Chapter 3

  • 27 November 2002


    Sometimes I wonder whether I made the right decision back then. Over the last six years, I became the best mechanic in the company. I had a great boss, a good salary, a secure future and awesome colleagues. I didn't really want to give up all of this, and yet I did. I just feel that this job can no longer teach me anything new, nor is it challenging enough for me.

    I remember my old childhood dream of becoming a top manager, but is it worth giving up what I have, only to chase dreams, not knowing whether I'll ever make it anywhere? I don't know, but the decision is made now. And here I am, back with the books again, studying business administration at university. Who knows where this will end. Anyway, I need to focus right now. I'm preparing for my first exam. Let's see if I can solve this exercise:


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    Excercise:

    Imagine you work in the middle management of a mechanical engineering company.

    The general manager asked you to present a purchasing plan for machine components for the upcoming year. For the procurement of several machine components, you can choose between three suppliers:

    • The supplier 'Mecha-Heads' sells their components for only $20 per unit, but the components have a relatively low durability. Also, after some online research, you find that many customers rated the supplier's punctuality with 3 out of 5 stars.
    • The supplier 'Swiss Metal' is quite expensive and sells their components for $60 per unit, but their components have the greatest durability. Customers rate their punctuality with 4 out of 5 stars.
    • The supplier 'General Machines' offers components with average durability and their pricing is $40 per unit. Their punctuality is also rated with 4 out of 5 stars.

    Your general manager would like to purchase components of great quality that are cheap and are delivered punctually. But if it's not possible to have it all, he'd consider a low price to be twice as important as punctuality, and the quality twice as important as the price.


    You have to make a rational decision. Based on this information, which supplier would you choose and why?



    Task: Solve the exercise

    • 3 points for the correct answer
    • 7 points for the correct analysis


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  • Mecha-Heads are the cheapest but let down by both punctuality and quality so would be rejected, due to quality being the highest priority.


    Swiss Metal have the highest quality but are also the most expensive.


    General Machines are as punctual as Swiss Metal but are 2/3 of the price with lower durability.


    We are unaware of what difference the durability makes, ie how long a component from Swiss Metal will last in comparison to General machines. Does the 50% increase in price equate to 50% longer durability, or twice as long? Further tests would be needed to determine the actual surability. I would therefore recommend purchasing components from both Swiss Metal and General Machines for evaluation purposes.


    If further testing was not feasible then I would purchase from Swiss Metal due to their greater durability for only a 50% increase in price.

  • A) 'Mecha-Heads' - $20 per unit, low durability, punctuality with 3 out of 5 stars.

    B) 'Swiss Metal' - $60 per unit, greatest durability, punctuality with 4 out of 5 stars.

    C) 'General Machines' - $40 per unit, average durability, punctuality with 4 out of 5 stars.


    1) a low price to be twice as important as punctuality

    2) and the quality twice as important as the price.


    Step 1) The most important thing is quality => B) or C) (They have different prices and the same punctuality)

    Step 2) The following important is low price => C)


    My choice is C) 'General Machines'

  • Quality is twice as important as price. Price is twice as important as punctuality.

    So: the punctuality is at half importance than price, which is half important than quality.

    So the quality is most important and therefore the "Swiss Metal" should win.

    BUT: the General Machines products are 1/3 cheaper. So the greatest durability has to be at least 2/3 higher than the average durability. If it's not, the General Machines should win.

    My answer is "Swiss Metal" and i don't have convincing analysis :) :) :/

  • Swiss Metal

    Каждому из критериев выбора я присвоил баллы, которые потом суммировал и выбрал поставщика с наибольшим.

    1. Качество компонентов - низкое качество = 1, среднее качество = 2, высокое качество = 4.

    2. Цена компонентов - низкая = 3, средняя = 2, высокая = 1.

    3 Пунктуальность поставщика - равна количеству звезд.

    Итого:

    Mecha-Heads : 1+3+3 = 7

    Swiss Metal: 1+4+4 = 9

    General Machines: 2+2+4 = 8


    Swiss Metal набрал больше всех баллов.

