Tag: coronavirus

Guest Post: Building A Robust Supply Chain During A Pandemic

Today’s Guest Post comes from Prof. Jonathan Opata, who teaches Operations & Supply Chain Management at George Mason University, Southern New Hampshire University and Northern Virginia Community College

China is critical to the supply chains of many companies because it is the world’s leading manufacturer and its 2nd-largest economy. Government directives on strict quarantine measures have led to economic and supply chain disruptions globally. Companies must ensure risk management in the face of the pandemic. This requires integrated supply chain visibility, better forecasting and intelligent capacity building to meet demand.

Currently, many companies have limited access to employees and logistics, and face the closure of factories because of the ongoing measures to control the spread. This has resulted in a bullwhip effect and high product costs. Here are 6 critical areas for organizations to focus on that you can discuss with your students:

1. Develop Alternative Supply Sources: Developing and looking for new sources of supply is the premier strategy.
2. Create Business Continuity Plans: These plans should pinpoint contingencies in critical areas and include backup plans for transportation, communications, supply, and cash flow. Suppliers and customers need be involved in developing these plans.
3. Create a Comprehensive Emergency Operations Center: This operations center will require integration of company-wide data sources to allow visibility into daily operations.
4. Develop a Collaborative Approach to deal with transportation suppliers to increase visibility of shipments in the supply chain pipeline. This means conducting risk analysis and teaming up with all suppliers to act on supply issues.
5. Redesign to Source from Local Content: Companies need to have production facilities with local sources of supply in each of their major markets, to spread the risk.
6. Align the procurement strategy with Supplier Relationships: Companies should rely on small groups of critical suppliers and maintain a mutually win-win relationship with each. Also, companies need to adjust for higher than normal demand and proactively design robustness into the network to minimize the impact of the bullwhip effect.

These strategies are critical for both short-term recovery and longer-term contingency planning. When companies work together, they can withstand this pandemic and come out more reliable than ever.

OM in the News: Why the Richest Nation Can’t Get You a Face Mask

The U.S. is scrambling for surgical masks

Over the course of the past 50 years, the U.S has organized its economy following the theory of comparative advantage (see Ch. 2 in your Heizer/Render/Munson OM text). That means outsourcing to whatever external organization can provide the good or service at the best price. For much of this half century, the most cost-efficient strategy has been outsourcing to Asia. But outsourcing the wrong activities can be a disaster, as we now see in the coronavirus epidemic.

Critical supplies like medical equipment, pharmaceuticals, and food have been outsourced to China. “Most Americans know their iPhone comes from China but they do not know that more than 80% of all of their antibiotics, vitamin C and tilapia, 50% of their cod and apple juice, and 34% of their mushrooms come from China as well,” says one OM professor .

So I guess we shouldn’t be surprised by The Wall Street Journal headline  (April 2, 2020): “Why the Richest Country on Earth Can’t Get You a Face Mask.”  Indeed, Americans are asking why the most technologically advanced nation in the world can’t provide its citizens and health-care workers with lifesaving medical equipment.

Years of underinvestment in pandemic planning is a big part of the answer. But as in the pharmaceutical sector—highly dependent on Chinese and Indian producers—a reliance on global supply chains is also making life difficult for Western hospitals struggling to source gear. 85% of global medical mask-production capacity is in China. It is also a major producer of the polypropylene fibers that filter out dust and pathogens in the N95 respirators medical professionals rely on. The U.S. said in early March that it has only about 1% of the medical masks it would need to combat a year-long epidemic.

When the pandemic ends, one of the enduring changes it causes could be a major reassessment of complex global supply chains for critical medical goods.

Classroom discussion questions:

  1. What are the advantages of outsourcing?
  2.  Why can’t the U.S. produce the billion masks it needs this year?

OM in the News: Supplying and Shipping Take on New Importance

Companies like UPS are experiencing a boom in home deliveries

Just a few weeks ago, many people would have been hard-pressed to talk about the nation’s supply chain, writes The New York Times (April 1, 2020). But with shortages of protective gear for medical workers and basics like toilet paper and hand sanitizer, the inner workings of transporting goods from manufacturers to consumers, medical professionals and other businesses suddenly has taken on new importance.

