Category: Supplement 7

Content related to supplement 7

OM in the News: The Ongoing Supply Chain Squeeze

Across the world, manufacturers of everything from cupboards to cars or computers are still grappling with a logistics crunch that has disrupted supplies of essential inputs, threatening the post-pandemic economic rebound and boosting inflation, reports The Financial Times (Sept.7, 2021). 

The demand for computer chips is oustripping supply

Furniture, the latest sector to feel the supply chain pinch, encapsulates the broader problems. Even giant companies such as Ikea have been affected. The Swedish furniture maker has said it “cannot predict” when normal supplies will resume because of a “perfect storm of issues” that includes a shortage of truck drivers.

Transport is a “nightmare” where even “a screw or small component from Asia can take 3 months”, said one French furniture exec. “We had 16 containers being shipped to the US in June and July and they still hadn’t got through by August. Lead times to the U.S. have doubled.”

Transport costs have soared. Between China and Europe, fees are 7 times higher than last year. To work round that problem, Ikea said it was diverting some supplies on to trains. “We will use rail transport from China to Europe to free up container capacity that we can use to ship more to U.S.,” the company stated. In the U.S., meanwhile, lumber supplies usually transported by truck through the southern states have been disrupted by Hurricane Ida, which created havoc on the Gulf Coast.

Nearly half of EU rubber, machinery and computer producers, and most electrical equipment makers, report supply shortages. Almost 60% of carmakers remain affected. In Germany, where car production is 30% below pre-Covid levels, Volkswagen had planned to add extra shifts to clear an order backlog. But new Asian outbreaks of the Delta variant have shut ports and semiconductor manufacturing facilities there, stymying plans. It’s a common problem throughout the sector. VW believes computer chip supplies “will remain very volatile and strained” through the third quarter of this year. But one European economist believes full normalization will not happen until 2023.

The bottom line: uncertainty remains as to how the stability of global supply chains and the handling of the coronavirus pandemic will develop, especially in China, Europe and the U.S.

Classroom discussion questions:

  1. Why is there a shortage of computer chips, and what can be done? (See Supp. 7 of your Heizer/Render/Munson text, Capacity and Constraint Management)
  2. How can companies deal with shipping backlogs?

OM in the News: The Chip Crisis Finally Hits Toyota

Toyota’s Motomachi plant is one of the factories with suspended production.

The global semiconductor shortage has finally started to bite at Toyota, highlighting how a resurgence in Covid-19 infections from the Delta variant is now stifling chip manufacturing in Southeast Asia, worsening a parts crisis for car companies.

Japan’s largest car maker said Thursday it was cutting production in the country by 40% because of a shortage of semiconductors, highlighting how the scarcity is hitting even the best-prepared companies. In North America, Toyota is reducing factory output by between 40% and 60%. In total the cost will be 140,000-170,000 fewer vehicles manufactured. Toyota had recently touted its ability to insulate itself from the global shortages that burned its peers thanks to stockpiles of components and close relationships with suppliers.

Ford and GM also are scheduling more downtime at North American factories, in part because virus-related restrictions overseas are further adding to chip-supply constraints. Ford this year has lost output of more than 160,000 F-150 trucks, its top-selling vehicle and main profit driver. GM expects to make 100,000 fewer vehicles in North America in the second half of this year.

For much of this year, the chip-shortage challenges in the auto industry have largely stemmed from car companies miscalculating how quickly auto sales would bounce back and not ordering enough semiconductors, writes The Wall Street Journal (Aug. 20, 2021). Now, the auto industry is confronting a new wrinkle with a resurgence in Covid-19 infections in Southeast Asia, particularly in Malaysia, denting output at computer-chip factories that are already straining to fill orders. This region is where semiconductors are assembled into small components that control everything from engines to headlights.

The shortage has had a silver lining for Toyota and other car companies because the dearth of cars on dealer lots has pushed up prices.

