Butler systems is the world’s leading supplier of computer support systems and the largest supplier of precision air-conditioning and power protection systems. The matter of concern for Butler system is their inventory of HD-5 batteries, which has gone down from a normal 90-day supply to 20-day supply. A sudden influx of consumer demand has caused a shortage problem in the battery industry due to which SDX chemicals, the current supplier of Butler system for HD-5 batteries has violated certain agreements in their contract. Due to miscalculation of consumer demand and unforeseen events, SDX was unable to deliver their goods in time and insisted to double their current agreement price with Butler Systems and declare that the current contract is null and void.
Sue SDX chemicals for breach of contract and find a new supplier
Butler systems can sue SDX chemicals for failing to perform in accordance with the contract agreement, and shall ask to compensate for damages.
Now if Butler sues SDX Chemicals, it must find a new supplier throughout the process to continue its operations.
Suing SDX chemicals and finding a new supplier will incur costs to Butler systems.
Find new supplier and do not sue SDX Chemicals
As discussed in the case study, the selection of Butler System’s battery supplier is done through the competitive-bidding process, it may quickly turn to suppliers who have joined.
If Butler will not sue SDX for the breach of contract, butler will still have to find a new supplier to be able to continue its operations. However, the cost to be incurred intended for filling a case against SDX will not pursue.
With this alternative, Butler will save resources because it will only incur the costs for looking for a new supplier.
Negotiate with SDX chemicals
Butler must remind SDX chemicals about the contract between them and negotiate about the price, if it is the prime issue that SDX is concerned.
If negotiation will pursue,