global supply chains – The OM Blog by Heizer, Render, & Munson

OM Podcast #37: Global Supply Chain Vulnerabilities

We hope you’re enjoying summer! In our July podcast, Barry Render interviews Darrell Edwards, professor of supply chain at University of Tennessee Knoxville. Prof. Edwards has decades of industry experience, including at La-Z-Boy, a leading provider of home furniture, where he was Chief Operating Officer. In this podcast Barry and Darrell discuss vulnerabilities in global supply chains.

Heizer Render Munson OM Podcast · OM Podcast #37: Global Supply Chain Vulnerabilities

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OM Podcast #35: A Look at Procurement and AI in Global Supply Chains

Hope everyone is having a great end of their semester! In our latest podcast, Barry Render interviews Chris Calabretta, founder of Silk Road Supply Chain Advisors, which specializes in transforming supply chain operations and procurement and purchasing functions. In this podcast Barry and Chris will be discussing how procurement in global supply chains has been totally refocused since Covid, especially in the area of biologics.

Heizer Render Munson OM Podcast · OM Podcast #35: Procurement in Global Supply Chains

Transcript

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Instructors, assignable auto-graded exercises using this podcast are available in MyLab OM. See our earlier blog post with a recording of author and user Chuck Munson to learn how to find these, or contact your Pearson rep to learn more! https://www.pearson.com/en-us/help-and-support/contact-us/find-a-rep.html

OM in the News: The Supply Chain of the Future

“The supply chain of the future will look like a multiheaded dragon,” said the CEO of a Vietnamese industrial-park. “The era of sourcing from one global manufacturing base in the world is completely over.”

Workers stitching apparel at a factory in Ho Chi Minh City, Vietnam

Under the current U.S. tariff plans (which are subject to change, of course), certain countries with lower tariff rates are set to emerge as relative winners. Mexico, Brazil and India would step up to a bigger role linking China’s vast supply chain to the U.S. market. Those countries would draw investment to replace the current “connector states” in Asia, led by Vietnam and Cambodia.

Products vulnerable to tariffs are toys, videogames, computer parts and smartphones. Vietnam and China supply more than half of the furniture imported by the U.S. Vietnam supplies a third of the sports shoes and a quarter of the solar cells imported by the U.S. China, Vietnam and Thailand make much of the world’s portable computers.

Businesses such as Apple, HP and Nike have invested heavily in Asian countries outside China and moved assembly there, reports The Wall Street Journal (April 6. 2025). This strategy is termed “China plus one.” It was designed to sidestep tariffs imposed by both the Trump and Biden administrations.

Apple, Taiwan Semiconductor, and the South Korean automaker Hyundai have announced large factory investments in the U.S. this year, in line with the administration’s goal of rejuvenating American manufacturing.

But it would be unrealistic to expect labor-intensive businesses such as apparel to return to the U.S. It lacks workers skilled in those industries and a nearby supplier network to keep costs down. U.S. manufacturing employees earned around $103,000 on average in 2023 (including benefits). That is around four times the wage level in China and 2.5 times that in South Korea. Chinese factories could seek to cut costs by sourcing such components as resistors and transformers from parts of China where labor is cheaper.

Many Chinese factories have already relocated to Vietnam. The next place is jumping to India where tariffs are lower.

Classroom discussion questions:

What is your supply chain strategy if you are an Asian manufacturer?
What if you are a U.S. toy company with most production coming from China?

OM Podcast #25: Global Supply Chain Disruptions

In our latest, very timely podcast Barry Render interviews David Panzera, Vice President of Purchasing for FXI, who has 30 years of experience in global supply chains. Dave and Barry discuss disruptions to global supply chains, including increasingly common weather events and the lingering, long-term impacts they have.