Classroom discussion questions:

  1. What techniques shown in Supp. 7 of your Heizer/Render/Munson text are available for matching capacity to demand?
  2. What is the cause of the global chip shortage, and what is the solution?

OM in the News: Where Airplanes Go To Die

Davis-Monthan Air Force Base in Tucson

What happens when an aircraft is no longer needed and its engines are turned off and allowed to cool down for the final time? What comes after that?

Airlines may put retired aircraft in open-air aviation museums, such as the renowned Concorde SST, but the majority of such aircraft end up in “boneyards” after they retire. Thousands of aircraft, for example, are kept in vast boneyards, dotting the deserts of the southwest U.S., reports Interesting Engineering (Aug. 16, 2021)

On the outskirts of Tucson, Arizona sit rows of aircraft, ranging in size from massive cargo lifters to heavy bombers, stretched out in the blazing desert sun. This is the world’s largest aircraft storage and preservation facility, known as the Boneyard, which resides within the Davis-Monthan Air Force Base. Arranged over 2,600 acres, this place is home to almost 4,000 aircraft from the U.S. Air Force, Army, Coast Guard, Navy, Marine Corps, and NASA.

While some seem to be brand new, others are shrouded in protective covers to keep sand and dust away. Not all jets are fortunate enough to survive retirement in one piece, and some have been reduced to boxes of spare parts, ready to be sent out to different locations around the globe to give a hand to other aircraft take to the skies again.

Why Tucson? First, the climatic conditions in Arizona, with its dry heat and low humidity, mean aircraft take longer to rust and degrade, making them less susceptible to corrosion and making it easier to keep them in proper working condition. Also, deserts offer a large amount of space for an affordable price, which means those interested in their service save a lot of money. The geology of the desert with its alkaline soil is also hard enough to prevent aircraft from sinking into the ground. This way, planes can be parked in the desert without costly new parking ramps.

Although the desert is kind of like an aviation retirement home, some of the planes’ flying days are still ahead of them. If a plane is due to fly again, it’s looked after by facility technicians who make sure all entrances to the aircraft are sealed to keep out dirt, dust, and wildlife. They regularly operate motors and other equipment to ensure that everything is working smoothly.

Classroom discussion questions:

  1. What events have caused commercial airlines to park planes in the “boneyard”?
  2. What are the OM issues that managers face in these facilities?

OM in the News: Awash in Hand Sanitizer

In Supplement 7, Capacity and Constraint Management, we ask “What are the strategies for when demand exceeds capacity? When capacity exceeds demand?” The past year saw the hand sanitizer industry whipsawed from desperate shortages to massive excesses.

Now Piggly Wiggly stores in Alabama and Georgia, are offering 4-for-1 specials on sanitizers after sales nearly halted. They tried selling the disinfectants for half-price and discounted them at 75% to no avail. Lucky Supermarket in Millbrae, Calif., is offering free bottles of hand sanitizer with any $10 purchase. Supermarkets are on a mission to get rid of hand sanitizers. Once nearly impossible to find, America is awash in it.

sanitizer

Consumers rushed to buy sanitizers when the pandemic took hold, writes The Wall Street Journal (May 21, 2021). The surging demand resulted in shortages and purchase limits at retailers. Hoping to fill their shelves, supermarkets bought inventory from overseas and turned to other businesses—including distilleries—that switched their production to make sanitizers for the first time. Manufacturers expanded capacity, at times overpaying for components like pumps.

Now, supermarkets are sitting on pallets of them. Covid-19 cases are declining. Health officials now say that the virus is airborne and that the disinfectants aren’t as effective as masks and distancing. Sales of hand sanitizers are down 80% from a year ago. Weekly sales hit as high as $52 million in July. Average unit prices are $2.10, about 40% lower than a year ago.  Prices on the Liquidation.com marketplace have fallen to 2 to 3 cents on the dollar, a 90% decline in resale prices over 6 months

Among those struggling with the current glut: distilleries that jumped into the sanitizer business when brands couldn’t keep up with demand last year. Adirondack Distilling, which makes whiskey, vodka and gin, still has between 10,000 and 20,000 sanitizers that the company made in stock. In Oregon, Crater Lake Spirits is giving away leftover sanitizers after it produced roughly 60,000 gallons of disinfectants for hospitals and hotels last summer.

