Boston University Ashmark Diversifies Supply Chain Risks Case Study Questions
This case study illustrates the management of external suppliers at an OEM and associated risks.
is unique in that it takes place in the bowels of a global supply chain and is presented from the point of view of a Tier I supplier. Prior to reading the case, be sure to familiarize yourself with the definition of an OEM, and the meaning of Tier I, II, and III suppliers.
Working in teams, provide one response per team to each of the following questions. Be sure to follow APA guidelines included on the course Blackboard site.
Address the following questions (in at least one case, find an article that supports your statements):
List two reasons why Red Star was a good supplier.
List two reasons why Red Star was not a good supplier.
What were two key “issues” with the Red Star-Ashmark relationship that led to the situation presented in the case? For each issue cited, what “red flag” should have caused concern at Ashmark.
Discuss either an advantage or disadvantage of Ashmark using multiple suppliers for the low volume parts made by Red Star.
List an action taken by Ashmark immediately after the bankruptcy and discuss its effectiveness.
Describe a future action that could be taken at Ashmark.
Case Study #3: Ashmark Corporation: Dealing with Supply Disruption, by Bent B. Moritz andChristopher W. Craighead Ivey Publishing, Case W15358 2015This case study illustrates the management of external suppliers at an OEM and associated risks.is unique in that it takes place in the bowels of a global supply chain and is presented from the point of view of a Tier I supplier. Prior to reading the case, be sure to familiarize yourself with the definition of an OEM, and the meaning of Tier I, II, and III suppliers.Working in teams, provide one response per team to each of the following questions. Be sure to follow APA guidelines included on the course Blackboard site.Address the following questions (in at least one case, find an article that supports your statements):List two reasons why Red Star was a good supplier.List two reasons why Red Star was not a good supplier.What were two key “issues” with the Red Star-Ashmark relationship that led to the situation presented in the case? For each issue cited, what “red flag” should have caused concern at Ashmark.Discuss either an advantage or disadvantage of Ashmark using multiple suppliers for the low volume parts made by Red Star.List an action taken by Ashmark immediately after the bankruptcy and discuss its effectiveness.Describe a future action that could be taken at Ashmark.Your team should submit one Word file, with a title page containing your names and the case study name.
1 List two reasons why Red Star was a good supplier.Red Star and Ashmark have had a productive relationship for decades and until the Chapter 7 bankruptcy filings, Red Star was a generally advantageous supplier to Ashmark. Two of the key reasons the Ashmark-Red Star relationship was able to prosper so long was Red Star’s ability to produce quality products at an affordable price and its willingness to adapt its capacity to fit Ashmark’s corporate strategy. Both attributes are a byproduct of their co-dependences on one another and can be viewed as a double-edged blade. While Red Star was a superb supplier for decades regarding Ashmark’s bottom line, their demise made it evident they were not a great supplier in terms of enterprise risk management.Red Star produced extremely labor-intensive cast aluminum products to unique specifications using very specialized manufacturing equipment (Moritz 2015). This is a task ideal for outsourcing due to the high levels of risk and the unique skillset required. Since Ashmark made up more than 90% of Red Star’s business, when Ashmark made a demand, Red Star had trouble countering due to their compromising position. This allowed Ashmark to continually require price reductions to levels far below the rest of the industry. Even when new suppliers from competitive markets like Mexico, Brazil, and China were considered, Red Star’s competitive prices were unbeatable (Moritz 2015). Red Star did not realize their mutual dependence on each other and their ability to demand higher prices for their products until it was too late.As previously mentioned, 90% of Red Star’s business relied on Ashmark. Consequently, when Ashmark requested an additional stage of product refining to be overseen, Red Star was willing and eager to have an opportunity for continued business development and appease their biggest customer. Several years before Red Star’s demise they added machinery for an additional level of finishing on their cast aluminum products. This furthered their reliance on each other. In the short term, it allowed Ashmark to focus on higher value-added processes and left the “less important” work to Tier II suppliers like Red Star (Moritz 2015).
2 List two reasons why Red Star was not a good supplier. Areas that show Red Star as not being a ‘good supplier’ is evidenced by their financial struggles and lack of leadership. When sourcing suppliers and conducting due diligence, a supplier’s financial records including historical performance and future business projections are commonly reviewed by a buyer or sourcer. In addition, random audits and vendor risk assessments are often recommended to be conducted. Red Star, being a privately held company, did not have financial records that were open to the public. The lack of information and transparency led to a lack of apparent indicators of financial distress; therefore, Ashmark, nor any other company, bank, or firm, outside of Red Star, would have had the ability to realize that there was a financial risk when relying on Red Star as a supplier, or in the case of the bank, a customer.The article indicates that Red Star’s leadership lacked a sense of urgency and control. According to Moritz and Craighead (2015), Barry Louden, the president of Red Star, tended to be more hands-on and “happiest when he was on the factory floor, fixing a machine or solving a production issue” (p. 3). This deterred him from recognizing any potential signs of risk and red flags as he was more focused on the ground level rather than the top-level. To elaborate, Louden failed to realize the extremities of Red Star’s financial struggles that included piles of unpaid invoices, staffing issues that included the termination of his accountant, and lacked a sense of urgency and control in creating strategies for improvement to mitigate risk. Red Star’s leadership presents nonchalant leadership characteristics that posed a threat to strategies for improvement which were critical and crucial to the life of the business. 5 List an action taken by Ashmark immediately after the bankruptcy and discuss its effectiveness. As the Fate of Red Star became blatantly apparent to Scott Tilden, the supply chain manager for Ashmark, he realized there was no formal contingency plan for the inevitable situation. Tilden immediately began devising a plan for this transition. The key elements of the plan consisted of identifying and qualifying replacement suppliers, cataloging, transporting, and storing the equipment that was owned by Ashmark, and stockpiling the low production run products that would be most difficult to get online at a new facility. Many of these aspects were beneficial and assisted in streamlining the transition and reassuring the OEM customers that Ashmark was doing everything in its power to mitigate the effects of the unfortunate situation. Some of the tools owned by Ashmark had already been successfully transported and were operational at the time of Red Star’s announcement. Additionally, the qualification process for new suppliers had already begun and was atypically comprehensive for the purpose of mitigating the potential of future disruptions. While some characteristics of the contingency plan were underway rather quickly the totality of the plan would take a minimum of 6 months. The reasons for the extended timeline were threefold. The plan was not developed until an issue was apparently causing the recovery time to be longer than if this possibility was considered earlier. “Red Star provided components for more than 75% of Ashmark’s products (Moritz 2015)” resulting in several suppliers now being needed as a replacement to the one, further complicating the logistics of the supply chain. Some of the products were very specialized and only produced in extremely small batches. It will be very difficult to find suppliers with the capabilities to make these parts and the willingness to take on a contract with very small and inconsistent order volumes. In the six months to a year during this transition period, there will be many late orders, frustrated customers, and angry executives. Once Ashmark endures this transition, the longevity of their supply chain and the company will be much stronger and resilient. “Using a single source is not an effective approach under many situations. (Berger 2006) Yes, prices will likely be higher than they were with Red Star but only up to a sustainable market price.