With the economic challenges many companies are now focused on concerns that key suppliers will not deliver due to financial challenges. Well what happens when a Volcano in Iceland erupts and shuts down your supply chain? That’s exactly what happened to BMW and many other companies impacted by the recent eruption.
As I sit here in [...]
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An interesting article appeared in Bussinessweek.com regarding the new approach that the Chrysler Corporation is attempting with its supply base. Chrysler Chief Procurement Officer Dan Knott is attempting to undo the past few years of hardship that the economy and Chrysler has bestowed on its suppliers. Collaboration around accelerated payments and working capital management will [...]
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In the context of last week’s surprisingly positive job numbers (so surprising in fact that President Obama had to do a last minute rewrite to his speech Friday), two news stories have shared additional good news for US manufacturing. They’re largely anecdotal evidence, but perhaps they show a return of manufacturing jobs to the US for a number of reasons, including hedging against currency fluctuations and utilization of manufacturing capacity.
First, there was news that Daimler AG is moving some production of US bound Mercedes C-class cars from Germany to Alabama. Citing currency fluctuations as the key driver, Daimler officials plan to shift 20% of the production of their most popular model in the US to this Southern US state that is gaining traction in the automotive manufacturing industry. Interesting, the NPR report also points out that Alabama is a “right to work” state that requires far less vacation and other benefits than the 1,800 Stuttgart employees who are losing their jobs enjoyed.
The second story covered the emerging trend of jobs returning to historic manufacturing counties in the US. The AP article focuses on the furniture industry in western North Carolina. The industry has seen a drastic turn-around in the last 6 months, with companies going from layoffs to aggressive hiring to keep pace with demand. In fact, it’s that demand and the lack of a ramped up workforce that proves to be the underlying lesson of the article. Were companies too quick to shed jobs in the last 18 months? Can they ramp up quickly enough or will their customers see shortages in their supplier’s capacity? And is that excess capacity in manufacturing centers enough to draw renewed hiring from domestic, foreign and globally based companies?
These stories probably stir up more questions than answers about the future of manufacturing in the US. For starters, are these just a nice anecdotal case (Daimler) and a statistical blip (manufacturing jobs) rather than the start of a strong, lasting trend? Will the new normal – in regards to global risk from currency fluctuations, shipping/commodity costs, and consumer demand – lead to more jobs being “onshored” to the US and other countries that had fallen out of favor for low-cost countries in recent years? And if we do see more manufacturing jobs in the US, will they last?
What do you think? Where are we headed? Insights, anecdotes and questions are welcome in the comments (leave them anonymously if you must).
Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.
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Last week on SpendMatters, William Busch covered the shutdown at a Canadian Ford Motors factory that was caused by labor unrest at an auto parts supplier facility in India. I provided my views in the Comments, but wanted to share them here as well, since Supply Excellence readers may also have some insights on the topic.
Unfortunately for Ford, this case caught them off guard and demonstrates how tricky risk management can be. You never really know where an impactful disruption might occur. However there are structured ways of being prepared.
Firstly one has to be aware of all the different kinds of risk that might hit you; disruption, financial, reputational or even major disasters like a tsunami. Probably nobody has the resource to cover every possible risk. During my time as global head of procurement, we developed a risk segmentation prioritized by profit at risk. This way one can deploy moderate resources and protect the business where it matters most.
In such an approach, one cannot stress enough how important it is to have solid, up-to-date supplier information. So, supply risk management and information based supplier management are two sides of one coin. You should not attempt one without the other. Fortunately today there are information providers and systems available to help with these tasks. However, this can only help if you get your spend management house in order and know exactly how much you spend for what.
In the past many have shied away from what can appear a daunting task that could potentially devour all of your valuable resources. With structure, good base data and possibly some external help, one can manage comfortably. This appears infinitely better than having to explain why 5,000 cars could not be built and huge sales are being lost.
Uwe G. Schulte’s LinkedIn Profile.
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Yesterday, GM and Chrysler reported that they’ll begin administering the $3.5 billion in TARP funds to their Tier 1 suppliers ($2b from GM and $1.5b from Chrysler, while Ford took a pass on the Fed’s $1.5b offer that would have reached the planned $5b). The money will be used to guarantee the suppliers’ receivables and, [...]
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Last year, Tata Motors’ plan to produce a car for approximately 1 lakh (approx. 2,500 USD) was greeted with equal parts excitement, envy…and skepticism that they could deliver the shockingly inexpensive car. 14 months later, the Tata Nano has arrived. As you can see in the test drive video below, the car drives surprisingly well [...]
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Today the US Treasury announced that they’ll use up to $5 billion in TARP funds to guarantee auto suppliers’ receivables, thus unlocking the liquidity needed to keep the supply chain flowing to GM and Chrysler…AND by extension, the other OEMs since they all share the same web of suppliers. The long awaited move (well, “long [...]
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We’ve spent a great deal of time discussing the plight of auto suppliers and manufacturers, as well as the potential impact of US Treasury actions aimed at this struggling industry. Of course, this has been a very supply side focused look at the challenges and potential solutions. But as any high school economics student can [...]
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President Obama earned some political points recently when he identified the “procurement process gone amok” behind the Marine One helicopter project, whose projected costs have risen from $6.1 billion to $13 billion. Although the new fleet – scheduled for delivery in 2012 and 2019 – has major safety and communication upgrades, the President feels the [...]
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Well, it’s about time. The plight of the auto suppliers and the danger their financial distress poses to the supply chains of the entire auto industry – the Big 3 and foreign car makers like Toyota – is finally getting some attention in the press. But is it too little, too late for many of [...]
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