ASHMARK CORPORATION: DEALING WITH A SUPPLY DISRUPTION Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

ASHMARK CORPORATION: DEALING WITH A SUPPLY DISRUPTION Case Solution

1. Introduction:

Ashmark a Tier 1 supplier:

Ashmark was a supplier of complex, emission and safety-critical engine component and had built a reputation in the market for having high quality and high technology solutions. Ashmark had accounted global sales of several billion dollars. Ashmark was major Tier 1 automotive supplier in the industry. It had provided engine and machine to several well-known OEM customers. The company had a profitable business with a large growing market and acquired a greater market share. Ashmark increased its efficiency standards with a large global market production facility. Many major OEMs were dependent on the Tier 1 firms such as Ashmark due to its technical proficiency and efficient manufacturing capabilities. In addition, the OEMs also depended on Tier 1 firms to run the Tier 11 and Tier 111 supply base.

Red Star a Tier 11 Supplier:

Red Tier was a foundry used a traditional casting process but had changed to sinister-looking machinery to speed production process. Red Star’s workers transported a large amount of the molten aluminum by hand in large ladles which had created a dangerous, hot and dusty environment for the workers. On the other hand, Red Star owned the molding machines, conveyors and other tools and equipments, whereas Ashmark owned the tooling which comprises of the molds and core patterns for each specific part.

It had established effective operating practices and expanded its capabilities and resources to better serve the needs of Ashmark.Red Star had expanded its business for finishing machining in order to provide complete parts instead of only making castings, which also enabled Ashmark to stop its in-house finish machining. In addition, this also facilitated Ashmark to give its focus on higher-value-added machining, design and assembly while leaving the less value added part of its business.Moreover, prior to Red Star’s bankruptcy, Ashmark had sourced few of its higher volume products from the other suppliers located in the low cost countries, which left Red Star with higher unit of lower volume products.

Tilden,then ew supply chain manager at Ashmark, was shocked due to the poor sales of the company that were less than $10 million per year, which were far less than he expected. Red Start had supplied more than 75% components for Ashmark’s products and consequently 90% of the Red Star businesses were represented by Ashmark. Red Star had competitive prices as compared to local and global competitors due to which Ashmark didn’t want Red Star to increase its prices. Despite this, the previous supply chain manager had negotiated with Red Star to further decrease the prices which could help him to achieve the cost reduction goal. This decrease in the prices had contributed to create a complex situation for Red Star hence increased the financial pressure.

Dealing with a supply disruption Case Solution

Louden, the owner of Red Star, had fired 18 accountants before declaring bankruptcy. Red Star had faced a difficult situation and had months of unpaid invoices which came out later by the time Tilden joined Ashmark. Furthermore, Red Star as a private firm didn’t give any sign nor an indication of bankruptcy which made it tricky for Ashmark and other OEMs to recognize the problem. Some banks also granted a loan of several billion dollars to Red Star for the purpose to support its operation and to enable Red Star to expand its building and install more finish machining capacity.............

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