iPod battery supply constrained by a polymer producer

Posted on March 29, 2011 by aviyer2010

A Wall Street Journal article (March 29, 2011) traces supply worries for the lithium ion batteries used in the iPod to a polymer manufacturer, Kureha. The company produces PVDF – polyvinylidene flouride, a polymer that is flexible and thus ideal for lithium ion batteries. Kureha’s plant in Iwaki City was not significantly affected, but the port of Onahama is damaged and suppliers of raw material such as vinyl chloride and salt are not easily available to the plant. Kureha reports plants in the US, China and Vietnam but intellectual property (IP) considerations have caused them to keep the key technology in their Japanese plant. This story provides yet another example of third or fourth tier suppliers with significant global market share who expose the global supply chain to vulnerabilities.  Is Kureha right to be so worried about IP that production should be centralized in one location ? Should Apple and other OEMs offer to fly in product, albeit at higher cost, to keep the supply chain operational ? Should OEMs like Apple switch lithium ion batteries in the short run so keep their product supply flowing ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , | Leave a comment

Managing food prices by Adjusting package sizes

Posted on March 29, 2011 by aviyer2010

A New York Times article (March 29, 2011) describes package size adjustment as an approach to maintain prices at the grocery store.  Examples cited include whole wheat pasta packs with 13.25 ounces instead of the usual 16 ounces, baby wipes boxes with 72 instead of the usual 80 wipes, 4 lb bags of sugar instead of the usual 5 lb bags, 15 % fewer graham crackers in a pack etc. These changes are sold to customers as environmentally friendly, or lower calories or fresher (because they use more individual packaging).  Will such adjustments to manage prices survive the recession ? Is it optimal for an individual firm to indulge in such adjustments in a competitive environment ? Will customers remain brand sensitive as they figure out these changes ?  Would the manufacturer be better off decreasing the package size and the price to coordinate with consumer willingness to pay ?

Posted in Operations Management, Service Operations, Supply Chain Issues, Sustainability | Tagged , , , , , , | Leave a comment

Panic Buying or redesign to avoid potential Japan earthquake related supply disruptions

Posted on March 29, 2011 by aviyer2010

A New York Times article (March 28, 2011) describes actions being taken by manufacturers to prevent supply disruptions of their product.  Hollywood film equipment suppliers are scouring the world to build up stocks of tape, and also suggesting digital options.  A smart meter manufacturer, Echelon, is described as verifying that its 25 component suppliers are unaffected, but still planned to build up inventory of components to more than a few months of demand.  Circuit board manufacturers were redesigning boards to switch components in short supply. Will the combined frenzy of OEMs, each driven by their competitive zeal, exacerbate the shortage ? How should component manufacturers work with their customers to manage the available supply while being fair to all ? Will the adjustments made by OEMs cause some suppliers to lose clients when they come back up or are these redesigns temporary patches until supply resumes due to the rampant use of supply contracts  ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , | Leave a comment

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 ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , | Leave a comment

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 ?

Posted in Collaboration, Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , | Leave a comment

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 ?

Posted in Global Contexts, Operations Management, Service Operations, Supply Chain Issues | Tagged , , , , , | Leave a comment

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 ?

Posted in Global Contexts, Operations Management, Service Operations, Supply Chain Issues | Tagged , , , , , , | Leave a comment

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 ?

Posted in Collaboration, Operations Management, Supply Chain Issues | Tagged , , , , | Leave a comment

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 ?

Posted in Operations Management, Service Operations, Supply Chain Issues, Sustainability | Tagged , , , , | Leave a comment

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 ?

Posted in Global Contexts, Operations Management, Service Operations, Supply Chain Issues, Sustainability | Tagged , , , , , , , | Leave a comment