The prototype rig sent over to the Middle East has proven viable. Net profit after all operating expenses is $20,000 per day. Management wants another rig built and put into service ASAP. Three vendors have been qualified and sent a Request for Quotation (RFQ). In the RFQ package, the packing and crating is identical to how the prototype was shipped. A possible exception is the 19 foot tall / 75 ton piece which proved difficult to move efficiently or safely, and added considerable risk. The RFQ invites the vendors to quote two prices:
exactly as first shipped,
and breaking the 75-ton base into two pieces, then flying welders to the job site to weld them together after transportation.
The bidders are located in Brady, Texas (the incumbent); Deer Park, Texas; and Rotterdam, The Netherlands. The company owns the engineering design, so it can share it with all bidders. Operators of the rig will train on the one already on site, meaning as soon as the rig is completed and passes inspection it can be shipped. The company is very sensitive to environmental concerns and management wants to minimize its carbon footprint. The buyer experiences holding costs of 25% per year of the purchase price of the goods during the lead time.
Brady Company bids: $18 million, design identical to the prototype, and can have it delivered in 23 months. They decline to bid on breaking up the 75 ton base. Logistics for delivery will be substantially identical to the bid and is included in the bid price.
Deer Park bids:
$17.5 million, delivery in 24 months, and agrees to break the 75 ton piece apart which is included in the price. The cost of the transportation and per diem for the welders is included in the price.
$17 million, delivery in 25 months if it leaves the large piece intact. $16.5 million, delivery in 26 months if it has to break the 75 ton piece apart and send welders to the Middle East. The cost of the transportation and per diem for the welders is included in the price.
Which company and method do you choose?
When deciding the winner, in addition to the straight cost analysis (Total Cost), what is the “story” you tell justifying the selection?
Elements to the story must take into consideration the:
Transportation complexity (risk of things going wrong)
Environmental impact, and
Submit a FULL analysis of the situation, given the available information. Analyze the case quantitatively (financially) AND qualitatively and submit a well-reasoned and THOROUGH response written in good business communication style with references to any additional claims made. This will certainly require substantial thought and likely research beyond the case materials. You may turn in supporting files, but make sure the full case is made in a single Word document or PDF.
List of vendors engaged
List of all involved in Brady Rig move as follows:
Landstar Transportation Safety Director on site for all of loading process
Landstar Heavy Haul Provided Transport of materials
Steve Huntly Transportation Heavy Haul also provided surveys for route to port of Houston
High lift of Houston (Bucket Trucks 3 ) en route entire trip
McRae Crane Service one 100,000 Ton Crane and 50,000 Ton Crane
Alamo Crane Service Heavy Lift 250,000 ton crane
City of Brady Scale House Service
TransPak Crating Service
McCulloch County Sheriff’s Office
TXDOT Weights and Measures division
Department of Public Safety Escorts
City of Bryan, Texas Utilities
Reliant Energy Navasota, Texas Office (stop sign removals at all intersections, electrical lines disconnect for city)
Navasota, Texas Police Department
Harris County Sheriff’s Office escorts and over weekend security of substructure)
Wyoming Escort service provided 3 in route escorts entire trip
Arthur Menard of Landstar handled all on site management and en route transportation of Project material .
Reliant Energy of Houston provided electrical line disconnect en route to Port of Houston
TXDOT Permit department provided all permits and routing
All local counties and small townships were notified and provided permission to remove any obstacles that were in the way such as Trees that were trimmed small signs removed all which was done neatly by our crew in route as we proceeded down the highway.
CAD/RSU Agency of Landstar provided all dispatch of trucks as well as all organization of rig move.