“Shippers are facing huge challenges to ensure that they have the tools and have capacity,” said the CEO of an online trucking marketplace. “And the truckers had enormous pressure as well because they can’t work from home and are constantly on the road.”

Some manufacturing plants and warehouses are understaffed, so the truckers that went expecting a quick turnaround for loading could wait as much as 15 hours for their cargo. Pennsylvania briefly decided to close all of its rest stops in a move intended to protect travelers, but the closures also impeded long-haul shipping without roadside facilities, so some were later reopened. And there are driver shortages, compounded by the aging population of truck drivers, whom some deem to be more at risk to die from the virus than those who are younger.

Delivery companies like FedEx and UPS are experiencing a Christmas-like boom in home deliveries, while shipments to business, which have closed by the thousands on government orders, have deteriorated. One estimate shows that  business-to-business shipments could decline up to 25% for months. Delivering to homes is generally less profitable because drivers ferry fewer packages across many more stops.

Classroom discussion questions:

1. What are the challenges facing shippers?

2. How are each of the six shipping systems described in Ch.11 (in the section on Logistics Management) impacted by the current crisis?

OM in the News: GM Hustles to Pump Out Ventilators

Factory workers will assemble ventilators at an idled GM facility in Kokomo, Ind.

On March 19, four GM engineers boarded a late flight from Detroit to Seattle. By daybreak, they were huddled in a conference room at Ventec, a small maker of ventilators whose entire operation is smaller than a GM car dealership. Ventec execs had turned over blueprints for the roughly 700 parts that go into its ventilator to the GM engineers, hoping to get their help scaling up production. The GM contingent, which usually specializes in designing and sourcing parts for building vehicles, used their smartphones to take videos of the toaster-sized machines being built by hand. A box of parts was overnighted to Michigan.

A shortage of the machines for patients with the coronovirus has sent the government and private sectors scrambling, reports The Wall Street Journal (March 30, 2020). Manufacturers from GM, Ford and Tesla to medical-device giants like Medtronic, and even British vacuum-maker Dyson, are gearing up to boost production. GM said it would start producing ventilators at its Kokomo facility and ramp up to 10,000 machines a month. (The auto industry had also been drafted to help during World War II).

There is little overlap between making cars—a highly automated process involving fast-moving assembly lines and robotic welding machines, which plays out in vast factories—and the labor-intensive job of building ventilators, which are largely hand-built at small workstations.

But car companies are being called on to help because they typically work with thousands of parts suppliers—many making components similar to those needed for a ventilator—and are accustomed to manufacturing at a large scale. At the same time, car makers have been in crisis mode themselves from the new coronavirus. GM has shut most of its N. American factories to keep the virus from spreading among workers. Still 100’s of workers volunteered for the job to help the nation.

Classroom discussion questions:

  1. How do the manufacturing processes differ between a GM and a Ventec?
  2.  What strengths does GM bring to the table for this project?

OM in the News: Retail Haves and Have-Nots

Whole Foods gears up

The coronavirus pandemic has led many retailers to close stores temporarily and millions of Americans to do nearly all their shopping online, writes The Wall Street Journal (March 25, 2020). Particularly crippled have been retailers that haven’t embraced e-commerce or sell nonessential items such as fashion. Online sales for apparel and footwear retailers plunged this month.

By contrast, online sales at general-merchandise retailers have soared, jumping 50% in one day, March 13, compared with a year ago. Giant sellers such as Amazon and Walmart have struggled to keep up with the surge in demand, and those 2 companies are among a dozen large retailers looking to hire roughly 500,000 people in coming weeks.

The reliance on e-commerce is poised to grow as efforts to stem the virus have darkened stores and limited travel. Foot traffic to U.S. stores fell 58% in March. Roughly 1/3 of U.S. households now say they have used online grocery pickup or delivery. More than 40% tried it for the first time this month (including myself today with a grocery order to Whole Foods. It arrived in perfect shape in one hour!) Some retailers, though, that appear to have well-oiled e-commerce machines have been overwhelmed by rising demand. Grocery delivery time slots are hard to find at Walmart and Amazon in many markets.

