global supply chains – Page 6 – The OM Blog by Heizer, Render, & Munson

OM in the News: Pratt & Whitney Grapples with its Supply Chain

Pratt & Whitney has bet billions on its commercial jet engine market, but first, it has to get parts delivered on time. The Wall Street Journal (June 8, 2016) reports that half of the company’s suppliers for its new “geared turbofan” engines aren’t delivering parts and materials at expected levels as seamlessly as the company expected. Some 44% of the company’s 1,600 suppliers weren’t meeting the company’s on-time delivery and quality control targets. “Forty-four percent is the challenge,” said the CEO.

It is the latest hiccup in P&W’s effort to ramp up production of the engine from 15 in 2015 to 200 units this year, and 1,200 a year by 2020. As P&W tries to coax its supply chain into shape, the company is requiring underperforming suppliers to provide buffers of extra parts as insurance against any interruption in production. The firm has more than 7,000 orders for the engine, and says that the new design will offer increased fuel efficiency and thrust while lowering engine noise—big enticements to airlines.

Unlike previous generations of engines, 80% of parts for the geared turbofan will be made by entities other than P&W itself, then shipped and assembled in the company’s engine manufacturing centers in Connecticut, Florida, Canada and Germany. As a defensive measure against production problems, the company says it has tried to double up its suppliers—signing up duplicate makers for many of the engine parts to avoid interruptions. “We have all the capacity we need—the challenge is to get all the parts in on time,” said P&W’s VP for operations. “It’s a dogfight every day.”

Classroom discussion questions:

Discuss P&W’s approach to defend against production problems.
Why is this supply chain problem arising?

OM in the News: Planning for Japan’s Next Earthquake–The Really Big One

A huge earthquake in the Japan’s industrial heartland — costing as much as 40% of GDP and disrupting supply chains at companies such as Toyota — is seen as inevitable, reports The Financial Times (May 19, 2016). Understanding the risk and reducing damage is critical (as we discuss in Supplement 11). The recent magnitude 7.3 earthquake in Kyushu, which killed 49 and destroyed thousands of homes, is a reminder that Japan remains exposed to frequent natural disasters. But a big earthquake directly below Tokyo, in the Nankai Trough, would be an economic shock of global significance. The government puts the odds of a magnitude 8.0-plus Tokyo earthquake at 50% in the next 20 years, 70% in the next 30 years and 90% in the next 50!

A Tokyo region earthquake could be more devastating than the one in 2011 at Tohoku, which left 18,800 dead, thousands homeless and crippled the Fukushima nuclear facility. The global impact of the Tohoku earthquake surprised many. Car plants as far afield as Louisiana and Ohio had to halt production for a lack of parts, from microcontrollers to paint.

Yet Tohoku is on the periphery. Tokyo is a manufacturing heartland, a link in some of the world’s most important supply chains. Fanuc, the world’s leading maker of industrial robots, is based in the region, as are 1/2 the world’s musical instruments (manufactured by Yamaha and Roland), and 1/3 of the world’s Nand Flash memory (by Toshiba), built into every smartphone. But even in this region, two supply chains stand out: it is home to Toyota (which makes 1.6 million vehicles a year there) and to most of Boeing’s Japanese suppliers (which make the 777 and 787 fuselages).

Japanese business learned a lot from the Tohoku disaster. Companies changed their supply chain systems to increase redundancy and have extensive continuity plans. However, even if Toyota’s own plants managed to restart quickly, they are only as resilient as their weakest subcontractors and the regional infrastructure of roadway, ports, and airports.

Classroom discussion questions:

What can firms like Boeing do to protect their fuselage supply chain?
What models in Supplement 11 can be used to deal with this problem?

OM in the News: Apple’s Transparent Supply Chain

Apple stopped short of declaring itself conflict-free because some suppliers might still use smuggling or fraud for small amounts of minerals that might get back to armed groups. — Apple stopped short of declaring itself 100% conflict-free because some suppliers still use smuggling or fraud for small amounts of minerals that might get back to armed groups.

Apple has reached what it’s calling a milestone in supply-chain transparency, saying it’s now auditing 100% of its suppliers for the use of conflict minerals linked to violent militia groups in the Democratic Republic of the Congo, reports Businessweek (March 28-April 3, 2016). The iPhone maker has been working since 2010 to remove minerals connected to these groups from its supply chain, and while it isn’t yet declaring its products totally conflict-free, the company said all of its 242 smelters and refiners of tin, tantalum, tungsten and gold are now subject to third-party audits. That figure is up from about 88% at the end of 2014 and 44% in 2013.