Heizer Render OM Podcast · OM Podcast #25: Global Supply Chains & Purchasing

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OM Podcast #24: Andreas Wieland’s New Book–Supply Chain: A System in Crisis

Welcome to our newest podcast. In this podcast Barry Render interviews Andreas Wieland, a professor of Supply Chain Management at the Copenhagen Business School and Editor of the Journal of Supply Chain Management. Andreas and Barry discuss Andreas’ new book, Supply Chain: A System in Crisis, as well as other topics such as the circulator economy and the latest trends in journals.

Heizer Render OM Podcast · OM Podcast #24: Supply Chain: A System in Crisis

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OM in the News: The Role Ports Play in Global Supply Chains

I am taping a podcast in a few weeks with an executive of the Port Of Philadelphia (PA), and in preparation have been learning about how ports operate and how efficient they are.

Maritime transport, it turns out, forms the foundation of global trade and the manufacturing supply chain. The maritime industry provides the most cost-effective, energy-efficient, and dependable mode of transportation for long distances. More than 80% of global merchandise trade is transported via sea routes. A considerable and increasing proportion of this volume (35% of total volumes and 60% of commercial value) is carried in containers.

Containerization brought about significant changes in how and where goods are manufactured and processed, a trend that is likely to continue with digitalization. Major container ports, of which there are 405 in the world, are critical nodes in global supply chains and essential to the growth strategies of many emerging economies. The development of high-quality container port infrastructure operating efficiently has been a prerequisite for successful export-led growth strategies. Such ports facilitate investment in production and distribution systems, expand manufacturing and logistics, create jobs, and raise income levels.

But inefficient ports and terminals cause shipment delays, disruptions in supply chains, additional expenses, and reduced competitiveness. The negative effect of poor performance in a port can extend beyond as container shipping services follow a fixed schedule with specific berth windows at each port of call on the route. Poor performance at one port can disrupt the entire schedule. This, in turn, increases the cost of imports and exports, reduces country competitiveness, and hinders economic growth.

Comparing operational performance across ports has been a major challenge for improving global value chains. But new technologies and industry willingness to work toward systemwide improvements now provide an opportunity to measure and compare port performances (such as vessel time in port) in a reliable manner. The World Bank and S&P’s Global Market Intelligence have recently produced the 2023 Container Port Performance Index (CPPI).

The top-ranked container ports in the CPPI 2023 are Yangshan (China), followed by Salalah (Oman), Cartagena (Columbia), and Tangiers (Morocco). Where do U.S. ports fall in the rankings? None are in the top 10%: Charleston (53), Philadelphia (55), Miami (77), Boston (75), Wilmington (81), NY/NJ (92), Jacksonville (99), New Orleans (167), Mobile (173), Baltimore (189), Tampa (219), Honolulu (224), Virginia (301), Houston (312), Seattle (360), Long Beach (373), LA (375), and Savannah (395).

Why don’t our ports rank higher? Good question. Listen to our upcoming podcast and find the answer!

Classroom discussion questions:

Why is port efficiency an important OM issue?
Why do you think the U.S. ports are not the most highly ranked?

OM Podcast #23: Global Supply Chain Management at Ricoh USA

We are in full swing with new podcasts coming every 2-3 weeks for you this semester. In our most recent podcast Barry Render interviews Todd Ahern, Vice President of Supply Chain for Ricoh, USA, the biggest producer of large printers in the world. Barry and Todd discuss the complexity of supply chains for a global company with facilities in Asia, Mexico, and the US.

Heizer Render OM Podcast · OM Podcast #23: Global Supply Chain Management at Ricoh USA

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OM in the News: The Rare-Earth Supply Chain Issue

The U.S. and Europe would love to cut their dependence on China for rare earths, reports The Wall Street Journal (July 16, 2024). Standing in the way of that ambition are low prices and Beijing’s willingness to throw its weight around to keep the market down.

Rare earths are a set of 17 metallic elements that are an essential part of many high-tech devices.

