Montreal Transit Corporation Case Study
Essay by chinchin11 • June 16, 2018 • Case Study • 1,091 Words (5 Pages) • 2,083 Views
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Table of Contents
Problem2
Cause2
Analysis3
SWOT Analysis3
Solution5
PROBLEM:
Jean Belanger at Montreal Transit Corporation/Societe de transport de Montreal (STM) is required to provide his recommendation to the Board of Directors regarding the procurement method to use for a modernization project involving the purchase of 336 metro cars which has a contract estimated value of over $1 billion.
STM operates one of the heavily used transport system in North America comprising of buses and subway trains (Montreal Metro subway system). However, it is also an aging system which is high maintenance and less energy efficient. In addition to a limited budget and a tight timeline, Jean has to decide on a strategic solution which also considers the following:
- Corporate Social Responsibility which promotes social and environmental change
- Financially viable solution for STM
- Risks as an effect of a fast changing environment (i.e. strikes, work stoppage, natural disasters, etc.)
CAUSE:
The Montreal Subway Metro System has been in operations since 1966 and has not gone through major technological advances for more than four decades and is now seeking to modernize and replace 336 metro cars with a $1 billion budget. In addition to this, there are concerns about timelines and delays which may result to significantly more costs and most importantly, the negative impact to an estimated 1.1 million daily ridership.
Analysis:
Options | Strength | Weaknesses | Opportunities | Threats |
Single Source to Bombardier | - Reputation of being a world leader in manufacturing planes & trains. - Support of local businesses - Less complex negotiation focusing on cost controls, term of contract, train specs and warranty only – reduce delays. - Local management team to look after production and relationship with STM. - Local production facility/factory in La Pocatiere supporting local community. - Nearshoring avoids delays caused by logistics and natural disasters. | - Produce less energy efficient trains. - Less sustainable products as they lack the innovation to improve. - Financial Stability as their revenue has declined from $7.6 billion to $6 billion. - Less options with limited supplier reach. | - Positive influence to public relations with local population which can lead to lower prices and quicker turnaround in negotiations and contract management. - Generating 4,600 jobs locally in La Pocatiere for the next 8 years. | - Higher costs as a common threat on single source partnerships - Negative public perception as it was not managed competitively - Non-compliance to BPS Directive and CETA Trade Agreement - Back log of $21.3 billion for the transportation industry which can result to possible delay in STM’s train production. |
Single Source to Alstom | - Access to innovation and more sustainable and environment friendly trains. - Global company with presence in 63 countries. - Financially stable at $17.4 billion - Lower cost to STM for the production of trains due to wide variety of access to suppliers and resources contributing to lower production cost - Faster turnaround with negotiation and implementation. | - Headquarters located in Paris. - Management and production team is located in Paris - With diverse global reach, parts and materials are off shored which can delay production due to risks of logistics and natural disasters. | - Dedicated CSR with a focus on short and long term impact to people and resources which can influence STM positively as a company and its long term impact to environment - Possibly lower long term cost due to sustainable and mutually beneficial solutions to both STM and Alstom | - Higher costs as a common threat on single source partnerships - Negative public perception as it was not managed competitively - Non-compliance to BPS Directive and CETA Trade Agreement - Negative public perception of STM as local business is taken away by Alstom. - Negative impact to local economy with employees in La Pocatiere losing their jobs. - Currency fluctuation |
RFQ/RFP | - Competitive process will ensure lower overall long term cost. - Compliant with BPS Directives and CETA Trade Agreement. - Access to wide variety of supplier base which promotes opportunity, flexibility and lower cost. - Production of more energy efficient and sustainable trains will have a positive impact to environment and financially to STM. | - Public tender results in generally a longer process which can result to delays. - Contract negotiation will be more complex adding more delays. | - A long term sustainable solution can be identified (i.e. supplier partnerships). - Opportunity for innovation which can be incorporated in the production and maintenance of trains initially and long term. - Helps promote ethical sourcing principles. | - Negative public perception of STM as local business is taken away by Alstom. - Negative impact to local economy with employees in La Pocatiere losing their jobs. - Access to wider variety of suppliers may be a threat if offshored due to challenges with logistics, strike, natural disasters. - Threat due to political climate may cause delays. - Currency fluctuation |
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