LG 312 THE DUTZEL DIESEL CASE
Question # 00328495
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Updated on: 06/30/2016 06:12 AM Due on: 06/30/2016
THE DUTZEL DIESEL CASE
Jack Haley, a senior supply manager for the Dynamite Truck Company, was confronted with an
interesting predicament—and possibly a trip overseas. Rising gasoline costs and increased foreign
competition had caused the management at Dynamite Truck to develop a new truck powered by
an air-cooled diesel engine.
From bumper to tailgate, the new vehicle was designed as a full-performance diesel
truck. It was heavy-duty throughout: frame, suspension, brakes, axles, and steering. It was built to
endure. Under normal operating conditions, the new truck, using an efficient air-cooled diesel
engine, was designed to yield 18 to 20 miles per gallon. The warranty was for 100,000 miles or
two full years, whichever came first.
Jack had been actively involved in the development of the new truck. He provided the
Dynamite engineers with information on the availability and cost implications of various
materials, components, and subassemblies under consideration. From a technical, cost,
availability, and service point of view, the diesel engine was the most crucial item to be
purchased for the new truck.
Jack obtained technical data on four air-cooled diesel engines that appeared to satisfy
Dynamite’s requirements. Two of the manufacturers of these engines were located in Europe, one
in Japan, and one in the United States.
Discussions with the program manager indicated that from a technical point of view, each
of the diesel power plants was acceptable. Accordingly, all four manufacturers were invited to
submit bids. The request for bids stipulated an estimated requirement of 10,000 engines per year
for each of the next three years.
The date specified for the close of the bidding period was Friday, June 13. All four firms
submitted bids by the established date. Dutzel Diesel of Gailsdorf, Germany, was the low bidder
with an F.O.B. destination price of $14,263 for the first year, and a standard price escalation
clause for the second and third years. The second lowest bidder was a U.S. firm, the Great
American Diesel Company. Its price bid for the first year was $16,287 per engine. The price for
the second and third years contained the same economic escalation clause as Dutzel’s bid.
Jack sat contemplating a course of action. He wondered if the $2,024 per unit price
differential required to buy the U.S. engines could be justified. He also wondered about the
necessity of a trip to Gailsdorf to perform a survey on Dutzel prior to awarding the contract.
1. Do you believe that buying from global sources is destined to give supply managers
an increasing number of problems? Discuss.
2. What is the easiest way for supply managers to start buying internationally?
3. If you were Jack, how would you decide this issue?
Jack Haley, a senior supply manager for the Dynamite Truck Company, was confronted with an
interesting predicament—and possibly a trip overseas. Rising gasoline costs and increased foreign
competition had caused the management at Dynamite Truck to develop a new truck powered by
an air-cooled diesel engine.
From bumper to tailgate, the new vehicle was designed as a full-performance diesel
truck. It was heavy-duty throughout: frame, suspension, brakes, axles, and steering. It was built to
endure. Under normal operating conditions, the new truck, using an efficient air-cooled diesel
engine, was designed to yield 18 to 20 miles per gallon. The warranty was for 100,000 miles or
two full years, whichever came first.
Jack had been actively involved in the development of the new truck. He provided the
Dynamite engineers with information on the availability and cost implications of various
materials, components, and subassemblies under consideration. From a technical, cost,
availability, and service point of view, the diesel engine was the most crucial item to be
purchased for the new truck.
Jack obtained technical data on four air-cooled diesel engines that appeared to satisfy
Dynamite’s requirements. Two of the manufacturers of these engines were located in Europe, one
in Japan, and one in the United States.
Discussions with the program manager indicated that from a technical point of view, each
of the diesel power plants was acceptable. Accordingly, all four manufacturers were invited to
submit bids. The request for bids stipulated an estimated requirement of 10,000 engines per year
for each of the next three years.
The date specified for the close of the bidding period was Friday, June 13. All four firms
submitted bids by the established date. Dutzel Diesel of Gailsdorf, Germany, was the low bidder
with an F.O.B. destination price of $14,263 for the first year, and a standard price escalation
clause for the second and third years. The second lowest bidder was a U.S. firm, the Great
American Diesel Company. Its price bid for the first year was $16,287 per engine. The price for
the second and third years contained the same economic escalation clause as Dutzel’s bid.
Jack sat contemplating a course of action. He wondered if the $2,024 per unit price
differential required to buy the U.S. engines could be justified. He also wondered about the
necessity of a trip to Gailsdorf to perform a survey on Dutzel prior to awarding the contract.
1. Do you believe that buying from global sources is destined to give supply managers
an increasing number of problems? Discuss.
2. What is the easiest way for supply managers to start buying internationally?
3. If you were Jack, how would you decide this issue?
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Rating:
/5
Solution: LG 312 THE DUTZEL DIESEL CASE