  • let's give some weight to each criterium :

    punctuality = 1

    price = 2

    durability = 4


    Now we give points (1 = bad, 2 = average, 3 = best) to each good for each criterium :

    Mecha-Heads : punctuality = 2 ; price = 3; durability = 1;

    Swiss Metal : punctuality = 3 ; price = 1; durability = 3;

    General Machines : punctuality = 3; price = 2; durability = 2;


    we then multiply with the weight to finally have that Swiss Metal scores better than General Machines and Mecha-Heads are the worst.


    More simply, we could just see that Swiss Metal and General Machines score the same in punctuality, and are reversed on price and durability, but durability is more important to the manager. So we select the one with the best durability, since Mecha-Heads scores poorly.

    Fr-201 Bad Wolf de coeur

    en pause indéterminée - away from the game until next interesting server


    Likely coming back for clash!

  • Answer: Swiss Metal


    Explanation:

    Priority Analysis Scoring - Point ranking system weighted by priority:

    x1 Punct (1,2,3 Pts) x2 Cost (2,4,6 Pts) x4 Qual (4,8,12 Pts) Total Points
    Mecha-Heads 1 Point 6 Points 4 points 11 Points
    Swiss Metal 2,5 Points 2 Points 12 Points 16,5 Points
    General Machines 2,5 Points 4 Points 8 points 14,5 Points

    If it ain't Dutch, it ain't much!

  • Penso que os dados apresentados não são suficientes para tomar uma decisão bem suportada. Para isso seria necessário analisar quantas peças, em média, são gastas ao ano e qual o impacto que a peça avariada teria sobre a produção na fábrica.

    No entanto, tendo em conta os dados apresentados e tendo em conta a componente económica, eu optaria por escolher a 'General Machines'. Pois assim não teria um gasto muito enorme nesse ano e como têm um tempo de entrega de 4 estrelas, a entrega seria rápida em caso de necessidade urgente. Para além disso, uma durabilidade intermédia garante que não existem problemas num futuro imediato.

  • Use a decision matrix


    Relative importance:

    Punctuality is least important score 1

    Price is twice as important as punctuality score 2

    Quality is twice as important as price score 4


    Rate each company from 1 – 3 in each category then multiply rating score by importance factor

    company

    Price

    Punctuality

    Durability


    Total score

    Importance

    factor

    2

    1

    4


    Mecha-heads

    $20 per unit

    Rating score 3

    Total score 3x2=6

    3/5 stars

    Rating score 2

    Total score 2x1=2

    Low

    Rating score 1

    Total score 1x4=4

    6+2+4=12

    Swiss metal

    $60 per unit

    Rating score 1

    Total score 1x2=2

    4/5 stars

    Rating score 3

    Total score 3x1=3

    High

    Rating score 3

    Total score 3x4=12

    2+3+12=17

    General machines

    $40 per unit

    Rating score 2

    Total score 2x2=4

    4/5 stars

    Rating score 3

    Total score 3x1=3

    Average

    Rating score 2

    Total score 2x4=8


    4+3+8=15


    Outcome: I would recommend Swiss Metal as the decision matrix, based on the boss’s priorities, indicates that that this best meets the company’s needs.


    Besides which, as a lover or cheese and chocolate, a quick visit to Switzerland (by train of course) to have a proper assessment of the product, would be very welcome!

  • Starting with punctuality, the factor of least importance, the different companies are rated Mecha-Heads 3, Swiss Metal 4, General machines 4. These scores are graded out of 5.

    The other ratios (for punctuality and durability) are graded out of 3, so the raw scores will be adjusted to maintain consistency. The raw scores will be divided by 5 (stars) and multiplied by 3.

    This method gives the scores Mecha-Heads 1.8, Swiss Metal 2.4, General Machines 2.4.


    The ratio for low pricing is 3:1:2 for Mecha-Heads : Swiss Metal : General Machines.

    As pricing is twice as important as punctuality, these ratio scores will be doubled.

    Mecha-Heads scores 6, Swiss Metal scores 2, General Machines scores 4.


    Keeping the ratio 1:2:3, Mecha-Heads has a low durability so scores 1, General Machines has an average durability so scores 2 and Swiss Metal has the greatest durability so scores 3.

    As durability is twice as important as pricing, these ratio scores will be multiplied by a factor of 4.

    Mecha-Heads scores 4, Swiss Metal scores 12 and General Machines scores 8.


    Adding the scores gives Mecha-Heads a total of 11.8, Swiss Metal a total of 16.4 and General Machines a total of 14.4.


