Managing Risk in the Supply Chain: Case Kapton

Managing Risk in the supply chain

Case 3: Kapton

CASE BACKGROUND

As the major consumer in this case, Delta Electro-Mechanical, Inc. is a small manufacturing firm located in Fort Myers, Florida that manufactures various electronic and electro-mechanical products. Since Delta is using a strategy called 'build-to-print' which means the customer designs the product and then Delta fabricates the product according to its customer's design and requirement, often the customer will specify the exact material that is to be used in the product. Kapton, due to its excellent mechanical, thermal, and electronic properties, is such a important material that is often specified by Delta's customers. Kapton is manufactured exclusively by DuPont, one of the major suppliers in this case, thus Delta has no choice except to purchase Kapton from DuPont.

DuPont, as a global leading company, located in Ohio, only sells directly to original equipment manufacturers that consume large quantities of Kapton. For small manufacturers like Delta, customers can only purchase Kapton through a network of DuPont's authorized distributors. As the other major supplier in this case and the only direct supplier of Delta, ABC Insulating Products is such an authorized distributor of DuPont which located in Los Alamos, New Mexico. In addition to purchasing Kapton tapes and films from ABC, Delta also purchases laminated Kapton film from ABC. Since ABC does not laminate the Kapton film in its factory, it outsources this service to a supplier called Insulock Company of Round Rock which located in Texas. A recent supplier audit of ABC showed that much of its equipment is old and manually operated. Capacity also appeared to be limited. Furthermore, neither ABC nor Insulock has a formal quality assurance program or holds ISO certification. And whenever the demand of Kapton exceeds available supplies, DuPont will always first fill orders for its preferred customers and then allocate the remaining supply...