Classroom discussion questions:

  1. What are the OM choices when demand exceeded capacity?
  2. What are the options now that capacity exceeds demand for sanitizers?

OM in the News: Capacity Problems for Chip Makers

Semiconductor companies are asking their customers for patience as the industry works through a sharp increase in demand from makers of everything from cars to consumer electronics. But there is no quick fix to the situation. As we point out in Supp. 7, Capacity and Constraint Management, adding new chip-making machinery is expensive and slow. And some of the deepest supply problems are taking place with older production lines that are less lucrative for manufacturers. In the whole semiconductor industry there is very little spare capacity right now, reports The Wall Street Journal (Jan. 15, 2021).

Demand for laptops has skyrocketed, and remote work during the Covid-19 era has increased appetite for cloud-computing and their data centers. Plus a surge in demand for chips that go into new 5G phones has put a squeeze on capacity. This chip shortage will likely last through 2022.

Ford said it was idling a factory in Kentucky because of chip shortages

With chip plants effectively running all out already, auto makers and consumer-electronics manufacturers are competing for every bit of limited manufacturing capacity. The car industry was among the first to be hit. VW is reducing production at its factories in China, Mexico, Tennessee and Germany. And in the face of the shortages, GM just asked suppliers to stockpile a year’s worth of chips.

The auto industry bears some responsibility for failing to place orders early enough in anticipation of the demand recovery. Over the past 2 decades it has become one of the largest consumers of computer chips, rivaling the PC industry, as cars become increasingly powered by software. Chips now power everything from engines and emissions control to brakes, A/C, windows, and a growing array of sophisticated safety features such as automatic lane control and crash avoidance.

The production cycles for chips are long, and the development cycles are even longer. Lead times across the chip industry have risen to 6-10 months, from 8-10 weeks before the pandemic.

Classroom discussion questions:

  1. Which time horizon in Figure S7.1 is impacting the chip industry’s capacity options?
  2. What tactics might the industry employ to adjust capacity to demand? (Hint: see p. 312 in your Heizer/Render/Munson text).

OM in the News: UPS Says No!

“No exceptions,” said the message from UPS to its drivers. As we enter a holiday season when retailers are increasingly dependent on delivery companies to move online orders, we see a dynamic that has shifted power significantly. United Parcel Service, reports The Wall Street Journal (Dec. 3, 2020), imposed shipping restrictions on some large retailers this week, an early sign that the pandemic-fueled online shopping season is stretching delivery networks to their limits.

The company on Cyber Monday notified drivers across the U.S. to stop picking up packages at Gap, Nike, L.L. Bean, Hot Topic, Newegg, and Macy’s. The move comes as UPS and rival FedEx have raised prices and promised to hold merchants to volume agreements. It is a sign that UPS is metering the flow of packages into its network to preserve its performance during one of the busiest shipping weeks of the year. 

FedEx and UPS both prepared their customers for tight capacity for this holiday season, as consumers, fearful of venturing out to stores due to the virus, are stocking up on household essentials from online merchants at the same time the holiday shopping season kicks off. The combination is expected to create a surplus of as many as 7 million daily packages between Thanksgiving and Christmas.

FedEx and UPS for months have been processing packages at levels more common during the Christmas season and were preparing to layer another surge of orders on top of that. They have responded with restrictions on capacity and surcharges to offset higher costs from hiring tens of thousands of workers and renting extra equipment. UPS picked up 81% of packages on the day they were ready between Nov. 15 and Nov. 21, compared with 95% for FedEx.

