As noted last week, some of our readers may be experiencing an “attack page” message blocking access to this blog site.  This situation was caused by a technical difficulty that occurred on April 7, and this site has been since repaired.

We apologize for this interruption and can assure you that this blog continues to exist, and is a safe site.  Google and other search engines have not as yet updated their verification status.

If your web browser continues to block access, you can alternatively access Supply Chain Matters from this URL:

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Reading and commentary functions also work at this alternative site.

Thanks for your continued readership.

Bob Ferrari

I was recently asked to respond to April’s Manufacturing Business Challenge featured by Industry Week.

The problem concerns a hypothetical landscape and building maintenance vehicles manufacturer and are unlike those being asked by many small and medium manufacturers and distributors today.  Like it or not, the business environments in many industry settings have dramatically changed, especially if your business includes continuous product cycles and a volatile supply base.  Many supply chain organizations today find themselves asking a lot of ‘what-if’ types of questions.  An understanding of the difference in approaching ‘what-is’ vs. ‘what-if’ information analysis is the key to understanding what needs to change.  Knowing that you will have a problem, as well as what will cause the problem — before it occurs — is the first step to correcting any problem.  This capability is today’s fundamental building block for supply chain business intelligence.

I trust you will enjoy and benefit from this challenge scenario and my response.

Bob Ferrari

Apple, Inc. this week postponed by one month the international launch of its iPad tablet computer, indicating that it has been unable to keep-up with stronger-than-expected U.S. demand.  My sense is that the international launch was delayed not by unexpected U.S. demand, but by a forecast mix problem.

In a previous Supply Chain Matters posting, Apple Product Forecasting Euphoria Gone Wild, I noted the existence of pumped-up euphoria among various analysts in their predictions of iPad sales.  On the Monday after the weekend launch of the iPad, Apple reported that 300,000 units had been sold either on the weekend or thru pre-orders.  By Wednesday of that week, Apple indicated that more than 500,00 unit sales had been recorded, but also noted that a “large number” of pre-orders were associated with the 3G model previously scheduled to go on sale in the U.S. at the end of April. This 3G model provides connectivity with the AT&T mobile network. This is a different model with an added communication component than the initial  launch unit.

A recent Wall Street Journal article (paid subscription may be required) quotes an Oppenheimer & Company analyst who indicates that “Apple is forcing suppliers to scale up on components (the large sensors for iPad’s touch screens) that have never been mass produced before.”  As noted in our past posting, a teardown analysis conducted by Chipworks, iPad’s initial components are nothing unique, more related to a big iPod Touch.  That implies to me that Apple’s internal supply chain planners are dealing with juggling product mix issues around the initial launch model and the follow-on 3G model.  That is not uncommon with any consumer electronics provider but has very visible effects when it involves Apple because it is so closely watched.  Apple suppliers are well aware of the need for rapid ramp-up but mix of components is one related to the art of forecasting demand among models.

How many and what ultimate mix of iPads actually sold in 2010 will be determined by both the vote of Apple’s consumers and the skill of Apple’s supply chain planners in planning and forecasting model mix.

How do you view this headline? Do you concur that Apple planners are dealing with a forecast mix problem?

Bob Ferrari

One of the most far reaching supply chain disruption events this year may well be underway concerning the effects of the shutdown of all air traffic in certain parts of the continent of Europe.  Large parts of air space around northern Europe are expected to remain closed to air traffic as a result of a moving cloud of volcanic ash that originated from a volcano in Iceland. Thousands of commercial air travelers are currently stranded and ground transportation networks such as bus and rail are currently overwhelmed. About 17,000 flights are impacted for Friday and Germany’s Frankfurt and the UK Heathrow airports, Europe’s busiest have suspended operations for all but emergency flights.

This morning’s Financial Times depicts the situation “as one of the most extensive bans on commercial flights since world war two.” The traveling cloud of ash and debris is expected to migrate to the upper portions of northern Europe this weekend and forecasters are finding it rather difficult to predict when any sense of air traffic normalcy can resume.

On its web site, UPS has acknowledged a disruption to its air traffic and is reminding customers that service guarantees do not apply when transportation networks are disrupted. DHL and FedEx on the other hand seem to remain silent but are certainly impacted.

The obvious impacts for global supply chains dependent on exported shipments will lie in the duration and scope of this disruption.  Since most air shipments tend to be time critical, my sense is that if the situation does not improve by Sunday, firms will experience some economic impacts as air transport carriers try to adjust to the effects of this disruption.  Obviously, this situation bears close watching by procurement planning, logistics and distribution teams.

Bob Ferrari