Ti-Tech Case Study

Ti-Tech

1. 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

 Can't 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:

(1) "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 customer's decision

(2) The job is similar to what Ti-Tech built before and could consolidate the advantages in know how and production processes

(3) Contribution before SG&A should be significant

(4) With good payment terms

(5) Better balance the customer proportion

Solution: Stone-Parker's order

2. 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