Rare-earth prices have plummeted this year and are now hovering at 3-year lows. The price of neodymium, a silver-gray alloy, has fallen by almost 20% this year to $50,000 a metric ton. Other rare earths are down even more.

Today, these neodymium minerals are mainly used in permanent magnets for a range of essential household items such as TVs, refrigerators and headphones. Increasingly, though, the magnets also help turn motors in electric vehicles, wind turbines and robots. By 2030, such high-tech products are expected to account for 2/3 of demand for neodymium permanent magnets.

Yet despite the promise of soaring demand driven by the energy transition, prices of rare earths have spiraled downward since 2022. A glut of Chinese supply is one problem. In recent years, Beijing has ramped up production of rare earths. In 2024, China ordered its state-owned miners to produce 135,000 metric tons of rare earths, up 13% from the quota in 2023.

At the same time, demand for rare earths hasn’t lived up to expectations. EV sales, for example, have slowed globally amid wavering consumer sentiment.

China’s overproduction, with its increasingly negative impact on industry profits, only makes sense as part of a broader economic strategy. The country produces 60% of the world’s mined rare-earth minerals. In recent years, it has also tightened its grip on the entire magnet supply chain: It controls 91% of refining activity, 87% of oxide separation and 94% of magnet production.

One theory is that Chinese overproduction is designed to stymie efforts to develop alternative sources of supply. Low prices of rare earths have squeezed margins for Western producers. This situation has long worried the West. The U.S., European Union, U.K., Canada and Australia have all drafted “critical mineral” strategies. To stand a chance of loosening China’s grip on rare earths, the West will need to deploy the country’s own tactics: unprofitable production and long-term thinking.

Classroom discussion questions:

What options do operations managers have with regard to the rare earth supply chain?
Will China’s strategy work?

OM in the News: How Boeing’s Troubles are Affecting its Suppliers

Boeing’s troubles are bleeding out to its supply chain, where uncertainty over production rates has suppliers guessing at how many parts to make to avoid the cost of holding too much inventory, reports Financial Times (May 29, 2024) . It has slowed manufacturing of its workhorse jet, the 737 Max, as it tries to improve production quality following a recent door panel blowout on a flight. And it is facing an FAA deadline to deliver a plan that addresses a “flawed safety culture”.

The production slowdown is testing the resilience of a brittle aerospace supply chain that already has faced years of price cuts and choppy production thanks to Covid-19 and two fatal crashes that grounded the Max worldwide. Without a well-oiled supply chain, Boeing will struggle to deliver jets to airlines clamoring for them, and could destabilize labor in an industry that employs hundreds of thousands of workers.

The FAA has capped Boeing’s production of the Max at 38 per month. (The company is currently building even less). That affects the operations and finances for suppliers. The ones that do a lot of business with Boeing were “feeling the pain at the moment. Everybody was expecting a ramp-up in the production of the 737 and 787. They may have invested in people or capacity to meet that ramp- up, and when they get pushed back, it’s a problem,” said one industry consultant.

Spirit Aerospace, which produces the 737 fuselages, has had its own struggles with quality and has been the most high-profile casualty of the slowdown on the Max. Boeing stopped accepting those fuselages that do not meet specifications in an effort to reduce rework at its own Washington state factory, where rework performed increases the likelihood of manufacturing errors.

Spirit is far from alone. Howmet Aerospace, Triumph Group, Hexcel, Senior and ATI all have been affected by the slowdown on the 737. Triumph, for example, supplies $300,000 worth of equipment on each 737 Max and $1 million worth on each 787. It has slowed ordering materials from its own suppliers. Howmet is now assuming Boeing will produce 20 Maxes a month for the rest of the year, down from a previous assumption of 34. It is planning to deliver lower volumes “to prevent the case where we get caught with a lot of inventory.”

Classroom discussion questions:

What are Boeing’s OM options?
What can its suppliers do?