“Impulse purchases will be lost,” said an industry exec. “Walmart and Target will do well as people stock up on supplies. But fashion retailers will be hurt.” One exception: lounge wear. As more people work from home, they are stocking up on comfy clothes including sweatpants and robes! (The number of sold-out tracksuits rose 36% this year). But for now, most shoppers are staying away from stores unless they are buying groceries or other essential items.

Classroom discussion questions:

  1. Which of the 8 techniques for improving service productivity in Table 7.3 in your Heizer/Render/Munson text are being implemented by the on-line shopping changes?
  2.  Table 1.2 summarizes the 10 OM decisions around which your text is based. How is each impacted by the current operations environment?

Guest Post: Waiting Lines and the Coronavirus

Our Guest Post today comes from Howard Weiss, Professor of Operations Management Emeritus at Temple University.

A couple of thoughts have come to my mind recently with respect to the coronavirus.

As more citizens become infected with a virus, fewer citizens are available to become infected. This is identical in principle to the arrival rate in a finite population waiting line system. Consider, Example D7 from your Heizer/Render/Munson textbook. There are 5 printers that each break down at the rate of .05 per hour. Thus, if all five computers are working, the system arrival rate is 5*.05=.25 while if all 5 are broken down the system arrival rate is 0. Over time, the arrival rate changes depending on the number of printers that are working and we can compute the weighted average arrival rate, which we term the effective arrival rate. The Excel worksheet for this example, available on MyOMLab, computes the effective arrival rate as .218 printers per hour. This effective arrival rate is similar to the effective reproductive number that epidemiologists use for viruses.

Data Results
Arrival rate (l) per customer 0.05 Average server utilization(r) 0.436048
Service rate (m) 0.5 Average number of customers in the queue(Lq) 0.203474
Number of servers 1 Average number of customers in the system(Ls) 0.639522
Population size (N) 5 Average waiting time in the queue(Wq) 0.933264
Average time in the system(Ws) 2.933264
Probability (% of time) system is empty (P0) 0.563952
Effective arrival rate 0.218024

 

An interesting graphic related to the virus spread is at this Washington Post web site.

Observation: I recently had the opportunity to attend a concert at the Amalie Arena in Tampa. At intermission, the men’s room had a long line. This is not unusual. However, the line was not for the urinals or stalls but rather for the sinks. This was unusual. The design of the bathrooms was clearly for normal use rather than for a situation like the one we currently have with increased demand for handwashing. I was wondering what an arena might do to handle the increased sink demand.

OM in the News: The End of Just-in-Time?

After a brief recession in the early 1990s, the grocery industry came under pressure to improve profit margins. Companies settled on just in time that aimed to produce, ship and stock as few goods as possible to meet demand. By decreasing the capacity of their distribution centers, retailers saved on rent, utilities and labor. Distributors saved on fuel and wages. Manufacturers cut down on unsold inventory. In the past 2 decades, producers and grocery stores such as Kroger have gone from keeping months of inventory on hand to holding only a few weeks’ supply.

Other industries did the same, from auto making to health care. This finely balanced system works well while goods are flowing steadily. But the coronovirus black swan event blew it to pieces. For many items, supplies sold out in days, exposing the downside of the push to hold less stock in warehouses and operate fewer, fuller trucks.

Now abruptly, manufacturers, distributors and retailers have thrown that strategy into reverse, writes The Wall Street Journal (March 24, 2020). They are making as much food as they can, delivering it as fast as possible and adding staff, all to restock denuded shelves.

General Mills is trying to skip steps in a carefully calibrated process. It is delivering truckloads of Cheerios, flour and pasta straight to stores’ warehouses, instead of first sending products to its own warehouses, to eliminate a link in the supply chain. Retailers, meanwhile, are overriding the sophisticated algorithms that say how much of what products they should buy, after seeing how those models failed to account for the demand surge. Instead, retailers are talking directly to manufacturers and making decisions in real time. “JIT purchasing has been thrown out the window,” said one CEO.

Yet manufacturers run the risk of throttling up production too high if the crush in demand for some products proves to be temporary.

Classroom discussion questions;

  1. Relate this article to the discussion of supplier partnerships in Ch. 16 of your Heizer/Render/Munson OM text.
  2. How does this “black swan” event impact the bullwhip effect discussed in Supplement 11?

