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Publisher: The McGraw-Hill Cos.
Pub. Date: May 2007
ISBN-13: 9780071492607
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August 22, 2007

Global Supply Chain Woes from the Pros

By T. D. Clark

Despite all the fancy supply chain technology that firms have implemented, or in some cases, tried to implement, there seems reason to be very concerned that even "leading-edge" manufacturers still can't get their arms around what appear to be basic concepts of supply meeting demand.

Case in point: Persistent delays in laptop shipments caused by paint problems and supply constraints have put a crimp in Dell Inc.’s turnaround efforts. So much so, in fact, that some Dell customers might be waiting until October before they receive their orders, thanks to “supply chain problems” in addition to some sort of painting malfunction, according to The Financial Times (via MarketWatch).

What gives? According to FT:

The delays, which surfaced earlier this month, come amid concerns about possible industry-wide component shortages ahead of the seasonally busy back-to-school computer-shopping season. Dell said shipments of its Inspiron and XPS M1330 lines of notebook computers were delayed because of problems with new paint applied to their outside panels — a feature introduced earlier this year as part of an effort to re-energize Dell's flagging consumer PC business.

Considering that the notebook segment is the fastest-growing segment of the PC industry, and accounted for 27 percent of Dell’s $14.6 billion in sales last quarter, I’d say this is a rather damning problem.

Granted, technology can’t fight all of your supply chain battles. But, again, here is an instance of a company that probably has millions invested in a world-class IT infrastructure. Even with a sticky issue like a component shortage, forecasts and expectations could be adjusted to minimize customer service issues easily; at least, theoretically.

Yet Dell is clearly not alone in this type of “oops, we’re missing a piece of our product” slip-up.

Boeing is also feeling the supply chain pain as it relates to the “slow assembly” at its 787 Dreamliner jet’s assembly bay in Everett, Wash., according to The Seattle Times (via The Chicago Tribune). In fact, apparently there are “big structural pieces” missing from the aircraft — even though Boeing says its first flight is about a month away.

The Seattle Times reports:

The airplane on display in July appeared complete on the outside. But it was a partially empty shell, and its engines, vertical tail fin and doors were dismantled after the rollout ceremony to allow installation of systems and interiors that had been left unfinished.

Now mechanics are scrambling to complete the installation and reassembly work. And one report suggests the Everett scramble could have a domino effect down the supply chain. The delay in finishing Dreamliner seems to be creating a bottleneck that is holding up delivery to the Everett operation of sections for the subsequent airplanes — a bottleneck that could stall the rollout of the second airplane for the test-flight program and potentially delay the 787’s certification and entry into service, according to Flightblogger.

(Related, primarily due to increased use in the civil aerospace industry, the market price of carbon fiber saw a 150 percent increase during 2005. Allocation and contracts to Boeing’s 787 Dreamliner and Airbus’ A350 XWB caused supply constraints, and suppliers raised prices to suit. The carbon fiber industry was seemingly unprepared for the demand spike caused by both the commercial aircraft industries and the Pentagon. As such, producers have addressed increasing their capacities aggressively.)

So where is Boeing’s whiz-bang supply chain technology now that the aerospace giant really needs it? Isn’t it supposed to smooth over delays, adjust time lines and above all, avoid bottlenecks?

Perhaps Boeing can learn a thing or two from Apple and the semiconductor business.

According to EE Times Asia, the popularity of both Apple’s iPod and the new iPhone devices is driving up semiconductor spending among the top 10 electronics equipment manufacturers in the United States.

“Companies that engage in design of electronic equipment, such as PCs, mobile phones and TVs, also are responsible for specifying the use of particular chips in the products being developed,” iSuppli analyst Min-Sun Moon said in a statement. “Thus, these companies have a major influence on global semiconductor spending patterns.”

So while the popularity of Apple’s products is putting a major strain on the supply of computer chips, so far Apple looks like it is able to meet demand; and there’s nary a word about other companies that play in the semiconductor space not being able to keep pace.

Are these companies utilizing their supply chain solutions fully? Or is there another reason why the complex semiconductor industry is able to avoid major missteps that plague companies like Dell and Boeing?



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1 Comments

John Shoulders said:

The aerospace industry should concentrate on quality above all other factors in the supply chain. The 787's have a very aggressive production schedule in order to meet current orders and this increases the chance for deviations throughout the entire supply chain. I would not rest easy on that plane having read this article.

August 22, 2007 1:38 PM




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