Boise Automation is a Canadian-based company that operates in the industry of manufacturing, designing, and installing automation solutions for heavy industries. The case study illustrates the issues that led to Boise Automation losing the Northern Paper Inc order. Although Boise is an experienced company with well-designed technical solutions, the innovation that they integrated into their products increased the final costs. This case study analysis will answer the questions to explain why Boise lost this contract.
Boise Automation could have secured this order at a lower price. According to the case study, in the automation industry, the price comparison was the final step of the proposal approval and selection. The engineers and the purchasing department of the customer created specifications and send a request for quotations (RFQ). The purchasing department examined the contracts that the suppliers offered, and the engineering department focused on the technical aspects. Hence, the technical aspects of the proposals were evaluated before the customer began to compare the prices. It is possible that at this stage, Boise’s proposal was dismissed because they offered equipment that was superior to the industry’s standard.
The case study mentioned that Boise offered systems with high-resolution displays, and increased durability that was ready to be integrated with a new telecommunications system that began to emerge on the market. This factor probably contributed to the high price of $1.5 million that Boise initially anticipated since other suppliers did not use similar displays and telecommunications hardware. An engineering manager from Boise’s Toronto office called the sales manager on February 23 to warn that Boise’s equipment surpassed Northern’s requirements because, as mentioned, their systems were more advanced than those of the competitors. This surplus of capabilities contributed to Boise’s price being 25% to 50% higher when compared to the competition. Hence, Boise’s price could be $375,000 to $750,000 lower, which would help them win this contract. These were the estimated calculations before Boise submitted their bid at $1.35 million. In the end, Boid did lower the price to $1.25 million, which was still higher than the price of their competitors. As one of the committee’s managers noted, Bois’ price of $1.35 million was 30% higher than that of the lowest bidder, meaning that the final price would have to be:
$1.35 million * 30% = $405,000
$1.35 million – $405,000 = $945,000
Competitive advantage can manifest in areas other than the price of a product. For example, the shipment time or the quality matter as well. However, this depends on the customer’s priorities and their willingness to pay more. Boise’s sales manager tried to convince the decision committee that the price is an investment in the new technology that was emerging in the market, but it appears that Northern needed the current technology to make products that can be compatible at this moment. One solution for Boise would be to offer different payment systems for Northern, for example, in installments.
It appears that Boise Automation’s sales team lost the sale at the first stage of the process. The case study indicates the significant differences between Bois’s process of preparing an offer and expectations from Northern. Mainly, Northern focuses on the specifications and the details of the contract first. Moreover, the alternative proposals are submitted separately from the proposals based on Norther’s specifications. Northern’s management and senior executives evaluate alternative proposals separately and decide if these changes are necessary.
Moreover, the case study mentioned that the sales manager from Boise expected a request for proposal (RFP) from Northern, but he receives an RFQ. RFP allows evaluating the merits of different suppliers, while RFQ targets the cost for a specification. Next, Norther did not want superior technology because their managers concluded that it is uneconomical for them to maintain. Bois, however, discontinued the line with the old technology since it undermined the benefits of the new technology with faster controllers and better sensors. Essentially, Boise had nothing to offer to Norther because their equipment surpassed the requirements of Northern. Finally, Mr. Jennings from Northern called the Boise sales manager on February 17 because he was familiar with Bose’s automation systems. He emphasized the importance of competitive pricing for this proposal. Boise’s price surpassed that of the competitors by 25% to 50%, which made it impossible for them to win the bid.
This case study is an illustration of the fact that in some instances, it is best to lose a customer instead of planning and preparing for a large order. Boise’s products were clearly superior to what Northern wanted, and the managers of the latter were unwilling to pay a higher price. Boise was unable to deliver the automation line with older technology because it was discontinued, yet their engineering and financial departments prepared to fulfill this order. The best solution was to focus on other customers once Boise’s managers realized that they could not deliver what Northern requested. Overall, although Boise had a superior product, its price was too high for their customer. Ultimately, the best decision was not to submit the offer because it caused a ripple effect for Boise since several departments prepared to fulfill the order for Northern.