OM in the News: The Key Bridge Collapse and Auto, Coal and Tofu Supply Chains

A containership plowed into and destroyed a major Baltimore bridge this week, causing deaths and disrupting one of America’s busiest ports. The Singaporean ship, called the Dali, lost propulsion and struck the Francis Scott Key Bridge, sending large sections of the steel truss bridge tumbling into the river below. The collapse severed a part of Interstate 695.

The bridge collapse stands to snarl shipping along the East Coast for months, reports The Wall Street Journal (March 27, 2024). Companies that transport cars and coal, two of the key cargoes that run through Baltimore, are already looking for alternative destinations. The Maryland governor said it would take a “long-term build” to replace the bridge. “There’s no question that this will be a major and protracted impact to supply chains,” said the U.S. Transportation Secretary.

The Port of Baltimore is the 17th largest in the nation. It handled 52.3 million tons of foreign cargo worth nearly $81 billion in 2023, and creates more than 15,000 jobs. Some 800,000 vehicles passed through the port in 2023, making it the top port in the nation for auto shipments. The port ranks second in the country for exporting coal and is a niche port for tofu and soybeans.

All vessel traffic in and out of the Port of Baltimore is suspended. Ports in Norfolk, Va., and the New York and New Jersey area are expected to pick up most of the diverted ship traffic. All East Coast ports have become more important in recent years as the U.S. attempts to boost its trade with friendly nations and reduce geopolitical risks related to trade with China, which generally happens via West Coast ports.

Baltimore port’s suspension is one more disruption in an already-stressed system for the global supply chain. Cargo will now have to be rerouted to other ports, which means figuring out where there is enough capacity to move things. The biggest problem is the effect on other ports. Many ships stuck in the port were destined to make stops at other U.S. ports to load and unload goods before heading overseas, a complicated logistical dance now scrambled.

Classroom discussion questions:

How can supply chain managers deal with a situation like this (which we call a “super-event” in Supplement 11 of your Heizer/Render/Munson text)?
What other events that have impacted global shipping have taken place in recent years? (Hint: think canals)

OM Podcast #17: An Interview with Pfizer’s Global Supply Chain VP

In our latest podcast, Barry welcomes Tom Cheslock, VP of Global Supply Chains at Pfizer. Tom and Barry discuss the massive network of supply chains that support Pfizer’s pharmaceutical business, including their recent success delivering the COVID vaccine to 180 countries around the world during the height of the pandemic. Additionally Tom describes his recent trip to Tokyo to experience the Toyota Production System first-hand and bring new tactics back to Pfizer.

Heizer Render OM Podcast · OM Podcast #17 (3/1/24): Pfizer’s Global Supply Chains

Transcript

A Word document of this podcast will download by clicking the word Transcript above.

OM in the News: Shipping Dangers on the High Seas

Ships today handle more than 80% of global goods. And the modern economy rests on the rule that ships of any nation may sail the high seas. “Suddenly, that pillar of the international order shows signs of buckling,” writes The Wall Street Journal (Feb 1, 2024).

In the Red Sea, Houthi rebels have stormed onto cargo ships, causing freight rates to quadruple and setting a precedent that American vessels aren’t welcome across one of the world’s most vital transport lanes.

Open oceans allowed a global economy to emerge from the wreckage of two world wars. The freedom for all container ships to safely ferry goods on the high seas helped lift China from poverty, turn the U.S. into a country of middle-class consumers and cement the dollar as the world’s reserve currency. Until the 20th century, trading nations competed in blood for the right to ship merchandise to foreign ports; these days they compete on price and quality.

Only eight decades separate the present from a past when most manufactured goods moved by land and a ship was only as safe as the state protecting it. Less than 500 million tons of dry cargo crossed the seas annually in the 1950s. That world was dotted with small manufacturers serving local buyers. Today, container ships carry 23 times more tonnage, integrating a global economy of mammoth conglomerates targeting whichever customer on earth offers the most profit, soonest. That integration has driven down costs, allowing IKEA to cheaply sell identical sofas in 59 countries and McDonald’s to fry Idaho’s Russet Burbank potatoes around the world.

