PACECO: The Purchasing Decision for the Fénix Project

PACECO ESPAÑA is a leading engineering company specializing in the design, manufacture and assembly of cranes for loading and unloading containers, mainly in port facilities. Its American parent company was the first to patent ship-to-shore container cranes as we now know them. PACECO ESPAÑA is now undertaking one of the biggest projects in its history: to supply four ship-to-shore quay cranes to one of its main customers. Since the customer already has six cranes with very similar characteristics, PACECO ESPAÑA must adjust its cost structure to achieve a positive net profit margin without compromising on the project customization it's known for, and while ensuring that a tight delivery deadline is met. If costs are not adjusted as quickly as possible, the project could take a heavy toll on the company. Javier Vázquez, the head of Purchasing and Procurement, must decide how to significantly reduce costs on mechanisms, the second most significant purchasing category in terms of costs. Javier is considering three options, but all of them entail certain risks, including economic risks, as well as risks related to delivery time, compliance with technical requirements, and the company's internal organization.