Abercrombie & Fitch tells online shoppers to place their orders by Dec. 4 if they want items to arrive by Christmas using its standard shipping option.

Classroom discussion questions:

  1. What techniques can UPS apply to handle this capacity issue? (Hint: see p. 312 in your Heizer/Render/Munson OM text).
  2. Compare this capacity problem to that facing airlines today.

OM in the News: The Brexit Bottleneck

The U.K. faces a logistics nightmare that could bring delays and shortages in essential goods after the country completes its exit from the European Union, reports The Wall Street Journal (Nov. 30, 2020). On Jan. 1, the free movement of goods across the English Channel is due to end for the first time in half a century. The change has sparked fears of severe bottlenecks at British ports and highways, where customs officers will inspect trucks amid an acute lack of staff that could rattle supply chains.

Some 10,000 trucks cross the channel on ferries each day, moving about half of all goods between the U.K. and the continent while dozens of daily sailings move freight mainly between Dover on the British side and the French ports of Calais and Dunkirk. The Port of Dover estimates that for every 2 minutes of delay each truck has to spend at the crossing, a 17-mile traffic jam will be created on the M20 highway heading to the port.

Hundreds of trucks held up on the M20 highway heading to the Port of Dover

British supermarket chains that built distribution schemes on the assumption that products would go straight from trucks to store shelves are short of refrigerated warehousing, prompting fears that much of the cargo could spoil.

Bottlenecks could affect more than 30 car makers, including Honda, Toyota and Jaguar—companies that produce around 1.8 million cars every year in the U.K. The manufacturers depend heavily on JIT parts from the EU that go straight to assembly lines to produce many vehicles exported to the continent. Some manufacturers are looking at airfreight to replace trucks, a solution that would bring big new logistics costs on top of EU tariffs that could substantially raise the price of British-made vehicles sold in Europe.

Classroom discussion questions:

  1. Which of the 10 OM decisions described in your Heizer/Render/Munson text are affected by capacity issues like this one?
  2. There are 6 tactics for matching capacity to demand listed on page 312 in Supp. 7. Will all, or some of them, apply here?

OM in the News: The Megaship Capacity Disaster

In 2006, the Emma Maersk left her shipyard. The length of 4 soccer fields, Emma was far larger and more expensive than any container ship ever before. She was a bet on globalization: By transporting a container more cheaply than any other vessel afloat, she and her 6 sister ships were expected to stimulate even faster growth in international trade, lowering the cost of moving goods through the supply chains that had reshaped the global economy. But the opposite occurred. Emma and the even larger ships that followed in her wake became a nightmare.

Container ships are the workhorses of globalization. Operating on regular schedules— an identical vessel departs Shanghai every Wednesday, stops in Singapore 9 days later and arrives in Antwerp 5 weeks hence, with tight connections to barges and freight trains—intermodal container transport gave manufacturers and retailers the confidence to plan tightly organized long-distance supply chains. Emma and her sisters’ size was expected to give shipping an immense cost advantage. Maersk forecast in 2006 that the demand for container shipping would double by 2016.

The container ship Emma Maersk in Hamburg

But the boom never occurred. Instead, international trade collapsed in 2008-09, and when it picked up again, its growth was far weaker than before. By the early 2010s, there simply weren’t enough container loads to fill all the new capacity, wiping out the cost advantages of larger vessels. And discharging and reloading megaships took longer as well, with more boxes to put off and on, while giant shoreside cranes needed to reach a greater distance to pick up a container. Thousands more boxes multiplied by more handling time per box added days to a port call. Delays were legion.

Once, container ships would have been able to make up those delays en route. But to save fuel and reduce greenhouse gas emissions, vessels must now travel at 17-18 knots instead of 24-25 previously, adding several days to a long ocean voyage. By 2018, 30% of the ships leaving China departed late.

“With proper accounting,” concludes The Wall Street Journal (Oct. 24-25, 2020), “the globalization of manufacturers’ supply chains no longer seems such a bargain.”