But it has also made car factories, big-box retailers, fashion houses and electronics dealers significantly more vulnerable to even the smallest snags: Witness the tens of billions of dollars in trade held up when a single cargo ship, the Ever Given, ran aground in the Suez Canal for six days of 2021. Or the supply-chain breakdown that unfolded as the Covid-19 pandemic left container ships log-jammed outside Asian and American ports.

Governments from Europe to Asia that have grown prosperous and accustomed to safe seas want to keep maritime chokepoints open, particularly the Suez Canal, the Taiwan Strait and the Horn of Africa. Worldwide, the average cost of shipping a 40-foot container has jumped 2.7-fold in the past 3 months, to $3,964.

Classroom discussion questions:

What can operations managers do to address this risk?
In Supp. 11 of your Heizer/Render/Munson text (see page 477), transportation mode analysis is introduced. How can this model be used to deal with Red Sea disruptions/costs/dangers?

OM in the News: Military Supply Chain Struggles

A Norwegian factory, Kongsberg, produces a missile-defense system that can shoot down drones, helicopters and other airborne threats from 25 miles away. Capable of launching 72 missiles into the sky at once, the Nasams system is what protects the airspace over the White House. Kongsberg, which in addition to Nasams also makes ship-based missiles and parts of F-35 fighter jets, has ramped up production to 24-hour, 7-day shifts. That still may not be enough. With the West confronting a rising number of potential threats, including Russia, Iran, and China, orders are piling up for the Nasams. It takes two years to make one Nasams, and there is already a multiyear backlog.

Israel’s Iron Dome antimissile system intercepted rockets launched recently from the Gaza Strip

Modern weapons are hugely complex, often requiring thousands of parts, reports The Wall Street Journal (Jan. 4, 2024). Kongsberg, like most Western defense firms, designs and assembles its weapons systems but doesn’t manufacture most of the components. Over 1,500 suppliers contribute to the products. The Nasams supply chain alone consists of 1,000 companies and is built across two continents. Kongsberg states: “We are supplied by companies with their own supply chains, which in turn have their own supply chains, which have their supply chains, till it gets right down to the mine that digs up the basic resources.”

In a 2023 wargame simulation of how the U.S. would respond to a Chinese invasion of Taiwan, it was estimated America would run out of all-important long-range antiship missiles within the first week. The U.S. wouldn’t be able to replenish its stock quickly: As with the Nasams, each missile takes about two years to make.

Other missile categories have similar issues. Lockheed Martin said it will take four years to double production of Javelin and Stinger surface-to-air missiles, twice as long as expected, as supply-chain challenges continue. Pentagon officials said the problems were widespread, with everything from chips to springs and ball bearings running short. The U.S. tried to track the global supply chains for the two missiles with the goal of finding workarounds for bottlenecks, said a pentagon leader. His conclusion was sobering: “We do not have that ability.”

The Pentagon aims to map global supply chains for 100 weapons systems in production, down to part number and country of origin. The move is intended to identify pinch points early, and mitigate them by finding alternative suppliers.

Classroom discussion questions:

What is causing the supply chain problems in the defense industry?
How can they be addressed?

OM in the News: What is “Supply Chain by Amazon”?

Supply Chain by Amazon is poised to be a major draw for third-party sellers looking to simplify their logistics — if they can place enough trust in the e-commerce giant, writes Supply Chain Dive (Oct. 16, 2023). The end-to-end suite of services, just launched, is billed as a one-stop shop for sellers’ supply chain needs, helping them avoid juggling multiple logistics providers. Amazon can pick up inventory from manufacturing facilities, ship cross border, store and replenish inventory and deliver to customers, among other services.

