can we draw from comparing the supplier's quotations?

According to the supplier quotation there might be a risk of loosing the bid due to low price. Thus, it is required to hire another supplier if the failure occurs to avoid the interruption.

Should this item be made in-house (by the company, rather than by a supplier)? Why or why not?

The best consideration is to buy the parts from the suppliers rather than manufacturing in house as it costs more than the both estimates and the opportunity cost is comparatively low.

What are the risks with dealing with a new supplier?

The risks associated to new supplier are the quality concerns and the delivery issues. The supplier might have low technology equipment or poor tooling that can cause defects in parts costing more. A part from it, the freight charges may vary that might costs more according to the location there might be a possibility where supplier might be unable to deliver the product at same costs.

What can be done to reduce the risks of dealing with a new supplier?

To mitigate the risk of quality the management can employ the quality control team and for logistics the company can ensure the local brokers to supply their product as a standard time delivery.

If Mr. Brown thinks that the bids from the lowest suppliers is low as means to get established as a new supplier, is it appropriate for Mr. Brown to place the order with one of the other bidders ?

It is not appropriate as new supplier might involve the risk of financial that can affect the company for longer term.