Classroom discussion questions:

  1. How would the land side of international logistics be impacted by this issue?
  2. What capacity strategy best fits shipping companies now? (Hint: see Figure S7.6 in your Heizer/Render/Munson text)

OM in the News: Shipping Capacity Sold Out for the Holidays

One holiday item is already sold out: shipping capacity. Both FedEx  and UPS have told shippers that most of their capacity is already spoken for, and that any extra trailers with holiday orders will have to wait to be picked up.

“There will be days within the holiday season where the industry will be over capacity,” said one FedEx exec. The outlook has sent retailers on the hunt for alternatives with little luck. Smaller carriers also booked up their capacity for the holidays months earlier than usual and aren’t taking new customers.

The capacity shortfall could average 7 million packages a day between Thanksgiving and Christmas, reports The Wall Street Journal (Oct.19, 2020). Total shipping capacity for the industry will be 79.1 million parcels a day during that period, with 86.3 million packages looking for space.

Carriers and their shippers spend months planning for the holiday season and hone their forecasts for the number of packages they expect to ship. The two sides decide items like weekly shipping forecasts and how many trailers the carriers may need to pick up from their loading docks each day. Any deviation from the estimate can result in higher rates per package or penalties to compensate the carrier for needing to marshal more resources.

In previous years, shippers could usually find space to ship if online sales blew through expectations, though it would come at a premium to rates that had been negotiated. Now that doesn’t exist. The primary reason for this year’s capacity shortage is that carriers already have been operating near maximum capacity for months as consumers stayed home, avoided stores and shopped online.  Carriers can’t quickly boost capacity with new facilities as it often requires a multiyear planning process.

Classroom discussion questions:

  1. What might carriers do to “manufacture” some extra capacity? (Hint: see the section called Capacity on pages 308-313 in Supp. 7 of your Heizer/Render/Munson text).
  2. What can retailers do?

OM in the News: And Now a Can Shortage?

Aluminum drinking cans have been taking market share from glass and plastic bottles.

Demand for cans is booming during the coronavirus pandemic, writes The Wall Street Journal (Aug.26, 2020), propelling can makers to boost manufacturing capacity to prevent shortages and capitalize on a trend they bet will stick. As bars and restaurants closed across the U.S., consumers rushed to buy large packs of drinks—typically sold in cans—in supermarkets. Sales of canned food also jumped.

That is accelerating a continuing shift in favor of aluminum drinking cans, which were already taking share from glass and plastic bottles. Aluminum cans are lighter and more robust than glass, and have higher recycling rates than glass and plastic. The growing popularity of hard seltzers, usually packaged in cans, has been another factor. Coca-Cola said products like Minute Maid Lemonade, Cherry Coke Zero and Pibb Extra may be difficult to find in cans because of tight supplies.

U.S. retail sales of aluminum drink cans (which make up nearly all cans for drinks), rocketed since the pandemic. Ball Corp., the world’s largest maker of these cans,  plans to begin running two new production lines in the coming weeks in Fort Worth, Texas, and Rome, Ga., both of which have capacity to make a billion cans a year. Despite this, the company estimates it will still import two billion cans this year to meet N. American demand, from places like Europe, India and Brazil. Ball also plans to open two new plants in the U.S. next year.

Some companies are betting higher demand is here to stay, for canned drinks but also canned food. Previously falling out of favor, canned food sales soared over 23% in the past 6 months.

Classroom discussion questions:

  1. Identify a half-dozen OM issues that are topics in your Heizer/Render/Munson text that can manufacturers face..
  2. What options do can makers have for adjusting capacity (see Supp. 7)?

OM in the News: Why Are There Still Not Enough Paper Towels?

 

A shopper finds paper-products shelves mostly bare at this Costco in Teterboro, N.J.