“We could have very easily chosen a path of re-routing our supply and declared ourselves conflict-free long ago, but that would have done nothing to help the people on the ground,” Apple’s COO stated.

Apple, which uses the minerals in its mobile-phone processors, motherboards and screen displays, is required to investigate its supply chain for the presence of the minerals under the 2010 Dodd-Frank Act. The law is meant to choke off revenue to violent militia groups in African nations. More than 1,300 companies file annual conflict minerals reports, but few have been able to fully audit their supply chains and determine if their products are free of the minerals. Only a handful, such as Intel, have been able to say they sell conflict-free products.

To reach a fully audited supply chain, Apple spent 5 years “cajoling, persuading, and even embarrassing suppliers by publishing their names.” Apple has spent hundreds of hours in the region and also kicked out 35 smelters from its supply chain because they wouldn’t participate in the audits. The company started saying in 2014 that it would end supply contracts with companies that didn’t take part in the audits.

Classroom discussion questions:

Why is it so hard to validate Apple’s supply chain in Africa?
Why is supply chain transparency a major OM issue?

Video Tip: Building the New Boeing 787-9 Dreamliner

The wings are being installed onto the plane with heavy machinery

To celebrate the arrival of British Airways’ first 787-9 Dreamliner, it has released a time lapse video showing the aircraft being built at the Boeing factory in Everett, Washington.The behind the scenes footage shows the massive production that is involved in constructing the Dreamliner with parts flown in from all over the world on 747 Dreamlifter cargo planes.

The four-minute video goes inside the plane showing bathrooms being installed as well as galleys, overhead cabin bins and panels being fitted onto the aircraft.The video makes a nice fit to the Global Company Profile on Boeing that opens Chapter 2, Operations Strategy in a Global Environment. We think your students will enjoy it and that it can lead to interesting classroom discussions about global sourcing, assembly lines, project management, and quality.

The wings of the planes are lifted into place as are the engines and finally it is finished with a spray paint of the British Airways logo. British Airways has started flying the new stretched model (20 feet longer than the original 787) to Delhi. Routes to Abu Dhabi, Muscat, Kuala Lumpur and Austin will follow. The Boeing 787-9 Dreamliner seats around 250 passengers, has a flight range of 8,200 nautical miles, and uses 20% less fuel than the 747s.

OM in the News: Corruption’s Impact on Operations Decisions

Operations managers face significant challenges when building effective supply chains across cultures. In our chapter on Location Strategies (Ch. 8), we provide an excerpt from Transparency International’s ranking of corruption in countries across the globe.

“Corruption afflicts every corner of the world,” writes The Wall Street Journal (Dec. 3, 2015). The World Bank states that 70% of Brazil’s companies identified graft as a major problem. In China, corruption has greased the wheels of the country’s long construction boom and turned hundreds of Communist Party leaders into multimillionaires. Just this week, $2 billion meant for Nigeria to buy aircraft and ammunition to fight Boko Haram vanished. The scale of corruption is equally mind-boggling in Argentina, India, Pakistan, Russia and Turkey. The World Bank says that more than $1 trillion of bribes are paid world-wide each year. The World Economic Forum estimates that the cost from global graft is more than 5% of world gross domestic product.

“Chinese President Xi Jinping insists that corruption must be stamped out, but does not address the underlying problem: the Communist Party’s monopoly of power, which continues to create economic imbalances, stifle opportunity and enrich party cronies,” says The Journal.

Corruption doesn’t come from nowhere. It is a result of economic and political institutions that empower elites while shutting out the rest of the country. That empowerment lets politicians, bureaucrats and soldiers grab resources and get wealthy from bribes. What allows them to get away with it is the absence of democratic accountability and effective checks and balances, like the rule of law and press freedom. Without fundamental change in these institutions, it is indeed difficult for OM executives to locate and manage global supply chains.

Classroom discussion questions:
1. Why is corruption such a major OM issue?
2. What can U.S. managers do to assure ethical supply chains?

