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Weak Supply Contract Case Study 

The Challenge 
Our client a market leader and well-known brand had the supply of a key raw material interrupted. This was caused by a mechanical failure in manufacturing at theiir supplier. Although our client were not the dominant user of this raw material they assumed, as they were a leading brand and the product was required only in small volumes, they would not experience supply problems. 
 
The supplier of the raw material had suffered a 'single point of failure', which had not been identified earlier. The business interruption drastically reduced output and subsequently rationed the supply of the raw material. The dominant competitors in the market, upon hearing of the potential rationing, enforced their contractual obligations, secured their supply and absorbed all available material. 
The Impact 
The shortage of the material reduced our client's by 90% and would have been catastrophic for the manufacturing site, if production had stopped 100%. 
Significant reputational damage with leading customers. 
Root Cause & Solution 
 
The immediate action was for the Supply Chain lead to contact the dominant competitors asking if they will release some of the material allocated to them, understanding the catastrophic impact of no raw material they released product. 
 
ASM was engaged to do a detailed post-mortem of the situation, using their online assessment they rapidly identified no formal assessment had been performed to determine any single point of failure (SPOF) within the supply base. In addition, the supply contract was weak in that there was no clause to ensure supply or a pro-rata in the case of restricted supply. 
 
ASM facilitated a three-way agreement with the supplier and other users of the product to address the SPOF and allocation of supply in such serious supply restrictions. In addition, ASM performed a detailed analysis of the supply base to identify other risks and remedial action was taken. 
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