Spot market slip up: Steel casting manufacturer recalls automotive parts

In this product recall case study, we explore how a steel casting manufacturer opted to use the spot market to fill a product shortage but suffered severe consequences as the supplier had not been vetted or verified.

Manufacturers often have a complicated production process involving multiple materials and components incorporated into a finished product. Further issues can arise where the manufacturer’s product is a small component, part of a far more complex product. Product quality, supply issues, production breakdown and human errors can all cause complications in a supply chain. Not only will this result in delayed production internally, but it will also have a knock on effect with connected suppliers.

In this product recall case study, we explore how a steel casting manufacturer opted to use the spot market to fill a product shortage but suffered severe consequences as the supplier had not been vetted or verified.

The insured, a privately-owned steel casting manufacturer with a portfolio of standard castings and custom-made products, specialises in carbon steel flanges. This sector of its business has an annual revenue of USD 25,000,000 and makes up 40 percent of the overall company revenue. The flanges are used in consumer products such as automobiles, fridges and HVAC units.

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The companies and circumstances in this case study are fictional, but the scenarios are realistic and reasonable based on our experience.