Operations Due Diligence: An M&A Guide for Investors and Business

PRODUCT DEVELOPMENT AND PRODUCTION RISKS

In 1999 the explosive growth in the use of cell phones created a large production risk for a business I represented. The business was developing a product that used electronic components similar to those used in the manufacture of cell phones. Since the phone manufacturers were buying the components by the millions, our order by contrast was very small to our suppliers, and we risked being severely backlogged by the supplier for over a year. Because we recognized the risk early, we were able to implement a mitigation plan by which we used alternate components that were the same value but were slightly larger in their physical size than the original design. The alternate components were too large to be ...