The University of Lahore

Lahore Business School

Assignment
Vendor Selection
Master of Business Administration

Submitted to: Sir Zia

Submitted by: Maryam Khushbakhat (70073544)
Aqib Latif (70073860)
Raheel Raza (7003861)
Abubakar Makhdoom (70072814)
Abdul Ahad (70073544)

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 UNITED TECHNOLOGIES CORPORATION: SUPPLIER DEVELOPMENT
INITIATIVE
United Technologies Corporation undertook the Supplier Development Integration Program to
strengthen relationship with key suppliers.The major objective was to develop a productive and
cost effective set of reliable supply chain partners .The key qualities that were considered in the
relationship were: long term commitments, confidential information sharing, cooperative
continuous improvement efforts & risk and rewards sharing.
United Technologies Corporation has major revenues from 4 businesses: Carrier Corporation,
Otis Elevator, Pratt and Whitney and Flight System. United Technologies Corporation:
They are facing severe price and cost cut pressure because of the internet boost, mega-data
storage and retrieval systems, and email communication. Cost control had become major focus
and very aggressive cost targets has been in place at UTC. Restructuring and reengineering
process has been done which has resulted in improvement in cost, quality, lead-time reduction
sssssand lesser environmental impacts. UTC focused on seamless procurement process and
improving quality, reducing cost and facilitate the transfer of skills and capabilities to suppliers.
It evaluated suppliers based on two dimensions: their impact on UTC’s business and how
difficult it was for UTC to obtain supply. Important performance matrix were cost
performance, financial stability and risk, capacity capitalisation, competition, design capability,
materials and subcontract management, and continuous improvement implementation
UTC’s Supplier Development Process consisted of following seven steps: select supplier,
market to supplier, establish MOU, assess opportunity, train team and plan project, implement
project and report results.
Dynamic Gunver Technologies (DGT): Projected $100 million revenue in calendar year 2000.
It had recently signed a 20 year agreement with a major customer. DGT had been hoping for
similar involvement with P&W which was its largest customer
Relationship between P&W and DGT: Many problems faced by Gunver before merger with
Dynamic: It had significantly increasing overhead which resulted in substantial recurring
delivery problems and lost visibility of actual part manufactured cost. Dynamic was very price
competitive by minimising overhead cost and had demonstrated good performance in quality and
on-time delivery. By leveraging its expertise and knowledge gained form UTC, Dynamic won
many bids from major clients including Allied Signal, General Electric etc. It offered substantial
assistance in form of workshops on Kaizen process improvement, lean manufacturing and UTC’s
Ace program for improving quality. This resulted in enhanced productivity of Gunver. UTC
become dependent on DGT for its broad range of products applications. Both companies
negotiated a long-term agreement with aggressive cost saving goals long which was in favour of
P&W’s self-interest. However, there were many opportunities for DGT to improve its quality
and cost position
DGT’s management expressed that P&W was becoming difficult to work with demanding
immediate cost reductions and focusing only on the short-term. It saw Material Requirement
Planning (MRP) as an area that could be improved upon. P&W’s bi weekly updates of
committed orders where often incomplete in all time periods beyond the closest two-week period
which affected DGT’s production scheduling and product delivery. Better information flow
would have allowed DGT material Management to provide better planning and higher delivery
reliability. Planning and commitment where at the top of DGT priorities in considering a new
relationship with UTC. In-fact these issues were more important than price and volume
commitments. In the economies of Jet engines majority of profit came from selling of spare

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parts. This attracted DGT in the aftermarket which was eager to gain of piece of the spare part
business. Aftermarket was major source of revenue for P&W. This resulted in tension between

The two companies. P&W started losing revenue to DGT in the aftermarket to the US
government
Further improvements:
 Efforts to improve supply relationship.
 Main focus was on meeting aggressive cost targets.
 Both companies agreed to meet every two weeks or as necessary to review progress and
to provide a formal monthly update.
It had become clear that DGT was trying to capture more of the value chain and that P&W
considered DGT’s main relationship to them as a supplier of parts.

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