Tag: backlogs

OM in the News: Port Supply Chains Unclog

Back in January, 109 container ships waited off the California coast to unload cargo in Los Angeles and Long Beach, the nation’s two largest ports. Consumers, stuck at home amid the pandemic, had unleashed an avalanche of orders for goods that overwhelmed factories and ports.

A container ship is unloaded at the Port of Los Angeles

Importers were paying $20,000 to send a single container from China to the U.S. — sometimes more than the goods inside were worth. Businesses had to backorder everything from bedroom furniture to kitchen fryers, if they could get them at all.

These days? No freighters are lingering off the Southern California coast. Containers from China go for just $2,000. Restaurants can order fryers and have them delivered in a couple of weeks.

The supply backlogs of the past two years — and the delays, shortages and outrageous prices that came with them — have improved dramatically since summer, reports AP News (Dec. 7, 2022). “We are in a very different place than we were,” said a supply chain exec. “If you ask, how long does it take to move stuff, there has been notable improvement. If you measure it by how long would it take to get a cargo from Asia to a destination port, dramatically better.”

The web of factories, railroads, ports, warehouses and freight yards that link goods to customers have nearly regained their pre-pandemic levels. The main factor behind the improvement has been diminished demand for manufactured goods. And having splurged on everything from lawn furniture and sporting goods to appliances and electronic gear during the COVID shutdowns, consumers have increasingly shown a desire to venture out and spend on experiences rather than goods. Demand has shifted toward services — restaurant dinners and plane tickets, hotel rooms and entertainment.

At the sprawling Southern California ports, the shipping backup has eased, in part because companies have sent cargo to Gulf Coast and Atlantic ports to avoid delays. Port Houston says its cargo volume is up 18% from this time last year. In addition to the reduced demand that has lightened the strain on supply chains, ports have become more efficient. Additional ships have increased the transportation options.

Classroom discussion questions:

  1. What caused the longstanding backlog at California ports?
  2. What options did operations managers have when unloadings were delayed by many weeks?

OM in the News: Boeing 737s Piling Up at the Factory

Boeing is facing a problem as it races to meet demand for single-aisle, fuel-efficient jets: where to store unfinished 737s piling up at a factory near Seattle, reports The Wall Street Journal (Sept. 4, 2018). One answer is the taxiway of the small airport in Renton, Wash., next to its Boeing factory there. “Boeing is running out of space,” said a Renton administrator. “They have encountered an emergency production challenge that threatens to interfere with their ability to keep their airplane production lines running.” Boeing said the request for parking space was part of a “recovery plan” to get deliveries to match production rates.

Boeing delivered just 29 of the 737s in July, though more than 50 mostly-finished jets roll off the production line each month. The 737 is Boeing’s most popular commercial aircraft and a top moneymaker. The delays are due largely to two suppliers: engine maker CFM International and fuselage manufacturer Spirit AeroSystems. Both companies have said some of their own small suppliers are struggling to meet demand.

The engine shortage is “severely hampering production needs as we now have aircrafts ready to go but no engines,” a Renton airport official wrote to Federal Aviation Administration recently. The airport has about 35 spaces for 737s. The FAA in late July approved a plan under which large planes taking off from and landing at the Renton airport provide 2 hours’ notice to give Boeing time to move planes on the taxiway. It is also tucking planes between airport buildings and parking them on employee parking lots at its factory– and it is outfitting some 737s with temporary engines so pilots can fly them to nearby King County Airport. The temporary engines are removed there and trucked back to Renton to fly more 737s to King County.

Classroom discussion questions:

  1. What, if anything, can Boeing do to solve this problem?
  2. Why is it critical to get these planes finished and delivered?

OM in the News: Tesla’s Sloooow Rollout


Tesla charging stations wait to be unwrapped.

When Elon Musk first unveiled the Tesla Model 3 sedan in March 2016, consumers stood in long lines at showrooms to place $1,000 deposits, giving Musk an iPhone moment unprecedented in the auto industry. When people stand in line at an Apple Store, they typically walk away with a new phone; the all-electric Model 3 had yet to be built. Overwhelming demand inspired Musk to announce in May 2016 that he was advancing Tesla’s production plans by 2 years.  It would build 500,000 total cars annually by the end of 2018, rather than 2020—a fivefold production boost in just 2 years. For Tesla, which had no experience manufacturing cars in high volume, it has been a steep production learning curve, writes Businessweek (Jan. 15, 2018).

Tesla delivered only 1,770 Model 3 sedans to buyers in 2017’s second half. In August, Tesla said it expected to achieve a manufacturing rate of 5,000 Model 3 vehicles a week by the end of the year. In November the company back pedaled, saying it would hit 5,000 units a week in late March 2018, citing “production bottlenecks.” Musk stated he was on the “front lines” of production hell.

“They vastly underestimated how challenging it is to mass-produce vehicles, and quality should be their focus,” said one industry exec. On Jan. 3, Tesla delayed the production goal by yet another quarter, saying that it now expects to hit 5,000 units a week by the end of June, with a “focus on quality and efficiency rather than simply pushing for the highest possible volume in the shortest period of time.” Concentrating on quality makes sense for the carmaker. A mass-recall would probably be far more damaging.

(Tesla’s stock, by the way, surged 43% in 2017, despite the factory setbacks).

Classroom discussion questions:

  1. What are the OM issues that Tesla is facing?
  2. Do a quick SWOT analysis on Tesla.

OM in the News: Pain in Boeing and Airbus’ Supply Chains

Boeing and Airbus both built more jets last year than ever (763 and 718, respectively), but not enough to ease supply line strain as orders boom. The delivery frenzy has been a boon to both plane makers, lifting profit and share prices. “But it also has strained manufacturing and supply lines around the world,” writes The Wall Street Journal (Jan. 16, 2018).

Airbus and Boeing have already struggled at times to get planes out the door because of a lack of seats, toilet doors, and even engines. Airbus fell short of its target of building at least 200 A320neo planes last year because of lingering engine supply issues. The A320neo is the latest version of Airbus’ best-selling narrowbody jet. It and Boeing’s latest 737s have become the workhorses of both legacy and budget carriers because of their size, fuel savings and versatility. Airbus had 30 planes waiting for engines at year-end, and won’t commit to higher output of the plane until it has monitored supplier reliability for several more months.

Boeing and Airbus ended the year with a combined backlog of 13,129 planes, or 9 years of production at current output levels. To cope, both firms have promised to build even more planes this year—further stretching factories around the world that are already running at full tilt.

Supply chain tightness has spurred supplier consolidation to gain scale and become more financially resilient to afford the investments in production capacity Airbus and Boeing require. United Technologies last year agreed to acquire aircraft equipment maker Rockwell Collins. Rockwell in April closed a $6 billion acquisition of cabin interior specialist B/E Aerospace. French supplier Safran SA is expected to soon close its purchase of seat maker Zodiac Aerospace SA.

Classroom discussion questions:
1. What can Airbus and Boeing do, if anything, to exert better control over suppliers?

2. What do they need to do to reduce the backlog?