OM in the News: Toyota Shocks Its Keiretsu Network

Toyota's Akio Toyoda wants his firm's Japanese car-parts suppliers to be more globally competitive — Toyota’s Akio Toyoda wants his firm’s Japanese car-parts suppliers to be more globally competitive

Toyota launched a new Corolla in Japan this year that held a shock for its closely knit Japanese supplier network: a cutting-edge crash prevention system made by a German parts maker, reports The Wall Street Journal (Oct. 29. 2015). Until now, Toyota relied on Denso Corp., a major parts maker and key member of its traditional supplier network. The decision to go outside its traditional network highlights a growing concern within Japan’s auto industry: Parts suppliers, once considered the foundation of the country’s auto export prowess, are losing their edge, especially in next-generation software technologies for safety and autonomous driving.

The Japanese are lagging behind rivals in the innovation race in part due to their de facto control by the big auto makers, a system called keiretsu. This tight relationship enables close communications between car manufacturers and their suppliers, allowing them to fine-tune development of parts, but the insular nature of the groups may have stifled breakthroughs. “The globalization of Japan’s auto parts industry and competitive jockeying mean uncertainty and unpredictability” in a society that values stability,” says a U. of California prof. Toyota is the last of Japan’s Big Three to fully maintain a keiretsu. Nissan dismantled its keiretsu about 15 years ago to slash costs.

“There is no Google, Apple or Uber in Japan to force a rethinking of mobility and the features in a car,” said an industry consultant. “So Mr. Toyoda really has no choice but to look outside of the keiretsu, which concentrates on traditional automotive parts.” Toyoda himself adds: “If Toyota and its keiretsu members don’t get the best information and technologies and remain closed off to external influence, we won’t be able to survive.”

Classroom discussion questions:

Describe the concept of keiretsu. Why is it widely used in Japan?
Why is it not used in the U.S?

Good OM Reading: Sustainable Supply Chains

Climate change is once again rising up the global agenda. Physical climate, and regulatory and consumer preference changes expose supply chains to growing levels of climate risk. This new 21 page report, called Supply Chain Sustainability Revealed, by Accenture, discusses threats and opportunities for companies at the top of supply chains. Findings include: (1) High levels of climate risk in key supply chains, and inadequate supplier response; (2) Supply chains in the US, China, and India are considered ‘vulnerable’; (3) Suppliers in India and Canada are not doing enough to manage climate change risks; (4) Suppliers in Brazil have done the least to manage climate exposures and recent water shortages; and (5) Suppliers who demonstrate a high propensity to collaborate with supply chain partners to reduce climate risk and, and who invest in emission reduction initiatives, deliver the greatest ROI.

The report also shows an increasing level of climate risk management within supply chains, which in turn is generating better climate risk outcomes. Water risk remains a concern – despite its potential for shocks – with 45% of exposed companies surveyed not carrying out a water-risk assessment.

The report states that the onus for changing lies with the customers, the large multinational companies like Wal-Mart whose procurement spending drives the global economy. Accenture writes: “Leading companies already understand their ability to drive change among their suppliers. It is incumbent upon more of their peers to require that their suppliers measure and disclose their carbon footprint, and work with their suppliers to find and, if necessary, incentivize emission reduction initiatives.”

Suppliers, meanwhile, should recognize that it is in their own interest to embrace more sustainable modes of operation. Not only do these offer a means to reduce costs by driving efficiency in resource use, but sustainability is likely to become a key differentiator in the marketplace. The report also urges policymakers must acknowledge their responsibility, and provide regulatory support to encourage companies.

Good OM Reading: The Myth of the Ethical Supply Chain

Inside the Tazreen garment factory after the fire

The anti-sweatshop mania burst into the mainstream in the mid-90’s. Naked people chanted outside the opening of an Old Navy, Jennifer Love Hewitt led an anti-sweatshop protest, Kathie Lee Gifford cried in front of Congress. Nearly every major apparel brand was the target of a boycott campaign. In response, the companies adopted codes of conduct, banning workers under 16 and forced overtime—then expanding to health, safety, and environmental protection. Since 1998, Nike has followed U.S. clean air standards in all of its factories worldwide, while Levi’s gives financial literacy classes to some of its seamstresses. An entire ecosystem of independent inspectors sprung up.

However, it’s not the largest companies that are the issue. In the last 25 years, as the big brands were getting better at monitoring their supply chains, the entire global apparatus of manufacturing shifted. In the fast-fashion era, Western brands couldn’t afford the luxury of working with the same suppliers and ensuring that they meet the company’s standards. Most of them outsourced this coordination to megasuppliers: huge conglomerates that can take a design sketch, split the production between 1,000’s of factories, box up the goods and ship them to stores.

