Ashmark Corporation: Dealing with a Supply Disruption

“Ashmark Corporation: Dealing with a Supply Disruption”

Red Star and Ashmark have had difficulties and challenges operating and meeting their objectives. Red Star is the leading supplier of Ashmark Corporation. According to Scott Tilden, the disruption of supply from Red Star is the cause of inventory shortage, production, and other related challenges. The Red Star was had been declared bankrupt according to Chapter 7 of corporations regulations and ceased all its operations. Original Equipment Manufacturer (OEM) customers were worried about Ashmark’s ability to deliver diesel engines that were vital components in their routine operations.

On the side of Poshmark, the supply chain manager, Scott Tilden, was met with bad news of Jim Davis, the key project manager, resignation due to work-related pressure. Jim had complaints of many travels, work pressure, and declining health. The exit of Jim exacerbated the already bad situation at Ashmark Corporation. Though 200 units of production were an insignificant percentage of the business’s total monthly shipments (only 1%), the loss of Davis was mounting pressure on management.

The Poshmark-Red Star relationship struggles notwithstanding, the new supplier engaged experienced delays in the testing and qualification process besides the trouble of bringing tooling online. Additionally, the modest inventory built-up had been diminished before bankruptcy. Tilden’s fears and anxiety about the deteriorating state of the company made him regret why he decided to join Ashmark about eight months ago.

The OEMs have a role to play before and after disruption to minimize the effect of the risk. First, as an indirect customer of Red Star, it is of great importance for OEMs to monitor the progress of its progress and operations. A business should be concerned with primary and secondary suppliers. The effects will be felt across the chain if the supply chain is interfered with. For instance, OEMs were supposed to take an interest in Louden’s acts of firing Red Star’s accountant and the continued high turnover rate of employees at Ashmark Corporation.

OEMs have to keep in check their suppliers’ debt and liquidity capacity. Red Star had several obligations with local banks. Red Star had two small business admin credits, and later it was loaned several million dollars to add more finish machining and expand its building. OEMs were supposed to hear an alarming from the creditors who had begun calling for recovery, and at the same time, its customers were seeking new suppliers. OEMs were supposed to seek new suppliers in earnest before Red Star was held in ransom and its business halted. Another signal was communicated by customers who pulled their tools and terminated business engagements with Red Star.

After the firm is closed due to chapter 7 bankruptcy, the OEMs should float their tenders afresh. The purpose of tendering is to expand the portfolio of suppliers and evaluate them to know which firm supplies quality parts at a competitive price without compromising delivery order quantities and lead-time. Though Ashmark has not closed down its operations, it might be difficult for it to meet the customer demands without establishing another reliable supplier to replace Red Star, thus, the need for OEMs to cast their nets on deeper waters.

 

According to Tilden, a couple of actions can be undertaken by Ashmark Corporation immediately after disruption of the supply in the future. First, Tilden proposed Ashmark’s active management at Red Star to optimize and maximize its output for a long time as it recovers from bankruptcy. Tilden was explicitly critical in addressing the issues facing Red Star. He has long experience, and his input would help resolve the problem quickly.

Secondly, it was necessary for Ashmark to source another new supplier to stand in the gap occasioned by the closure of Red Star. It would be weird for Ashmark to stop all its productions simply because the leading supplier of many parts had closed down. Therefore, it is prudent for Tilden to source out new suppliers even if they do not meet the Red Star’s quality. Thirdly, Ashmark should duplicate the highest-volume tooling for production at a different source. Tilden confessed the presence of Davis and another key project manager at Red Star executing a withdrawal plan for specialized production tooling of Poshmark. The tooling that was not in immediate production at Red Star was kept in a rented warehouse nearby the site.

Additionally, Ashmark had foreseen the chapter 7 bankruptcy and termination of Red Star and built up a parts inventory that would last them for a substantial time after production is halted. The employees working in Red Star from Ashmark had made arrangements organized, labeled, and documented all the tooling for instant shipment whenever they would be needed. As reported by Tilden, a myriad of tools had successfully moved to a new supplier in anticipation of Chapter 7 outcomes. Other tools were in truck to a new supplier from Red Star.

The marketing team should be very vigilant of the market trends to inform the production section of the changing demands. In light of the shortage of production inputs, it is vital for the business to produce parts that are on-demand to avoid pressure from the OEM customers while at the same time maintaining their loyalty to Poshmark. When the main supplier is bankrupt or has closed down, it is apparently significant for the management and operations to focus on the demand of the main and frequent customers to take advantage of high profits realizable from sales made to them.

 

For every failure, there must be a cause if not a composition of many contributing factors. In the case of Red Star, there are a couple of signals that showed that it was on the verge of bankruptcy and liquidation. First and foremost, Red Star used centuries old casting process (xxxxp. 2). Although, the tier II supplier complimented the process with sinister-looking machinery for fast production, it was lagging behind the industry average on technology.

As evidenced by  xxxxx, p. 2), at the tier II supplier, employees used to transport much of molten aluminum in large ladles by hand. The operation created a hot, loud, dusty and dangerous environment. Despite Red Star owning production equipment like conveyors, molding machines, and others, it lacked critical tooling. It depended on Ashmark’s expensive specific parts tools. This is an implication that Red Star failed to make itself a self-sustenance production plant that does not have to operate on the mercies of Ashmark Corporation.

Lastly, Red Star dug its own grave by specializing on lower value-added repetitive finish machining so as fit in Ashmark’s strategy. The focus for the Ashmark Corporation was to high value-added design, machining, and assembly. The rest that the company considered less significant (low value-added repetitive finish machining) was left to Red Star. This strategy was detrimental to the tier II Company because Ashmark outsourced a higher-volume products elsewhere from different suppliers. Red Star erred by fashioning and specializing itself to serve the demands of Ashmark Corporation as its only customer. In business, production, marketing, operations, and sales are dynamic, and thus, management ought to cushion the company from collapsing or being rendered unnecessary by the emerging trends.

 

Strategies to mitigate disruption risks;

1. Avoid over-reliance on one supplier.
2. Always have stand-by alternative suppliers in case the contracted firm fails to deliver on time.
3. Build up inventory such that it last long enough when disruption occurs to avoid risks of losing customers or delayed delivery of clients’ demands.
4. Avoid over-reliance on one employer to settle a crisis.
5. Build the capacity of other employees for them to synergize each other.
6. Employer experienced managers and leaders of departments who have rich history of being in the same positions they are absorbed.

PROS of the above strategies:

1. When a supplier fails or is rendered bankrupt, the customer can source for delivery from alternative dealers without occasioning any delays in production or customer order quantities.
2. Expanded inventory keeps the company operational while sourcing for another reliable supplier.
3. Experienced employees and heads of units offer real-time solutions based on their expertise and skills.
4. Capacity building of employees help the company continue its routine operations even when one of them is unwell or resigns. In big reputable organizations, no worker is indispensable.

CONS of the strategies”

1. Suppliers may feel non-committal on orders given and fail to prioritize on the requests of the firms. In some instances, if another customer places an urgent order, yours may be put pending to service others first.
2. Buildup of inventory requires large size of warehouse, and hence, an implication of high cost expenditure setting up large stores.
3. Alternative employees’ skills reduces workers performance, and at times, they may exit and join other firms where they feel more valued and regarded. Human capital is emotional and want to be treated special and have job security by virtue of their uniqueness of their skills and experience.