Handling Sourcing Issues in Emerging Industries: Ecostrat's Biomass Supply Dilemma

Abstract

This case study covers the dilemma Pat Liew, Director of Business Development, experienced in 2014 when Ecostrat's first shipment of woodchips to one of its key customers was rejected because it did not fit the boiler. The customer, a particular location of a Fortune 500 corporation in North America, acquired and installed a woodchip boiler as part of its sustainability program. The customer sent out RFQs to supply whole tree chips (WTC), and Ecostrat won the long-term contract. As a biomass aggregator, Ecostrat made deals with local WTC providers to regularly replenish the customer's WTC stock. Things got complicated when the customer figured out that the specifications of the WTC in their region were significantly different from what the boiler provider recommended. The biomass industry was not mature enough, and the definition of WTC varied from region to region. Unaware of this complication, the customer did not mention detailed specifications in its RFQ and ended up receiving incompatible material. Liew had to decide whether to take the easy exit and cancel a valuable sales contract, or to put some effort into working out alternative solutions for the customer.

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