Few companies have Amazon’s robust supply chain network and logistics capabilities

Few companies can rival Amazon’s robust supply chain network and logistics capabilities, but it will take more than infrastructure for sellers to fully embrace Supply Chain by Amazon. A key for its success is to ensure sellers are comfortable enough to willingly cede more management of their supply chain to Amazon. One concern Amazon may need to assuage is how it handles data from its users.

Amazon has long faced scrutiny of how it handles seller data, and the recent lawsuit from the Federal Trade Commission also raises issues with the company’s practices. The FTC says that the company corners sellers into using its services and has “failed to adequately protect sellers’ commercially sensitive data, exposing this data to theft and appropriation.”

Sellers still have reasons to lean on Amazon’s expanding supply chain offerings. The fear of giving the company more control is decelerating among brands, as companies face difficulties raising capital and improving their own supply chain efficiencies in an uncertain economic environment.

The suite of services presents a high upside for smaller companies, as it helps them more easily comply with international trade rules and regulations. For large sellers, it may not work as an all-encompassing solution, but it can complement their existing arrangements with traditional freight forwarders and carriers.

One potential gap for Supply Chain by Amazon is its fit with mid-sized sellers, as these businesses would want help in their sourcing from countries beyond China. The cross-border transportation component of the service currently allows sellers to ship cargo only from mainland China and Hong Kong. Amazon has plans to grow its number of origin points and making more products eligible for the service.

Classroom discussion questions:

1.What is the supply chain service that Amazon is offering?

2. What are the advantages and disadvantages of joining Supply Chain by Amazon?

OM in the News: Apple’s Supply Chain and Climate Change

Torrential rains flooded Guangzhou this year, where Apple has 71 facilities.

Few global multinationals have been more vocal and forthright in their ambitions to take on climate change than Apple. Yet Apple’s vast supply chain — comprising more than 400 facilities across 180 regions in nearly 30 countries– stands in the path of some of the most damaging effects of climate change itself, .

Based on global databases of power-generation, extreme weather, flood zones, economic impact and carbon emissions, the very regions most vulnerable to climate change are those with the highest concentration of manufacturers, writes Bloomberg,com (Sept. 26. 2023). This risk isn’t exclusive to Apple. Global companies including Samsung, Sony, and Dell procure from many of the same vendors.

Put simply, the belt of the planet where natural disasters will intensify most rapidly due to global warming — from floods and heatwaves to increasingly powerful cyclones — is precisely the one where Apple has built its manufacturing footprint. It’s most visible in a swath of Asia from India to Japan.

We’ve already seen the damage weather disasters can do to multinational manufacturing operations. Floods across Thailand in 2011 shuttered more than 14,000 businesses, throwing a wrench into global automotive and electronics supply chains that were dependent on low-cost manufacturing. It was the biggest flood disaster in insurance industry history, causing about $55 billion of losses and slowing deliveries of Apple computers as component suppliers were forced to suspend work.

Much of the world has since made efforts to prevent such a disaster. Toyota, a pioneer of JIT, raised the time it held onto its inventory from 30 days to 49 now. Apple’s inventory days increased from 5 to 11 since the 2011 floods. Overall, larger inventories make supply chains more resilient to disaster — but they also cost money because of capital tied up in warehouses. Despite this, the countries in Asia where Apple’s supply chain has been built are also some of those that will be most prone to floods. Power cuts pose similar risks to manufacturers. A heat wave last year left India’s grid on perilously thin margins as coal-fired generators ran short of fuel.

Apple’s plans for greening its manufacturing network illustrate the challenge. The company has called on its suppliers to follow its own path to zero-carbon power by 2030. Yet many of the countries on which it is most dependent have unusually high shares of fossil fuels in their grids, with coal accounting for more than 60% in China and Indonesia, and nearly 75% in India.

Classroom discussion questions:

What can Apple do at this point?
What technique in Supp. 11 in your Heizer/Render/Munson text can be applied to analyze potential natural disasters?