An average of 21% of household paper products were out of stock in U.S. stores this month, reports The Wall Street Journal (Aug. 22-23, 2020). Why? Because of lean manufacturing and the efficiency of the industry. The competitiveness of the paper industry is such that firms must run near capacity with extremely high effective capacity (see Table S7.1 in your Heizer/Render/Munson OM text). The result is very little slack in the system. And the situation isn’t likely to abate soon, because producers have no plans to build new manufacturing capacity. The central piece of the machinery needed to make paper towels takes years to assemble.

The paper product scarcity is rooted in a decadeslong quest (known as lean manufacturing or JIT inventory) by businesses to eke out more profit by operating with almost no slack. Make only what you can sell quickly. Order only enough materials to keep production lines going. Have only enough railcars for a day’s worth of output. Stock only enough items on a shelf to last till the next batch arrives.

But mammoth paper machines require substantial support facilities on both the incoming side– where expensive digesters grind and mix the pulp to the proper consistency and on the outgoing side where huge machinery is required to move the 6,000 lbs. rolls for further processing. We discuss the options for adjusting capacity in Figure S7.1 on page 308. The paper industry has increased capacity by 25% using the options noted in that figure for short range increases. But the industry is also obviously reluctant to move to the more expensive intermediate and long-term options for what we all hope is a short-term problem.

Classroom discussion questions:
1. As manager of a paper company would you be willing to invest your company’s money on the long-term increased in the demand for paper towels?
2. In addition to added capacity, what other option can you suggest?

Video Tip: Demand and Capacity Management in the Air Cargo Industry

The COVID-19 pandemic is a health and humanitarian crisis, and it is also an economic shock, reports Accenture (May 8, 2020). The aviation and air cargo sectors have mobilized in a big way to help supply personal protective equipment (PPE), hand sanitizer, ventilators and other desperately needed items for combating COVID-19. The crisis is shining a light on the importance of logistics and supply chain management for helping save lives, but also for bringing staples and food to populations sheltering in place. Air transport is being heavily relied on because many emergency supplies are located overseas, or across the country, and air is the fastest mode for getting them to where the outbreak is spreading.

This 12 minute video provides a fascinating glimpse how the world’s airlines have had to prepare for shocks in capacity and demand management, the topic of Supplement 7 in your Heizer/Render/Munson text.

 

OM in the News: Why Do the Empty Planes Keep Flying?

An Atlanta-to- Baltimore Delta flight on April 20

Many of us are wondering why airlines continue to fly nearly empty airplanes. It seems like they are burning cash, fuel and goodwill. Don’t they know what they’re doing? They do, says The Wall Street Journal (May 7, 2020).

Airlines scrambled in March and April to ground as many trips as they could. But they still found themselves locked into flying many trips with hardly any passengers for a number of OM reasons that show just how complex airline schedules are and how hard the choices are that OM executives must make.

Airlines have grounded 3/4 of their capacity, and it still hasn’t been enough. More than 90% of traffic has disappeared. For American, 99% of flights have been less than 20% full. Besides critical travel for funerals, medical reasons, etc., there are often operational reasons that they need to fly with 2-3 people on board.

A flight might have to go with 2 fliers because a later flight in that plane’s schedule had 60 waiting. Sometimes it isn’t the aircraft that had to get there, but the crew needed somewhere else for later flights. Some aircraft need to get to a maintenance base for overnight routine work. Overnight parking is in short supply at many airports housing grounded planes. So a jet may need to make the last trip of the day with 1-2 passengers just to get to its assigned parking space. And a few passengers might luck out because the plane has a large cargo payload–often medical supplies.

Now a growing concern is that there will be heavier loads on flights where passengers won’t be able to socially distance. Adding to the complexity is a requirement in the federal airline bailout (Cares Act) that requires airlines to maintain service to all the cities they currently serve. Finally, because of the complexity of schedules, airlines need to figure out which aircraft to put in storage while facing uncertainty over travel patterns in the pandemic.