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?

OM in the News: As Country Shuts Down, Amazon Hires Up

Amazon plans to hire an additional 100,000 employees in the U.S. as millions of people turn to online deliveries at an unprecedented pace and Americans continue to reorient their lives to limit the spread of coronavirus. It will deploy the new workers to fuel its e-commerce machine and is raising pay for all employees in fulfillment centers, transportation, stores and deliveries in the U.S. and Canada by $2 an hour. (Amazon now pays $15-per-hour as a starting wage and has 800,000 employees). Amazon also expanded its sick-leave policy to include part-time warehouse workers and set up a relief fund, with an initial $25 million for delivery partners such as drivers affected by the outbreak.

The tech giant’s decision to go on a hiring spree and boost worker pay shows the dual challenge companies such as Amazon face as they seek to meet surging demand for food and key household items and also take care of employees at the front lines of the pandemic. Large, well-capitalized companies such as Amazon are moving to meet an extraordinary uptick in orders, writes The Wall Street Journal (March 17, 2020). “Amazon is big enough and powerful enough and decisive enough to take up a significant amount of the slack being caused by all of the shutdowns,” said the former CEO of Sears-Canada. Amazon accounts for 39% of all online orders in the U.S.

The 100,000 new Amazon jobs come at a time when broader retail is contracting and retailers rethink operating physical stores during a pandemic. Apple, Nike. and Lululemon, among others, have announced store closures. With people trying to limit their exposure, customers will rely on companies with e-commerce arms and the ability to rapidly replenish inventory more than ever. Execution so far has been spotty. Struggling with demand, many retailers have had to cancel portions of online orders or significantly delay shipping dates of some items.. The delivery-time windows of online grocers has surged to more than a week in many cities where customers were accustomed to next-day delivery.

Classroom discussion questions:

  1. Referring to Ch. 2 of your Heizer/Render/Munson text, how is Amazon achieving competitive advantage?
  2. What are Amazon’s key success factors and core competencies?

 

Good OM Reading: Learning Painful Supply Chain Lessons–Again

After the 2011 earthquake and tsunami in Fukushima, Japan, many multinationals learned painful lessons about the hidden weaknesses in their supply chains — weaknesses that resulted in loss of revenue and market cap. While most companies could quickly assess the impacts that Fukushima had on their direct suppliers, they were blindsided by the impacts on 2nd– and 3rd-tier suppliers in the affected region.

Almost 9 years later, it seems the lessons of Fukushima must be learned anew as many companies worldwide scramble to identify which of their “invisible” lower-tier suppliers — those with whom they don’t directly deal — are based in the affected regions of China. “Many companies are probably also regretting their reliance on a single company for items they directly purchase”, writes this interesting Harvard Business Review (March 5, 2020) article. Supply-chain managers know the risks of single sourcing, but they do it anyway in order to secure their supply or meet a cost target. Often, they have limited options to choose from, and increasingly those options are only in China.

Risk management principles (which are summarized in Table 11.3 of your Heizer/Render/Munson text) should be applied, at a minimum, to tiers 1 and 2 in company supply chains. Beyond tier 2, the risks should at least be understood. In some cases, it will not be possible to find multiple sources for certain parts or materials. For example, a supplier may possess unique intellectual property; sometimes volumes aren’t sufficient to justify two sources; or multiple sources are simply not available. In these cases, companies need to supplement their traditional sourcing practices with new sources of data and new approaches to understand and mitigate the risks they take on.

When companies have advance knowledge of where the disruption will come from and which products will be impacted, they have lead time to execute avoidance and mitigation strategies immediately — like
shaping demand by offering discounts on substitutes, buying up inventory, booking capacity at alternate sites, or controlling inventory allocations.

This epidemic again teaches that a robust supplier-monitoring system is a basic requirement for today’s supply chain managers.

Teaching Tip: Going On-Line with Your OM Course this Week

Jay, Chuck, and I put our 100+ years of teaching experience together to try to help as we all begin this transition to a coronavirus semester. If you are not using MyOMLab yet, we strongly encourage you to sign your students up (90 day free period if you are using our Heizer/Render/Munson texts). More ideas will follow this week.

