please respond to each of the following postings separately with or without citations
week 6 Discussion respond
1. Jhonny Gomez Orozco
I am glad to share my post corresponding to the DQ’s week #6.
Inventory and Supply Chain Management
One of the most important areas of focus in pursuing operational excellence is improving inventory and supply chain performance. As we have seen, supply chain shortcomings have regularly made headlines during the COVID-19 pandemic. In addressing the following questions, support your response with specific references to this week’s course materials.
Locate and post a link to a news story from the last six months published in The Wall Street Journal or other reputable source about an inventory or supply chain issue. This need not be directly related to COVID-19.
For this exercise I picked the article from the “Wall Street Journal: Where Are the Air Bags? Russia’s Hobbled Auto Industry Struggles to Reboot (1).
Briefly summarize the issue including what went wrong and the impact this had on customers.
The issue resides that Russia’s car industry was brought to a screeching halt earlier this year Within weeks of Russia’s invasion of Ukraine triggering sanctions to the country cutting off the supply of parts and, one after another, Russian car plants stopped production. By May, car production was down 97% compared with a year ago (1).
It was a lacking of airbags, anti-lock braking system sensors, or electronic stability-control technology, an industry standard.
What steps did the organization and/or its supply chain/logistics partners take to address the issue? What was the outcome?
Car making mostly relies on complex global supply chains and just-in-time logistics. Western sanctions cut off Russia’s access to technologies such as computer chips that are needed to operate modern vehicles. So being those external circumstances out of the hand of the industry it wasn’t too much room to maneuver.
Within days, Western sanctions began to hit Lada’s supply of parts such as fuel injectors, anti-lock braking systems, and air-bag modules, according to people familiar with the events who recounted the days of chaos after the invasion. As it exhausted its stocks, Lada began to run assembly lines at slower speeds, and only on certain days.
At Lada’s headquarters, thousands of employees switched their focus from designing the next generation of cars to re-engineering existing ones, without parts that couldn’t be sourced because of sanctions. Engineers trying to rewire Lada models worked from old designs.
Purchasing managers urged local suppliers, some of which had been selling only spare parts to Lada, to increase their volumes to make up for supply lost from Western sources.
“It was a massive refocus,” said one person familiar with the effort inside Lada. “The company was working only on this.”
Lada employees drew up lists of parts they could no longer get from the West. Anti-lock braking systems, for example, were supplied by the German engineering group Robert Bosch GmbH, people familiar with the matter said. “Against the backdrop of sanctions, Bosch stopped deliveries of vehicle components such as anti-lock braking systems to Russia at the start of the conflict and subsequently also to Russian customers,” a Bosch spokeswoman said.
Lada turned instead to Chinese suppliers, but the Chinese versions aren’t expected until next year, the people said
As Lada employees strained to redesign cars, executives in France at parent company Renault explored ways to leave the country. Paying staff costs while not being able to sell any cars was costing Renault’s Russian subsidiary tens of millions of euros a month at a time it was already low on cash, people familiar with the matter said. As it became clear the war would drag on, finding a way to leave became imperative.
Given the information available at the time, what could have been done differently to mitigate the impact on the supply chain?
Political impacts of military conflicts as economic sanctions have a broader and expansive reach into the business and industries that are little room to stretch and mitigate the impact. Furthermore the car industry not being able to do business with current suppliers did well dealing with other sources of the supply chain to restart production.
On the other hand, this unique situation that Russia’s car industry experienced challenges the Sourcing Strategies and put the question mark of whether they were enough suppliers on the market outside of the political spectrum.
Business leaders face another important decision when it comes to sourcing inventory. Will they produce it in-house, or will they have it produced outside the company? Make or buy is a phrase commonly used in inventory management to refer to producing inventory internally, while outsourcing refers to obtaining products and services external to the company (2). In this case, the many suppliers strategy could have saved the car industry in Russia. Many suppliers may be used for commodity products, where purchasing is typically based on price. The suppliers compete with each other, which produces cost savings for the buyer (2).
Thanks and Best Regards,
Jhonny Gomez Orozco
References:
Kantchev & Kostov, Oct 2022, Where Are the Air Bags? Russia’s Hobbled Auto Industry Struggles to Reboot, https://www.wsj.com/articles/russia-auto-cars-lada-reboot-air-bags-11667141126?mod=Searchresults_pos7&page=1.
Lecture Notes Week 6 – JWI 550 (1208).
2. Murali Krishnan Govindan
Briefly summarize the issue, including what went wrong and the impact this had on customers.
I have chosen an article from Wall Street Journal about the Chip Shortages Still Plague Toyota, Some Other Auto Makers. The pandemic has impacted the production of Chips required for auto manufacturing, leading to vehicle shortages and price soaring. Below is the link for the article. https://www.wsj.com/articles/chip-shortages-still-plague-toyota-other-auto-makers-11667280514?mod=Searchresults_pos19&page=1
What steps did the organization and/or its supply chain/logistics partners take to address the issue? What was the outcome?
Overall demand for a semiconductor may be softening, but the world’s biggest automaker says it still can’t get its hands on enough chips (1). The inventory of new cars has drastically reduced in the last few years, and both used and new car prices are soaring above the MSRP price. Overall, the chips are getting better than a year ago. One of the biggest analog chip makers, STMicroelectronics NV, said late last month that its backlog of automotive orders remains well above current and planned manufacturing capacity through 2023 (1).
Given the information available at the time, what could have been done differently to mitigate the impact on the supply chain?
Toyota’s current shortages are caused by chip makers having failed to increase capital investment in certain products, Mr. Kumakura said, without naming specific suppliers or types of chips. Due to the nature of vehicles today, “even if it’s just one type of semiconductor that’s in short supply, a car can’t be built,” Mr. Kumakura said. Toyota said last month it would temporarily give buyers of some models in Japan one smart key instead of two to help ration supplies.
The ability to recover quickly from an unexpected shock is a hallmark of a resilient system. When it comes to manufacturing supply chains, firms often adopt three inter-related strategies to strengthen resiliency (2):
Visibility: The capability to monitor the supply chain, often in real-time.
Buffer: Having multiple sources of supply or holding more inventory.
Agility: The ability to pivot quickly to alternative processes or products.
Toyota has done the right thing to mitigate the impact of the supply chain by reducing the production of cars, providing one smart key, and working with vendors to improve capacity. In addition, it would be better to obtain resources from multiple vendors to buy the chip. The bottleneck for Toyota was with Texas instruments. Toyota’s executive reached out to Texas Instruments, which agreed to add capacity and a road map to build semiconductor capacity for decades.
References:
River Davis. Nov 1, 2022. Wall Street Journal. Chip Shortages Still Plague Toyota, Some Other Auto Makers. https://www.wsj.com/articles/chip-shortages-still-plague-toyota-other-auto-makers-11667280514?mod=Searchresults_pos19&page=1
Sameera Fazili and Peter Harrell. September 23, 2021.When the Chips Are Down: Preventing and Addressing Supply Chain Disruptions. https://www.whitehouse.gov/briefing-room/blog/2021/09/23/when-the-chips-are-down-preventing-and-addressing-supply-chain-disruptions/.