Butler Systems Case Study

This case study examines the challenges faced by Butler Systems due to a sudden increase in the price of HD-5 batteries, a crucial component in their EPS products. The company's contract with SD5, their primary supplier, became void, and the supplier doubled the price due to increased demand from Chinese auto-manufacturers. The case highlights the company's inadequate inventory levels (only 20 days instead of the recommended 90 days) and lack of attention to external market changes. The analysis suggests immediate actions to replenish inventory and long-term strategies to diversify suppliers and secure long-term contracts to mitigate future risks. The study emphasizes the importance of proactive market monitoring and robust internal operational management in maintaining a stable supply chain.

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Butler Systems
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BUTLER SYSTEMS CASE STUDY 1
The company, Butler Systems, has deal with SDX for the good quality battery to the company.
The Butler Systems produces EPS for the customers whose primary components are HD-5
battery that are procured from the external party. The suppliers for HD-5 are selected through the
bid. The Butler Systems has always tried to deal with the suppliers honestly and under the pre-
defined rules, regulations, statements mentioned in the contract.
The current contract of the company was with SD5. The recent development in the Chinese
market concerning the demand of HD5 battery has changed the orientation of the suppliers from
Butler Systems to that of the auto-manufacturers in China. Moreover, one fine morning the vice
president of the came to realize the contract that the current contract has gone void and the
suppliers are willing to double the contract price considering the increased demand of the
battery.
The vice president also came to know that the company has currently only 20 days of inventory
for batteries instead of suggested 90 days.
As the VP of operations, I would say that the lack of attention to the external market and the
change in the orientation of the suppliers are the major reason (Lings, 1990). If my company had
regularly assessed the market condition for the variables that can impact the battery price then
this situation would not have come up. Moreover, the internal operational management does not
seem up to the mark as the lack of inventory and new contract might stall the company’s sale
(Bowersox et al, 2002).
At present, I will take two levels of actions for the company. The first action will be immediate
and the second will be long term. In the immediate action, my response will be to fill the
inventory for the next 90 days so that the company’s production keeps going. As I failed to

BUTLER SYSTEMS CASE STUDY 2
manage things properly, therefore the company has to bear the grunt and shell out money to
purchase costly batteries on the temporary basis to keep the production going.
The purchase of the batteries to fill the inventory for the next 90 days will allow me some buffer
time to find out suitable battery supplier.
The buying organization has significant role in selecting and qualifying the potential suppliers
(Wagner and Bode, 2014). As per the case, it can be stated that the Butler Systems had always
upper hand in the deals. Even the clauses in the contracts show that the major portion of loss will
be being handled by the suppliers if any unfavorable event takes place. This shows that till now,
the power was in the hand of buyer.
However, due to the change in the circumstances the power shift can be observed - from the
buyer to the suppliers. The suppliers became powerful due to the increase in the demand of their
batteries. At this point, the company has to follow what suppliers are saying. However, the
growth in the Chinese auto-parts is still an speculation and the company has the opportunity to
finalize strong deal with few suitable suppliers for the coming years. At this point, it is suggested
that company finalize the supply deal with three suppliers consecutively with around 33% of
supply share to each of them. The supply period should be five to 10 years so that the growth in
the Chinese auto-manufacturing will have no impact on the battery supply rates.
The learning from this case is significant. It helped in understanding that the company should
have never left monitoring the external market and the challenges that could impact the supply of
the materials for its final product. Moreover, the internal processes should always be strong,
which was not with only 20 days of inventory.

BUTLER SYSTEMS CASE STUDY 3
References
Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2002). Supply chain logistics management (Vol.
2). New York, NY: McGraw-Hill.
Lings, I. N. (1999). Balancing internal and external market orientations. Journal of Marketing
Management, 15(4), 239-263.
Wagner, S. M., & Bode, C. (2014). Supplier relationship-specific investments and the role of
safeguards for supplier innovation sharing. Journal of Operations Management, 32(3), 65-78.