  1. Teaching online is not the same as teaching face to face. Be proactive with communication, schedules, and assignments.
  2. Accept that your course will not be exactly as you planned….. and adjust.
  3. Details we assume in the classroom become important with remote students: Maintain context; identify the question, the problem, the post, include the date and time.
  4. Consider how your course material might best be captured: assigned readings, written out mini lectures, screen captures, short videos, etc.
  5. Videos:  If you make and post a video, shoot for 6 minutes or less. Or instead consider using the videos that come with our text (46 company video case studies, 90+ Solved Problem videos, 12 recent grad videos about OM careers).  It’s also possible to have students post their own videos, either recorded through Panopto or even their own phones. This allows for mini-presentations that other students could comment on.
  6. Don’t reinvent the wheel: Use existing resources that come with the text; Power points, videos, existing problems, etc.
  7. Participation: There are multiple ways of encouraging participation online: skype; face time;  group work through discussion forums; Zoom video conference.
  8. Make a schedule … your schedule and the student’s schedule. Be specific about deadlines. be clear about content and time expectations for their posts to each other in discussion forums. Let students know how they can raise questions and when you will be responding. Any online synchronous activities should be scheduled at the same time that the live class had been meeting prior to moving to distance.
  9.  Hybrid approach  You might try recorded lectures for more quantitative content but still have the class meet through Zoom, say, once per week for more discussion-based topics. Zoom’s screen share feature works quite well during a live class. Students primarily focus on the instructor’s computer screen with a small video of the instructor in the corner. And it’s easy to switch from a Power Point slide to Excel to showing a video, etc.
  10. Communications: Remember, the students may be new to this too, so continuing communication is important. Check your email more often than usual. Students may be asking questions at any time of day.

Guest Post: Being an Understanding Professor Under Extreme Circumstances

Our Guest Post today comes from Howard Weiss, Professor of Operations Management Emeritus at Temple University.

Nearly 50 years ago there was a nationwide student strike due to the shooting deaths of 4 students at Kent State University, with over 450 campuses shut down. The similarities between May, 1970 and today are striking. I was a student in 1970 and what I remember most is that all of my professors understood the circumstances and tried to accommodate students while maintaining as much academic rigor as possible.

The transition today from face-to-face classes to online classes is a difficult process. In addition, many students have been displaced and may not have reliable high-speed internet access at their new location. Some will not be familiar with web conferencing technology such as WebEx or Zoom.

Assignments An obvious way to reduce student apprehension is to extend the deadline on written assignments.  Students can submit Word documents through email and you can grade them using Word’s Review tab. If you have been collecting homework problems in class from your students then it is an easy change to have MyOMLab grade the homework. (Pearson has just made the MyOMLab available free for 90 days to all Heizer/Render/Munson adopters). If you usually have students solve problems by hand, consider allowing them to use the text’s free problem-solving software such as Excel OM or POM.

Exams If you have been giving exams that you have written yourself, consider instead using MyLab. The distribution of the exam would be simple and the randomness in the question order and the random numbers in the questions help mitigate students cheating.

Classroom discussions are much different than discussions using a Discussion Board. It is very easy for student replies to overrun the Discussion Board and for students to ignore other students’ responses. Control of the responses is of extreme importance. In addition, students may expect you to be monitoring the Discussion Board 24/7.

Lessons It would be useful for every professor to develop and teach an online course in order to be prepared in the event of any situation, ranging from a minor interruption to the current emergency. The main lesson though is that students and faculty all need to be understanding and compassionate during this troubling time.

Teaching Tip: Coronavirus and Your OM Class

It might be premature, but Chuck, Jay, and I have a suspicion that numerous live classes across the country may be pushed online after students return from spring break infected with the coronavirus. They’ve already done that for at least two weeks at the University of Washington and Stanford. Here are our thoughts about how our MyLabOperations Management can help.

 MyLab is actually perfect in situations like this. Not only can homework, quizzes, and tests be assigned and graded, but instructors may want to turn to other tools to help replace some normal classroom content. This could include the simulations but also assigning quite a few more of the company videos with cases and even referring students to our Solved Problem videos to help explain some of the mathematical content.

