Background:

Since the 1980s, TRIAS had been the Indonesian leader in the manufacture of welded cable ladder and tray systems used to support electrical and other types of cables. In July 2015, TRIAS won its largest ever tender bid at $1.68/kg. The news could get even better if TRIAS fines alternative materials that would make them more profitable with the new tender bid. TRIAS currently uses a well-known reliable vendor GI, TRIAS has trusted for years. However, GI uses an outdated production process, wielding, that has four steps.

TRIAS has the opportunity to fulfill the new tender using two new vendors that use riveting. The new vendors are PSC (South Korea) and NSH (Japan) who would cut out several production processes and associated costs with riveting. All three of these vendors have their pros and cons as shown below.

GI (old process of wielding):

• Long-term vendor that uses welding process
• Steel bars obtained at $0.65/kg from a long-term and to hedge supply contract appropriate lengths and welded together at a cost of about $0.25/kg.
• About 20 percent of the production needed rework at an average cost of about $0.35/kg
• hot dip galvanization (HDG), which protected the product from corrosion. This was done externally by the subcontractor GI
• transportation to and from the hot dip galvanization plant costs TRIAS $0.10/kg
• about 1.5 percent of the material sent to it had historically become unusable due to mishandling. Second, about 7 per cent had to be scrapped after failing to pass a mandatory corrosion protection quality control.
• TRIAS would contribute another $0.45/kg in either situation for unusable material
• Transaction done in U.S currency
• Old process of wielding that is still being used and has 4 stages.

PSC (South Korea):

• Priced its new material at $0.98/kg, with an additional import cost of $0.20/kg.
• welding, riveting did not require skilled workers, and its cost would be lower at about $0.15/kg
• probability of an unsatisfactory riveting job was higher (at 30 percent) rework to meet standards would cost about $0.025/kg because no hot dip galvanization (HDG).
• TRIAS paying a penalty due to tardiness in fulfilling the tender to be about 25 percent
• was well known for its high-volume capacity
• Have stressed that their prices are fixed and conditional on us buying from them the entire amount required to fulfill the tender.
• A clause in the tender specified a penalty of $0.56/kg on the entire order if it was not delivered in full by the due date.
• Total of two steps throughout this process.

NSH (Japan):

• Material priced at $0.95/kg, with a further import cost of $0.14/kg.
• Welding, riveting did not require skilled workers, and its cost would be lower at about $0.15/kg
• Probability of an unsatisfactory riveting job was higher (at 30 per cent) rework to meet standards would cost about $0.025/kg because no hot dip galvanization.
• TRIAS paying a penalty due to tardiness in fulfilling the tender to be about 40 per cent if NSH was selected
• Is facing overwhelming demand due to a weakening Japanese yen
• Have stressed that their prices are fixed and conditional on us buying from them the entire amount required to fulfill the tender.
• A clause in the tender specified a penalty of $0.56/kg on the entire order if it was not delivered in full by the due date.

  Background:

  Since the 1980s, TRIAS had been the Indonesian leader in the manufacture of welded cable ladder and tray systems used to support electrical and other types of cables. In July 2015, TRIAS won its largest ever tender bid at $1.68/kg. The news could get even better if TRIAS fines alternative materials that would make them more profitable with the new tender bid. TRIAS currently uses a well-known reliable vendor GI, TRIAS has trusted for years. However, GI uses an outdated production process, wielding, that has four steps.

  TRIAS has the opportunity to fulfill the new tender using two new vendors that use riveting. The new vendors are PSC (South Korea) and NSH (Japan) who would cut out several production processes and associated costs with riveting. All three of these vendors have their pros and cons as shown below.

  GI (old process of wielding):

• Long-term vendor that uses welding process
• Steel bars obtained at $0.65/kg from a long-term and to hedge supply contract appropriate lengths and welded together at a cost of about $0.25/kg.
• About 20 percent of the production needed rework at an average cost of about $0.35/kg
• hot dip galvanization (HDG), which protected the product from corrosion. This was done externally by the subcontractor GI
• transportation to and from the hot dip galvanization plant costs TRIAS $0.10/kg
• about 1.5 percent of the material sent to it had historically become unusable due to mishandling. Second, about 7 per cent had to be scrapped after failing to pass a mandatory corrosion protection quality control.
• TRIAS would contribute another $0.45/kg in either situation for unusable material
• Transaction done in U.S currency
• Old process of wielding that is still being used and has 4 stages.

• PSC (South Korea):

• Priced its new material at $0.98/kg, with an additional import cost of $0.20/kg.
• welding, riveting did not require skilled workers, and its cost would be lower at about $0.15/kg
• probability of an unsatisfactory riveting job was higher (at 30 percent) rework to meet standards would cost about $0.025/kg because no hot dip galvanization (HDG).
• TRIAS paying a penalty due to tardiness in fulfilling the tender to be about 25 percent if

PSC

• was well known for its high-volume capacity
• Have stressed that their prices are fixed and conditional on us buying from them the entire amount required to fulfill the tender.
• A clause in the tender specified a penalty of $0.56/kg on the entire order if it was not delivered in full by the due date.
• Total of two steps throughout this process.

• NSH (Japan):

• Material priced at $0.95/kg, with a further import cost of $0.14/kg.
• Welding, riveting did not require skilled workers, and its cost would be lower at about $0.15/kg
• Probability of an unsatisfactory riveting job was higher (at 30 per cent) rework to meet standards would cost about $0.025/kg because no hot dip galvanization.
• TRIAS paying a penalty due to tardiness in fulfilling the tender to be about 40 per cent if NSH was selected
• Is facing overwhelming demand due to a weakening Japanese yen
• Have stressed that their prices are fixed and conditional on us buying from them the entire amount required to fulfill the tender.
• A clause in the tender specified a penalty of $0.56/kg on the entire order if it was not delivered in full by the due date.

Draw a Decision tree for the three options GI, PSC, NSH ?