Paint additive shortage from Japanese supplier impacts car colors

Posted on March 27, 2011 by aviyer2010

A Wall Street Journal article (March 26, 2011) describes a shortage of an additive, Xirallic, made of coated glass flakes, and by a Merck plant in Japan.  This additive is shipped to paint makers in Germany and then to car manufacturers.  The Japanese tsunami  impacted this plant, located close to the earthquake area and with no power, water or utilities. The impact is that Ford has canceled production of cars with the red and tuxedo black color, while Chrysler has canceled 1o colors.  Does this disruption show the importance of third and fourth tier manufacturers  with large market shares ? Will the decreased colors impact overall sales or will it result in sales being shifted to other colors ? Should retail prices of these colors be increased so that only those customers who really want the specific colors are provided the cars ?

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Japanese Tiers 2 and 3 supplier impact of the tsunami

Posted on March 26, 2011 by aviyer2010

A Wall Street Journal story (March 26, 2011) describes production shortages at Renesas Electronics, a divison of NEC, and a supplier of chips to intermediates like Hitachi , Bosch and Siemens, who in turn create auto components to control engines, transmissions etc.  The company, which accounts for 41 % of chips ordered by Japanese auto OEMs, reports that production is at 50 % of normal rates.  Power shortages, the result of the disabled nuclear plants owned by Tokyo Electric Power Co, broken walls in facilities, and raw material supply from the company’s suppliers, all contribute to this global ripple effect.  The company does have many plant locations, so adjustments in production rates may cushion the impact. How should production rampup and parts allocation be managed – jointly across auto makers or by this supplier or by the component manufacturers ? At what point might the downstream impacted companies demand that the layouts and other details be shared with chip manufacturers so that the OEM impacts can be decreased ? Some suggest that this disruption exposes the impact of Just-In-Time invemtory, but could it increase the incentives for collaboration and restoration of supply ?

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Cargo Ships and containers impact of Japan earthquake and tsunami

Posted on March 26, 2011 by aviyer2010

A New York Times article (March 26, 2011) describes decisions made by cargo ships, ship owners of leased ships and container owners to avoid routes and ports that might result in exposure to radioactivity.  Ships that test positive for radioactive materials would face inspections for many years afterward – thus increasing risk aversion of ship owners. As a result, many shippers are cancelling calls to ports such as Tokyo, and routing their ships to Osaka with overland truck routing to destinations near Tokyo. Container owners in turn are requiring recipients to take ownership of the containers – as any exposure would cause delays to ships carrying them.  The global impact of diversion of 40 % of Japan’s cargo from Tokyo to other ports, both for imports and exports to Japan is potentially significant and may last a long time – the radioactivity of the plant is thus a more significant deterrent to logistics than the earthquake.  What might be reasonable alternatives in the presence of such disruptions – if containers can only go in but not be returned, then should an alternative to containers be considered, even if not ideal from an handling perspective ? How will the need to truck product from Osaka to Tokyo impact delivery lead times – could increased goods laden trains enable smoother flow of product ? How should the much needed food import requirements in Japan be satisfied ?

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Airflow Sensor shortage from Japanese supplier and auto OEM impact

Posted on March 25, 2011 by aviyer2010

A Wall Street Journal article (March 24, 2011) describes the supply chain impact of part shortages from a Japanese company, Hitachi Automotive, that has a 60 % world market share of mass airflow sensors that measure airflow to car engines. GM, Toyota and Peugeot are car OEMs already affected by this supply glitch but Ford, Nissan and Volkswagen may also be affected soon.  But global supply chain structures and production allocation worldwide means that US production may be unaffected for the most part. In addition, increased US production and exports may provide global demand relief.  The existence of other suppliers, such as Bosch and Siemens, may also permit some relief, if the part designs are fairly standard and modular.  Does this disaster and the associated supply glitches highlight the need to carefully monitor third and fourth tier supply capacity utilization and concentration int he industry ? Would part commonality and clear separation of hardware vs software controls permit greater supply chain flexibility to handle such disruptions ? How should the industry coordinate to ration supply across competing OEMs ?

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Auto Supply Chain Parts Shortages and OEM Impacts

Posted on March 24, 2011 by aviyer2010

A Wall Street Journal article (March 22, 2011) describes parts shortages across the auto supply chain for chips, sensors, forged parts etc. In some cases, past auto demand order drops have resulted in supplier capacity being diverted (for chips) from auto to consumer electronics.  The Japanese earthquake and its aftermath has further stressed parts supplies and has resulted in production shutdowns at Ford and GM in the US and Toyota and Honda in Japan.  One upside is the increased detail of information sharing regardig production schedules and sales forecasts between GM and its suppliers, in an effort to synchronize shipments.  Given the tight supplier capacity, will suppliers see relief in the form of higher prices and will customer retail prices increase ? Will supply capacity shortages result in increased part commonality across the industry ? Will imported cars from other country locations with extra capacity satisfy customer demand ?

