No sooner had we posted our Supply Chain Matters and Supply Chain Expert Community posting on Monday, A Supply Chain In Turmoil- What’s Ahead for PC’s, than the first significant salvo announcement comes to light.

Reuters and other media are reporting that Japan’s Sony Corporation, Toshiba Corporation, and Hitachi Ltd. will together merge their money-losing small liquid-crystal display operations to form a single company to be named Japan Display. Adding more twist is that the new venture will be backed by $2.6 billion of funding from The Innovation Network Corp. of Japan, a government backed agency who will take a 70 percent ownership stake in the combined entity, while each of the merging companies will hold a 10 percent ownership stake. The goal is to complete the merger by 2012 and list the new company as an operating entity by March of 2016.

The Reuters story notes that the announcement is a response to competitors such as Japan’s Sharp Corp, Taiwan’s AU Optronics and South Korea’s Samsung Electronics which are outpacing industry competitors and garnering a good share of long-term supply contracts. The obvious supply chain dominant force is Apple who buys a lot of small LCD’s to support its smartphone, player and tablet products.  Rumors have been circulating that Apple has plans to ramp-up iPad production levels to 10 million units per quarter, while the iPhone is experiencing healthy sales volume in China, which imply a lot of displays. Sharp is rumored to receive a considerable investment from Apple while Samsung has key supply agreements with other high volume smartphone clients including its own smartphone division.

Another twist to this Reuters story is the notation that Hitachi had been in separate talks with Apple’s prime contract manufacturer Hon Hai Precision Industry (Foxconn), about a joint LCD panel venture with Hitachi.  In our recent Supply Chain Matters commentary regarding Hon Hai’s Annual Meeting, we made note of another LCD joint venture with Sharp. Apparently multiple bets are being covered.

At first take, we view two significant takeaways from this announcement.

The first is how government funding was leveraged to insure industry survival of a chosen few providers.  How do you think Sharp feels knowing that three of its Japan based competitors garnered the political influence to provide a competitor that equates to over 21 percent of the market for small and medium-sized displays?  One would suppose that Japan’s leaders viewed this in the same context as perhaps the U.S. bailout of Chrysler and General Motors, to compete against rival Ford Motor Company.  The one nix however was that more jobs and more supply chain capability was at stake in the U.S. and the timing was in the depth of the past financial crisis in 2008.  It is not likely that this action would happen in the current political environment of a government spend crisis.

The second is the most obvious for our supply chain community, the actions and buying influence  power of certain supply chain dominants such as Apple and select others, and how that cascades to volume and profitability pressures in associated supply chains. HP’s announcement and uncertainty concerning its PC and mobile computing business compounded with the business challenges for Nokia and RIM will likely precipitate other announcements in the days to come as the shift from PC to mobile products drives more strategic supply chain decisions.

Bob Ferrari

A year ago there was a massive U.S. product recall involving hundreds of millions of packaged “shell eggs” because of the potential for Salmonella Enteritidis. The eggs, packaged under 13 different brand names, originated from farms in Iowa, the largest egg producing state in the U.S. producing 14 billion eggs per year.  These eggs were distributed to food wholesalers, foodservice companies and supermarkets and because whole eggs are the basis for producing and preparing other food products, there were unspecified aspects as to the total scope of the recall along with the potential for human illness. The incident garnered widespread media coverage with calls for safety.

At the time of the outbreak, the U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) conducted separate investigations to determine the source of the contamination. There was suspicion pointing to the feed provided to the various hens, although no definitive conclusions were made known.  There were suspicions as to the overall sanitary conditions of the egg farms themselves, with national media outlets showing videos of large piles of manure and feces. At the time, Supply Chain Matters and other social media challenged large producers such as DeCoster Farms to do something about the problem so this incident would not repeat itself.

We happened to be alerted to a recent rather eye-popping article published in the Des Moines Register and Tribune, Egg Farms rack up violations.  We wanted to insure that our readers took the time to read this article and pass it along to others.

The article reports that government inspectors continue to find unsanitary conditions and inadequate protections against disease.  Also noted: “None of the violations have resulted in fines or penalties from state or federal agencies, and Iowa’s major egg producers still aren’t required to tell state officials when they find salmonella on their farms.”  It goes on to note that critical elements of FDA inspection reports, such as brand names or size of infestations, are blacked out and are being withheld from the public. There are quotes from food safety experts that statistically, eggs are safe, but not safe enough.  Outlined are significant gaps in the current inspectional system, including the forewarning of farms to an inspection, overlaps and gaps in federal agency inspection authority, and legislative loopholes that exempt certain farms from inspection and reporting.

If you read the article, like some of my family members, one really has to take pause as to the quality and consistency of egg related supply chains. Some of you may not be able to completely get through the article. A tip-of-the-hat to the article’s author, Clark Kauffman, for calling the current stituation to the attention of Iowa and other readers.

Last year, our commentary was that consumers should not be expected to settle for apologies but rather industry-wide actions to address quality of the egg supply.  The United Egg Producers, an industry cooperative representing 95 percent of U.S. production farmers, has outlined a series of food safety actions including a Five-Star Total Quality Assurance Program to ensure consumers get a safe product. Yet, the Register article reports that Wright County Egg and Hallandale Farms, the companies identified in the 2010 recall incident were enrolled in this program but inspectors continued to find violations. Some states are noted as developing their own voluntary inspectional programs, but Iowa seems to be missing.

One year later, the burden of quality and safety should not be on the inspectional system, but rather on the producers to provide quality and consistency. Consumers sometimes have limited options in product consumption, and eggs certainly fill that category.  Eggs exist in many other food and service-oriented supply chains such as restaurants where brands stand on their reputations.

Consumers and producers need to add their collective voices or we all run the risk of yet another outbreak.  The status quo is not going to cut-it.

Add you voice, demonstrate your concern and call-for-action.