Operations Rules News - Aggregated operations and supply chain news site

For decades, shipping lines have been making bigger and bigger vessels, driven by an expanding global appetite for electronics, clothes, toys and other goods. The growth in ship size, which sped up in recent years, often made economic sense: Bigger vessels are generally cheaper to build and operate on a per-container basis. But the largest ships can come with their own set of problems, not only for the canals and ports that have to handle them but for the companies that build them.

Toyota may have pioneered the just-in-time manufacturing strategy but when it comes to chips, its decision to stockpile what have become key components in cars goes back a decade to the Fukushima disaster. After the catastrophe severed Toyota’s supply chains on March 11, 2011, the company realized the lead-time for semiconductors was way too long to cope with devastating shocks such as natural disasters. It came up with a business continuity plan (BCP) that required suppliers to stockpile anywhere from two to six months’ worth of chips for the Japanese carmaker, depending on the time it takes from order to delivery.

The world got another warning this week about the perils of its heavy reliance on global supply chains. As a single ship ran aground in the Suez Canal, shutting down traffic in both directions, international commerce confronted a monumental traffic jam with potentially grave consequences.

Only two companies in the world make the nasopharyngeal swabs, which are used for COVID tests: Copan Diagnostics Inc. in northern Italy and a small, family-owned business in Maine called Puritan Medical Products Co. The swabs are highly specialized devices requiring precise manufacturing in proprietary machines to meet the strict regulatory requirements of hospitals. No other companies could quickly step in.

NXP Semiconductors could lose $100 million in revenue from the shutdown of its Austin chip-making operations due to last month’s winter storms. Its two Austin fabrication plants are back up and running nearly a month after they lost power during statewide outages when sub-freezing temperatures swept across the state. A number of Austin’s largest industrial power users – including NXP and Samsung –were ordered by the city to idle or shut down their operations the week of Feb.15. The semiconductor companies had power restored last month, but have not been operational for weeks following the shutdown. Samsung, which is the biggest electricity user on Austin Energy’s power grid, has not yet resumed full operations at its Austin fabrication facility – a situation that industry experts say could be costing the technology giant millions of dollars.

Pilot projects that use innovative data collection to encourage recycling and responsible waste management are underway in Argentina, India and the U.S.

Supply chain woes mounted world-wide for makers of everything from cars and clothing to home siding and medical needle containers, as the extreme Texas weather and port backlogs compounded problems for manufacturers already beset by pandemic disruptions.

Around the planet, the pandemic has disrupted trade to an extraordinary degree, driving up the cost of shipping goods and adding a fresh challenge to the global economic recovery. The virus has thrown off the choreography of moving cargo from one continent to another.

President Joe Biden signed an executive order Wednesday intended to boost manufacturing jobs by strengthening U.S. supply chains for advanced batteries, pharmaceuticals, critical minerals and semiconductors. “It’s about resilience, identifying possible points of vulnerabilities in our supply chains and making sure we have the backup alternatives or workarounds in place.”

Supply chains typically get beaten up during recessions. As sales decline, companies draw down inventories to conserve cash instead of purchasing more parts and materials. Entire pipelines of supplies get cleaned out. When demand improves, even modestly, suppliers respond with an outsize increase in production to restock empty warehouses and assembly plants. The so-called bullwhip effect ripples all along supply chains, generating unusually large orders for suppliers that are far from end customers. This time, the bullwhip effect is even more pronounced because demand for consumer products has been extraordinarily high. At the same time, companies are placing supersize orders to compensate for the extra time it takes to procure supplies from factories and freight operators constrained by global efforts to contain the coronavirus. That’s exacerbating the strain on supply chains.

Cook’s global supply chain greatly improved upon the fabrication approaches that Dell and Compaq had developed. The big PC brands often outsourced both manufacturing and significant design decisions, resulting in computers that were cheap but not distinctive. Cook’s innovation was to force Foxconn and others to adapt to the extravagant aesthetic and quality specifications demanded by Jobs and industrial design head Jony Ive. Apple engineers crafted specialized manufacturing equipment and traveled frequently to China, spending long hours not in conference rooms as their PC counterparts did but on production floors hunting for hardware refinements and bottlenecks on the line.

Contract manufacturers worked with all the big electronics companies, but Cook set Apple apart by spending big to buy up next-generation parts years in advance and striking exclusivity deals on key components to ensure Apple would get them ahead of rivals. At the same time he was obsessed with controlling Apple’s costs.

COVID-19 vaccine makers are under intense pressure to rev up production, but the scale of the challenge is unprecedented — and the speed of production is limited.

A production problem at a single factory in Belgium has delayed tens of millions of doses destined for Europe, endangering the continent’s already-slow inoculation drive and representing the greatest threat so far to Dr. Soriot’s extraordinary pledge last year to vaccinate the world—and do so for no profit. After disclosing the European problem, the drugmaker now says it has been troubleshooting similar production issues in recent weeks as far away as the U.S. and Australia.

Strong demand for gaming systems, personal computers and other electronics by a world stuck indoors has sucked up supplies of semiconductors, forcing carmakers around the world to scramble for the chips that have become as essential to mobility as gasoline or steel.

The coronavirus pandemic snarled the world’s sprawling supply chains for months, shutting factories, disrupting shipping and making it difficult for companies to get products from factories to consumers. Now, many companies are considering changing the model to avoid future product shortages and transportation delays, even if it might increase costs. Some are looking at moving production closer to home. Others are considering spreading small factories around the world instead of putting all their manufacturing in one place. There is little evidence of a big shift so far, given the costs and the uncertainty. But surveys and interviews with corporate executives show some have started to make changes and many are seriously considering them, though consultants say the moves could take several years to roll out.

The Strategic National Stockpile doesn’t have enough supplies to meet the federal government’s own targets. But in the long run, health officials don’t want to make it bigger. The future of the stockpile is about having better visibility into the supply chain to know what’s out there and what is available, and how do we respond in a way that is timely and effective. Entering into contracts with key distributors that it would pay to share information on their supply chain, manage some of the national stockpile’s supplies, and agree to assist in future emergencies.