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Efficient Bagging and Supervalu competitiveness

Posted on March 24, 2011 by aviyer2010

A Wall Street Journal article (March 22, 2011) describes rules at Supervalu to increase bagging efficiency and thus decrease the more than 1.5 billion plastic and paper bags used across stores. The articles reports that a projected 5 % savings in bags translates to a $ 4 to $ 6 million annual savings.  These savings can then be used to lower prices for bread, frozen shrimp etc, thus making increasing the chain’s lagging competitiveness as customers move to discount stores.  The impact of better packing will potentially increase bag weights or come from elimination of bags for milk or other items in large containers with handles.  Will the customer satisfaction impact from heavier bags be outweighed by pricing competitiveness ? Should customers be encouraged to eliminate bags altogether by appealing to green benefits ? In general, what role can changes in customer preferences play in improving retailer costs and benefiting customers ?

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Wal-Mart Assortment, gas prices and one stop shopping

Posted on March 21, 2011 by aviyer2010

A Wall Street Journal article (March 21, 2011) describes adjustments to Wal-Mart’s strategies to increase the number of shoppers who do one-stop shopping at the store. Wal-Mart’s US chief, William Simon, claims that as gas prices increase, shoppers will be more inclined to do one stop shopping. But WalMart’s attempts to prune its product assortment and reduce restocking to save store labor costs have impact in stock levels for merchandise and annoyed suppliers. The store plans to make assortment adjustements, decrease items that may improve appearance but increase costs and not be valued and also rethink sustainability initiatives that were not cost effective for the store and consumer.  Is this a case of retail assortment being cut too far comapred to the optimal for the supply chain ? Will buy online and pick up at stores be a channel to revert sales decline ? Will the surging commodity prices make big retailers with larger spends more attractive to consumers because of their ability to leverage global supply chains and pool risk ?

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Japan Tsunami and Supply Chain Resilience

Posted on March 21, 2011 by aviyer2010

A New York Times article (March 19, 2011) descibes management of the global supply chain impact of the Japanese tsunami and earthquake and likens it to triage in a hospital.  Apple is quoted as having buffer inventory to compensate for the lead time for 30 % of flash memory chips sourced from Toshiba plants in Japan, but other articles claim that Apple will continue to receive priority supply due to its large volume commitments and prepayment for supply from some vendors.  In addition, with supply sources spread throughout the world – both for supplier plants and supply, global supply chains my be more resilient.  One former Apple manager is quoted as suggesting that the smaller parts sich as microphones, sensors and batteries may be the problem. Others suggest that raw material supply sources – such as damaged chemical plants may have a ripple effect.  Given the evolving disaster – from earthquakes to tsunamis to radiation related shutdowns and port impacts – what aspect of the disaster will be the bottleneck – input supply to suppliers or output flows from supplier plants ? Will shifting of production to other plants, in the US and elsewhere, dampen the US impact of this disaster ? Will innovation driven companies push back their new product introductions to compensate ?

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Recyclebank and consumer incentives to recycle

Posted on March 19, 2011 by aviyer2010

A Wall Street Journal article (March 17, 2011) describes the operation of Recyclebank. The company serves as an interface between consumers and their municipalities by weighing garbage and providing points that can be redeemed by consumers (around $ 150 per year on average) based on their recycle rates.  Municipalities see an impact of 20 to 200 % change in the recycling rates and thus reduced landfill costs – some of these savings are used to pay Recyclebank.  Branded consumer product companies in turn work with the company to reach consumers who are environmentally conscious.  This all makes for an incentive based recycling supply chain. Will such recycling schemes extend beyond household recycling to more proactive consumption elimination ? Will energy companies find a similar scheme to incent consumers to shut off unwanted lights or power down equipment ? Can such schemes incent car drivers to reduce emissions by shutting of engines during idling periods ? How will the supply chain be impacted by such efforts ?

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Brick and Mortar Retailers urge sales tax collection by etailers

Posted on March 18, 2011 by aviyer2010

A Wall Street Journal article (March 17, 2011) describes a move by retailers such as WalMart and Target to force internet merchants to collect sales tax – a much needed source of revenue for struggling states. The move has resulted in Amazon de-listing their affiliates in Illinois and canceling a distribution warehouse in Texas.  A sample of prices for products (branded camera, TV and playstation) suggest that the price advantage for Amazon.com for those  products is the sales tax not collected.  Some states claim that if Amazon.com has a warehouse and the product flows through, then local sales taxes should be collected.  Is it reasonable for etailers to compete based on sales tax not collected (thus leaving the responsibility to consumers during their income tax filings) ? Should ecommerce retailers be forced to collect local sales taxes based on the flow of their product through distribution centers ? What will be the effective source of competitive advantage for etailers i.e., will the consolidation benefits from shipping from the warehouse be sufficient ?

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