Classroom discussion questions:

  1. List some of the operations issues airlines are now facing.
  2.  What percent of your class is willing to fly in the next 4 weeks?

 

OM in the News: The COVID-19’s Effect on Flight Capacity

It’s not an exaggeration to say that the COVID-19 pandemic has thrown the travel world into a tailspin, with a staggering impact on the $880 billion global airline industry. The earliest pains were felt in February, as flight capacity in and out of China dropped 71% compared to 2019. Flight capacity for Hong Kong went down by 92%. Flights to and from Italy plummeted 89%, while Germany and Spain have 93% less capacity as of this month.

So it is no surprise that airlines have been forced to ground a significant portion of their fleets, reports Forbes (April 4, 2020). Large aircraft like the superjumbo A380 were some of the first to be grounded, with diminished demand for the seats. However, whether it’s widebodies or narrowbodies, airlines still have the issue of where to store these planes. Delta and American are each parking about half of their fleets – or more than 1,200 aircraft. Tulsa Airport has been able to close a seldom-used runway to fit about 50 American Airlines planes, charging them about $150 a day to store. American also parked 100 planes in New Mexico, 50 in Pittsburgh, and more in Mobile and Greensboro. In addition to the cost of parking, a facility may charge maintenance costs that begin at about $2,000 per plane a month. Every day, each plane needs to have its engine run, has to taxi far enough for the tires to rotate fully, and has to have its hydraulics, avionics, and electronics checked.

A grounded fleet of British Airway planes sit on the runway at Glasgow

Capacity planning, the topic of Supplement 7, is difficult enough during normal times. But look at the capacity cuts made these 6 airlines: Ryaniar, Flydubai, and Spice Jet, 100%; American, 80%; United, 65%; Southwest, 60%. And on Sunday, April 12th, 122,029 travelers flew through U.S airports–compared to 2.5 million on the same day a year ago!

Classroom discussion questions:

  1. What is the difference between demand management and capacity management?
  2.  How does this differ from the capacity issues faced in the recession (2008-2010) and the 9-11 terrorist attacks?

OM in the News: Companies Retool Operations to Assist in Coronavirus Fight

From a Kentucky distillery to a French bluejeans maker, companies are retooling to produce medical equipment for overloaded hospitals and slow the spread of coronavirus, writes The Wall Street Journal (March 19, 2020). Christian Dior perfumes has started making hand sanitizer. A car-parts company is producing hygienic masks. Luxury hotels are becoming makeshift quarantine shelters. An earthmoving-equipment maker and other manufacturers are examining whether they can help make ventilators, the key life-support machines.

As the pandemic grips the West, global demand for a range of goods and services has faltered—from handbags and tourism to cars. That has freed capacity for industries to produce medical equipment in short supply. World leaders have framed the crisis as a wartime struggle, and hark back to World War II, when nations on a much larger scale repurposed factories to make weapons and supplies. “We are at war,” says the French President.

Both GM and Ford are examining whether they could put their idled factories to work making medical equipment. Tesla’s Elon Musk stated: “We will make ventilators if there is a shortage.” The German government is considering redeploying unemployed workers such as waiters to harvest its fields. French whiskey giant Pernod Ricard is making sanitizer at plants in Kentucky, W. Virginia, and Texas.

The French bluejeans producer, 1083, saw demand plummet when stores across the country were forced to shut last week. Within hours of the government proclaiming a shortage of sanitary masks, 1083’s sewing machines were stitching together masks. “It’s much easier to make masks than jeans,” says the CEO. With tourism drying up, Israel has repurposed two luxury hotels to serve as quarantine shelters, the oceanfront Dan Panorama in Tel Aviv, and the Dan Hotel overlooking Jerusalem’s ancient skyline.

Classroom discussion questions:

  1.  How can companies that specialize in logistics redeploy their workforces to help fight the epidemic?
  2.  Why is it hard to shift manufacturers to produce the needed medical equipment?