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A Solution to Butler Systems Case

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The case presents a supply chain issue faced by Butler Systems, a manufacturer of
environment control systems and power conditioning equipment. One of the products
manufactured by the company is Emergency Power Supply (EPS) system. EPS is a power
protection system that safeguards network systems from limited power outages allowing them to
shut down in a smooth fashion so as to avoid loss of data and damage to hardware. The customer
requirements are determined by the design engineering department. The core component of the
system is HD-5 battery that the company procures from certified suppliers.
The supplier of HD-5 battery poses a great importance in the supply chain of Butler
Systems hence the selection process is very thorough and involves careful screening process.
This is done through competitive-bidding pricing process. Two of the suppliers that offer the best
prices are negotiated with and the one that proposes the best set of offerings is signed up as the
official supplier for the company. The case mentions of contract terms that the vendor needs to
meet and accept in order for the contract to go into effect. The current supplier of HD-5 batteries
for Butler Systems is SDX Chemicals. As the sole supplier of the company SDX holds a very
high bargaining power over the buyer.
Butler Systems is running low on the inventory of HD-5 batteries. Normally, it stocks a
90-day supply of batteries, which has been reduced to a mere 20-day supply. SDX has been
unable to honor its commitment. It has declared the contract to be null and void and demands
that in order to continue the supply of batteries the price of new batteries will be double the
original price agreed. SDX has pinned this change in price to change in the industry dynamics.
The battery industry has been facing shortage of HD-5 batteries whose demand has spiked due to
recent decision by Chinese auto-makers to use this battery in their electric cars. It has also been

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