Recall that in 2012, as the fire alarm went off in a Tazreen garment factory in Bangladesh, over 1,200 workers were scrambling to complete orders for Western brands: Dickies, Wal-Mart, Disney. After 100 workers died, NGOs focused on how Wal-Mart was responsible for 60% of the clothing being produced there. But Wal-Mart never actually placed an order with Tazreen. A year before the fire, Wal-Mart inspected the factory and discovered that it was unsafe. By the time of the fire, it had banned its suppliers from using it. So how did its products end up at Tazreen anyway? Wal-Mart had hired a megasupplier called Success Apparel to fill an order. Success hired another company, Simco, to carry out the work. Simco—without telling Success, much less Wal-Mart—sub-contracted the order to Tazreen’s parent company, the Tuba Group, which then assigned it to Tazreen. Two other 4th and 5th tier contractors also placed Wal-Mart orders at Tazreen, again without telling the company.

This lengthy, but highly readable, article in The Huffington Post, is a perfect supplement to your discussion of SCM in Chapter 11.

OM in the News: The “Conflict Minerals” Supply Chain Dilemma

A gold miner digging at an open pit at a mine in the Congo. The Dodd-Frank Act requires companies to disclose whether conflict minerals in their supply chains are connected to violent militia groups in the country.

“Hundreds of U.S. companies are coming up short as they face a deadline to reveal whether their supply chains contain even trace amounts of minerals linked to violence in Africa”, writes The Wall Street Journal (Aug. 4, 2015). The finding illustrates the challenges companies face in keeping tabs on all of the players and materials in their global supply chains. In all, companies shelled out roughly $709 million and 6 million staff hours last year to comply with rules to disclose “conflict minerals” in their supply chains. And next year, they will need to hire auditors to evaluate their results.

“Conflict minerals” include tin, tantalum, tungsten and gold originating from the Democratic Republic of the Congo. That country holds vast reserves of these 4 minerals, which are widely used in a flurry of products, from electronic devices to engagement rings to auto parts.

But tracking materials from more than 2 million miners in the Eastern Congo that smelt small amounts of metals—and determining their links to guerrilla operations—is like trying to “apply modern supply-chain logistics to the 1849 California gold rush,” said one consultant. To track the origin of tantalum, companies often have to dig 4 or 5 layers deep into their supply chains, as the material travels across the globe to various parts manufacturers.

Only 314 companies, or fewer than 24% of the total, reached full compliance with the law. The U.S. Commerce Department was supposed to publish a world-wide list of refiners and smelters that are being used to fund militia groups, but it said in September that the task was impossible.

Classroom discussion questions:

Why are “conflict minerals”, sometimes also called “rare earths”, so important to manufacturers?
What is the supply chain issue being faced by managers?

OM in the News: Troubleshooting Intel’s Supply Chain in the Congo

American manufacturers have for years been under pressure from Congress to avoid buying “rare earths” and minerals from rebel held mines in the Congo. Government commanders and rebel militias in the Democratic Republic of the Congo earn about $185 million annually through the illicit trade of gold and so-called 3T minerals (tin, tantalum, and tungsten)—crucial elements in consumer electronics such as cell phones and tablets. The revenue has financed a brutal ongoing conflict resulting in the deaths of millions of innocent people. Intel no longer wanted to contribute to an economy of suffering. Just recently, reports FastCompany (April, 2015), Intel became the first company to build microprocessors entirely from conflict-free minerals.

But controlling the supply chain process at Intel was not at all simple. Identifying how conflict minerals entered its supply chain was key to eliminating them. Smelting plants, where raw ore is refined, offered one place to trace the origin of minerals, if only the facilities would comply with a transparent auditing process.

Over five years, Intel’s supply chain director, Carolyn Duran, and her team visited 91 smelters in 21 countries, using Intel’s purchasing power to put pressure on smelters to develop and implement an auditing system to track minerals so corporate buyers can source responsibly. The result: Nearly half the world’s 3T and gold smelters have now passed conflict-free audits, shrinking the market for illegally traded minerals and reducing warlords’ profits. Intel hopes to be able to declare its entire product line conflict-free by 2016, inspiring other firms to do the same.

