OM in the News: Complexity of the African Supply Chain

While the aftermath of the Japanese earthquake is causing many companies to worry about the auto and electronics supply chains, a different pall is hanging over a supply chain in the Democratic Republic of the Congo. The substance in question is a rare earth metal called tantalum, and the Congo is the world’s 3rd largest producer of this ingredient key to smartphones, tablets, and computers. The Wall Street Journal (April 27,2011) reports that Intel, AT&T, H-P, and other big technology companies are caught in a new SEC rule that requires them to report if  their supply chain includes tantalum coming  from war-torn regions of Africa. Key minerals, according to the law, cannot come from the Congo’s rebel-controlled mines.

I have to admit that I did not know much about such “rare earths” until we blogged about neodymium . At that time China cut its exports of that metal by 3/4 to save supplies for its own electronics manufacturers. China makes 97% of the world’s neodymium, dysprosium, and didymium.

The complex African supply chain means that US companies don’t really know who they are buying from. They purchase finished products through suppliers that source from smelters,which in turn buy from traders on the ground. Intel, Dell, TriQuint, AT&T, and Microsoft are all scrambling to work with suppliers to track the minerals. AT&T, hoping for an exemption,  estimates it would have to wade through 35 manufacturers, 60-80 parts suppliers, 1,060 commodity-part suppliers, and an unknown number of brokers and distributors to get to the mine that is the source of its tantalum.

Just as Ford recently discovered that a 3rd tier supplier in Japan was the sole source for 3 paint pigments for its autos, manufacturers around the world are finding that complex supply chains are an OM function that needs to be monitored and managed.

Discussion questions:

1. Why is it so difficult to manage global supply chains such as this one in the Congo?

2. What alternatives do manufacturers have in replacing rare earth suppliers?