    Swiss Metal is the supplier chosen.

  • The supplier to choose is Swiss Metal


    The reason:


    Durability/quality is the most important, it has a multiplier of 4

    Price has a multiplier of 2

    Punctuality has a multiplier of 1


    Since Swiss Metal has the best quality, it has a quality value of 60, General Machines has quality level of 40, Mecha Heads has quality value of 20. All of this is multiplied by 4.


    Swiss Metal 240 points

    General Machines 160 points

    Mecha Heads 80 points


    Price is reverse so Mecha Heads has 120 points (2 X 60)

    General Machines 80 points (2 X 40)

    Swiss Metal 40 points (2 X 20)


    Finally for punctuality 5 is max so 5 = 60 points


    Swiss Metal 48 points

    General Machines 48 points

    Mecha Heads 36 points


    In the total ranking we have:


    Swiss Metal 328 points (240+40+48)

    General Machines 288 points (160+80+48)

    Mecha Heads 236 points (80+120+36)


    Swiss Metal should be purchased

  • There is hardly a way to tell what "the best" option is, since how good is "low" durability compared to "average" or "high". Furthermore how can I compare quality and price and punctuality? Isn't that comparing apples with pears?

    Moreover there could be many more criteria: consider that one company offers to deliver the components tomorrow, while another can only deliver then in a couple years time. In this case I wouldn't even consider the second company in my "purchasing plan for the upcoming year"...


    Anyway "A way" to decide comes down to the following:

    "Swiss" metal and "General Machines" have the same punctuality, so we can ignore that for now. "Swiss" is more expensive, but has greater quality than "General", since quality is more important than price, we choose "Swiss" over "General". The same holds when comparing "Swiss" with "Mega", on top of that "Swiss" has better punctuality than "Mega" thus we certainly choose "Swiss" over "Mega". Hence "Swiss metal" is the prefered company.

  • I would choose Swiss Metal.


    Given the relation Quality rates 4 punctyalities and Price rates 2 punctualities. The distribution is then:


    And by transform all the values in terms of punctuality:


    Punctuality Price Quality
    Mecha-Heads 3 5 2
    Swiss Metal 4 2,5 5
    General Machines 5 1,5 3
    Punctuality Price Quality Total
    Mecha-Heads 3 10 8 21
    Swiss Metal 4 5 20 29
    General Machines 5 3 12 20


    Swiss Metal wins

  • I would rate them all. The differences between them are all the same so ranking them can be done. The weight of the score is determined by the manager.

    Mecha Heads is the cheapest so it scores 3(2)=6 points for price, 1(4)=4 points for durability because it is low and 1(1)=1 for punctuality. total points = 11

    SwissMEtal: Price: 1(2)=2. Durability: 3(4)=12 Punctuality: 2(1)=1. Total points = 18

    General Machines: Price 2(2)=4 durability 2(3)=6 punctuality 2(1)=1. Total points 11.



    Swiss Metal scores the most points, so it will be the supplier.

  • Answer: the second supplier, Swiss Metal


    As the quality is twice as important as the price, Swiss Metal beats the General Machines, as the price is only 1.5 times higher.

    As the quality i four times higher than the price, Swiss Metal beats the Mecha-Heads, as the price is only 3 times higher, and the punctuality even better.


    But one can't solve this, without having a numeric comparison on quality. Low, average and greatest is not anything you can measure with ... My answer is only valid, if the quality doubles between the alternatives. If not, you can make any assumption to get any of the three offerings as the best. In that case even the overall answer will be affected.

  • The supplier 'Swiss Metal' is quite expensive and sells their components for $60 per unit, but their components have the greatest durability. Customers rate their punctuality with 4 out of 5 stars.

    -This ist the best choice.


    I gave for everithing points:


    1. deliver:

    3-points beause of the cheapest, 1-point because of worst quality, 1- point because of bad punctuality


    2.deliver:

    1.point for 60 dollars, 3 points for best quality and 2 points for punctuality


    3.deliver:

    2-points for price, 2 for quality and 2 for punctuality


    Now, because quality ist twice and punctuality only a half from price:

    1.deliver:

    3+2+0.5(5,5)

    2.deliver:

    1+6+1(8)

    3.deliver:

    2+4+1(7)


    so.. deliver 2 has most points...