Classroom discussion questions:

1. Why are rare earths critical to the supply chain and which countries supply them?

2. Why did Intel try to set this precedent?

OM in the News: Global Supply Chains and the Port Gridlock

The labor dispute that caused months of gridlock at West Coast ports may be over, but the disruption is expected to redraw the trade routes that goods take to reach U.S. factories and store shelves, reports The Wall Street Journal (Mar.6, 2015). About 1/2 of all U.S. cargo has flowed through these ports, including imports as diverse as sneakers, soy sauce and auto parts. But over the past year, supply-chain managers have increasingly shifted cargo to ports on the East Coast, Gulf Coast and in Western Mexico and Canada in attempts to avoid growing congestion resulting from union slowdowns.

This is bad news for West Coast ports, truckers and railroads already worried that the expansion of the Panama Canal, due for completion next year, would begin to divert more business to the East Coast. Already it is expected to take 3-6 months for West Coast ports to return to normal (29 ships are still anchored outside the LA area ports).

Supply-chain flexibility has become increasingly important since the 2008 economic crash, as businesses have become more focused on keeping inventories lean and scheduling deliveries to arrive just as they are needed. Decisions are made on a day-to-day basis, with the most sophisticated shippers tracking progress of their shipments via cloud-based technology.

The West Coast port chaos is just the latest event prompting shippers to both diversify transportation modes and ports. Hurricanes, a tough winter, or labor issues all can trigger severe product delays or even empty shelves, costing companies tens of millions of dollars. The biggest shippers, including Wal-Mart, Home Depot, and Target, have employed for years what is known in the industry as a “4-corner strategy,” in which networks are expanded to include warehouses at northern and southern ports on both coasts and the Gulf of Mexico. Now even smaller companies are diversifying.

Classroom discussion questions:

1. What is the 4-corner strategy and why is it being used?

2. Why are supply-chain managers concerned about the West Coast port slowdowns?

OM in the News: Valentine’s Day and the Rose Supply Chain

Valentine’s Day is the one day when a red rose is worth 2-3 times more than any other time of the year. The process of getting the roses to market is fraught with risk, middlemen, crazy expense and bad weather. Americans will buy 200,000,000 this Valentine’s Day. It’s a logistical challenge getting these millions of roses to bloom and arrive at the same time.

NPR (Feb. 13, 2015) interviewed Jan Ooms, the owner of Roses and Blooms, a flower shop in Manhattan. NPR: “How much is a dozen roses on February 14?” Ooms: “$80.” NPR: “How much is it on February 15?” Ooms: “$48.” NPR: “That’s almost double.” Ooms: “Yes. If we make a big mistake with Valentine’s Day, it would us cost so much that we would not be able to make it back the rest of the year.

Planning started in November. Ooms figured he could sell 25,000 roses. He called his Ecuador farm supplier every week because the problem with roses is things can go bad very quickly. NPR traveled to Ecuador to continue the interview. Farm owner Juan Torrey was worried: “I’m not sure that the roses will bloom in time. It depends a lot on the weather. It’s a matter of timing. You want to harvest a rose when the bud is perfect. But you also have to harvest before February 6 to get the rose shipped off for Valentine’s Day. There’s not much wiggle room.” In 2010, there was a warm winter and the roses opened a week early. Torrey sold what he could at less than half price and threw the rest away. This year, Torrey has the opposite problem. The weather is chilly, and the buds aren’t open enough. Workers run along the sides of the greenhouse, rolling down plastic walls to keep the flowers warmer.

Fast forward to Valentine’s day. It’s 6:30 A.M. and Ooms is at his shop to meet his roses. They arrived at JFK at 2 A.M. NPR: “Do you get nervous before you open up the boxes?” Although Ooms has solved all the logistical hurdles, he still doesn’t know what the flowers look like. Did they wilt? Did they freeze? Were they ripped apart by customs agents looking for drugs? Ooms: “They look good. They look really, really good. So I’m a happy guy.”

Classroom discussion questions:
1. How is the flower supply chain different from typical manufacturing supply chains?

2. Describe the rose supply chain.

OM in the News: Apple and its Supplier Problems (Again)

Rainto, 12, said he was worried about landslides in the mine he works in Indonesia

BBC’s secret filming of a Chinese iPhone production line showed Apple’s longstanding promises to protect workers were routinely broken (BBC News, Dec. 18, 2014). It found standards on workers’ hours, ID cards, dormitories, work meetings and juvenile workers were being breached at the factories. Exhausted workers were filmed falling asleep on their 12-hour shifts at the Pegatron supplier. One undercover reporter had to work 18 days in a row despite repeated requests for a day off.

