Company A from Europe had been sourcing from midsized Factory P a specific design of screws which are used in the assembly of the final product which is being assembled in their factory. The quality, competitive price of mild steel and freight have been working well for them since last 8 years. They have a great amount of mutual trust between them and have invested together in the development of tools for their patent design. The production and quality had been consistent, and they never had a single quality issue in all these years. The owner of the business Mr. Mukul is a thorough gentleman and has never failed in any business commitment. With the steady relationship going the Company A has a good amount of dependence on the Factory P which accounts for 80% supplies of the components and the rest 20% from a local source.
The Christmas buying is looking good and the order built up is gaining tracking. The sales for the festive season contribute to about 50% of the annual sales and had been the same trend. The factory P is aware of the business cycle and is also gearing up to bank on the extra business for the peak season. The orders are placed and as per the usual practice agreed that advance payment is made to ensure a smooth transaction to comply with the meticulous planning team at the Company A.
One evening Mr. Mukul is winding up his desk after sending the weekly production report and is having the review call with the planning team. Everything sounds as planned and both the parties are relaxed that the production is aligned as per the desired dates.
The following week there is no status report which is very strange as Mr. Mukul would rather send it a day in advance if he has any commitment to meet for the weekend. The messages on Whatsapp are unread and given the time difference no alarm bells rang and the day closed at the company A. It is Monday and the business review meeting is to be done and planning team has no update as the calls are not answered and emails / Whatsapp not responded by Mr. Mukul. The entire week goes by but no response what so ever and panic start building up at the Company A. The decision is taken to send a representative from the team to India immediately to understand the reason for this deafening Silence
The rep lands in India, rushes straight to the factory and this is the first time he is not being received at the airport and on his own. Lightening is struck as the factory is shut down with a big lock on the premises and there is no sight of the guard on duty. Looking at the perplexed foreigner the cab driver understands the situation and offers helps. He parks the vehicle and walks around and to only gets back with bad news that the owner of the factory Mr. Mukul died in a car crash last weekend. With the help of the cab driver they track down the home address of Mr. Mukul to find out he is left his family behind comprising of 2 young kids 10 & 12 years old and the wife who is still inconsolable and could barely converse in the English language.
Panic hits Company A and now they are left with no option but to ask 8 times from the other supplier who cannot fulfil the demand in time and is much more expensive compared to the factory P. It turns out to be a disastrous season as production could not be completed, supplies could not be made and to add insult to injury penalties for non-fulfilment of the committed orders with loss of brand equity. It turns out that the cumulative losses are far beyond the cost saving achieved in the last 8 years.
The Sourcing agents can act as an insurance policy to give you timely feedback, evaluate the vendor in terms of fallback plan and handle the local situation in such a disastrous scenario.