Self-contained Powerpoint slides are also available to all students and could be easily accessed. Instructor notes for those slides are contained in our Instructor’s Resource Manual (which is available to instructors on-line through the resource center), as are a number of suggestions for assignments outside of the classroom. Instructors might also wish to use features that they may not have in the past, such as our Active Learning Modules. For discussions and potential real-time interactions with students, instructors can access the MyLab Discussion Board feature or explore the possibilities of “virtual clickers” and other features available within “Learning Catalytics” (see the bottom of the home page in each MyLab course).

We believe that most students would be adaptable enough to move to an online course in the middle of a semester. And we are here to help instructors make the transition. If the switch to online eventually occurs at your school, MyLab has many features that can help.

Here are our emails if you need some help along the way: ProfRender@gmail.com; Munson@wsu.edu; and JHeizer@tlu.edu.

OM in the News: Where Will the Toys Come From?

Toy companies are delaying shipments and new product launches and struggling to fill retail orders as the coronavirus epidemic disrupts the industry’s supply chain, reports The Wall Street Journal (Mar. 2, 2020).

Some toy factories in China, where around 85% of the world’s toys are made, remain closed and others are operating at a fraction of capacity, either because of worker shortages or difficulties securing raw materials and molds to make their products. The disruption is threatening the carefully orchestrated schedule of manufacturing and shipments that delivers Barbie dolls and Nerf blasters to shelves. Some large retailers are searching for alternative products to fill holes in their inventories and considering delaying setting their shelves for the holiday season by a month.

Many toy companies have convened war rooms with daily calls to their Chinese manufacturers for status updates. Some have said they might see their expected output fall by around 25% in the second quarter of the year. Zuru, which makes X-Shot blasters and Bunch O Balloons water balloons, said its factories have reopened in phases over the past few weeks. Zuru installed dividers between workspaces, added extra sanitation stations and implemented other precautionary measures. But the company is thinly staffed due to restrictions on China travel and is operating at just 20% of capacity.

Some larger companies have worked to reduce their dependence on Chinese factories in recent years, with trade disputes recently creating the need for a more diversified base. Hasbro gets about 2/3 of its products from China and aims to reduce that to 50% over the next few years. Mattel makes less than 2/3 of its products in China and most of its two largest brands, Barbie dolls and Hot Wheels cars, are made elsewhere.

Even if the factories start churning out toys faster soon, another challenge will be getting them out of China, as toys will have to compete with iPhones and other consumer products for transportation.

Classroom discussion questions:

  1. What model in Supp. 11 (Supply Chain Analytics) did Hasbro and Mattel follow?
  2. What logistics issues does the article refer to?

OM in the News: Auto Manufacturers Start Flying in Parts

Auto parts shortages could soon hit North American factories

Did you know that cars and trucks are made of about 30,000 individual parts? And a finished vehicle doesn’t get off the shop floor until each of those component parts are in place. “It’s all or nothing,” says one industry CEO. The auto industry is preparing for supply-chain problems from the coronavirus outbreak in China to soon hit vehicle production in the world’s healthiest car market: the U.S., reports The Wall Street Journal (Feb. 29, 2020)

Auto parts made in China generally take several weeks to be shipped via ocean freight to the U.S., a lead time that has so far not had significant impact on U.S. vehicle production. However, with some critical components already in short supply, several car companies and auto-parts suppliers have chartered airplanes or booked space on commercial cargo planes to fly parts directly from China.

Nissan and Toyota are reserving space on commercial cargo planes to ship key electronic parts to their North America plants. Pinch points are even emerging for mechanical parts that have a broader supply base, such as brake pads and door hinges as many auto makers are scrambling to find backup supplies. Tensions over who will cover the cost of airfreight and other added expenses already have escalated, and often lead to months of wrangling between suppliers and auto makers.

Parts shortages already have forced some car factories to close or curb production in Japan and South Korea, and has threatened car output in Europe, where the coronavirus continues to spread. “There is a strong likelihood that there will be disruption of production” at car companies in the U.S. a Detroit exec said. “It will get more serious before it gets better.”

Classroom discussion questions:

  1. How can manufacturers deal with such shortages in today’s global economy?
  2.  What is happening tp vehicle sales in China?