Apple responded, saying: “We are aware of no other company doing as much as Apple to ensure fair and safe working conditions. We work with suppliers to address shortfalls, and we see continuous and significant improvement, but we know our work is never done.”

The poor conditions in Chinese factories were highlighted in 2010 when 14 workers killed themselves at Apple’s biggest supplier, Foxconn. Following the suicides, Apple published a set of standards spelling out how factory workers should be treated. It also moved some of its production work to Pegatron’s factories on the outskirts of Shanghai. But BBC’s undercover reporters found that these standards were routinely breached on the factory floor. Overtime is supposed to be voluntary, but none of the reporters were offered any choice. One reporter was housed in a dormitory where 12 workers shared a cramped room.

BBC also travelled further down Apple’s supply chain to Indonesia. Apple says it is dedicated to the ethical sourcing of minerals, but BBC found evidence that tin from illegal mines could be entering its supply chain. It found children digging tin ore out by hand in extremely dangerous conditions. Apple says its Indonesia situation is complex, with tens of thousands of miners selling tin through many middle men. It wrote: “The simplest course of action would be for Apple to unilaterally refuse any tin from Indonesian mines. But that would also be the lazy and cowardly path, since it would do nothing to improve the situation. We have chosen to stay engaged and attempt to drive changes on the ground.”

Classroom discussion questions:

1. Evaluate Apple’s choices.

2. Why is supply chain integrity so important–and so difficult?

OM in the News: A Crack in Apple’s Supply Chain

Shortly before 7 a.m. on Oct. 6, the CEO of GT Advanced Technologies called Apple with bad news: GT, which was to supply Apple with superhard sapphire screens for its new iPhones, had just filed for bankruptcy. The filing surprised Apple. Only one year earlier, Apple and GT had hailed a $1 billion plan to build an Arizona factory that would produce 30 times as much sapphire as any other plant in the world. Instead, the alliance turned into a rare—and public—misstep for Apple, whose strict management of its global supply chain has helped it become one of the world’s biggest companies. “From the making of the first iPhone in 2007, Apple repeatedly has pushed its suppliers to achieve the improbable, while driving hard bargains on price and time to market,” writes The Wall Street Journal (Nov. 20, 2014).

GT’s meltdown underscores the promise and peril for Apple suppliers. An Apple deal can generate billions in revenue. But it also means adapting to huge fluctuations in demand, at razor-thin profit margins and little room for error. “This is not easy money,” said one longtime Apple supplier in Asia. GT’s COO told the bankruptcy court that Apple had turned his company into a captive supplier, “bearing all of the risk and all of the cost. GT couldn’t make a profit at Apple’s dictated pricing.”

Apple turned to GT while seeking to solve a big problem with iPhones: scratched or broken screens. Sapphire is one of the hardest materials on earth, now typically produced synthetically, in furnaces that reach more than 3,600 degrees. It also is expensive—more than 5 times the cost of glass. Apple consumes 1/4 of the world’s supply of sapphire to cover the iPhone’s camera lens and fingerprint reader. Early last year, the company began looking for a much larger supply, to cover the iPhone’s screen. Producing sapphire proved to be the biggest problem. It takes 30 days and costs $20,000 to make a single ingot. Apple claimed more than half the GT ingots were unusable.

Classroom discussion questions:

1. Why did the venture between Apple and GT fail?

2. What issues face companies that supply one major customer?

Teaching Tip: Why Supply Chain Management Matters

When we discuss supply chains in Figure 11.1 in Chapter 11, we take note of not only first tier suppliers, but 2nd and 3rd as well. Sometimes manufacturers do not pay as close attention as needed down the line, but recent disruptions from tsunamis (Japan) and floods (Thailand) have raised awareness greatly. Ford discovered this all too well when its 2nd tier paint supplier (which made the pigment Xirallic used to produce the metallic look in red and black F-150s, Lincolns, Tauruses, and Explorers) was destroyed in the Japanese earthquake.

That is why this graphic is a useful teaching tool. It was developed by Prof. Andreas Wieland at the Copenhagen Business School (Supply Chain Management Research, Oct. 12, 2014).