By now, our readers have been catching-up on our global supply chain look back of predictions and events that occurred in 2011, as well as our corresponding Predictions for Global Supply Chains in 2012.  The year 2011 has proven to be a rather challenging one for supply chain teams from many perspectives, and 2012 looks to be just as challenging.  Many have risen to the challenges and some have succumbed.

As we approach the celebration for the calendar 2012 New Year, we should all take pause and reflect on the blessings of family, friends and professional career.  Much has been accomplished and we often do not take the time to celebrate.

We extend to all our Supply Chain Matters readers our best wishes for a prosperous, healthy, productive and beneficial New Year.

Bob Ferrari, Founder and Executive Editor

In late November this author penned a guest commentary on the Infosys Supply Chain Management blog that outlined our belief that retailers should anticipate different supply chain fulfillment capabilities for the upcoming 2011 holiday buying season.

Because of the reality of a rather challenging year of supply chain disruptions in 2011, we warned on the possibility of retailers not having the most popular and desired products the consumer wanted because suppliers would fall short of meeting holiday demand spikes.  We just posted an updated guest commentary, The Real Headline for the 2011 Holiday Buying Season- Need for Balancing Retailer Online and Fulfillment Process Investments, noting that initial evidence thus far, particularly what occurred at Best Buy again drive home the premise that investments in multi-channel operations (MCO )and responsive supply chain inventory management are often the best complement to effective multi-channel and online commerce plans.

Please share your own comments and observations on the Infosys Supply Chain Management blog..

Bob Ferrari

Disclosure: Infosys Limited is one of other named sponsors of this blog.

In all of the distractions leading up the Christmas holiday in the U.S. and other countries, readers may have missed the headline regarding another explosion occurring at an Apple supplier plant.

Reuters reported that an explosion occurred on December 17 at a manufacturing facility of Ri Teng Computer Accessory Co., a subsidiary of Pegatron Corp, located in Shanghai’s Songjiang Industrial Park.  According to a statement from Pegatron’s CFO, 61 workers were injured with 23 having to be hospitalized.  Reuters noted a report from the Shanghai city government noting that the explosion occurred at about 3:40pm on December 17, at a workshop on the fourth floor of the factory. The facility was designed to manufacture backplanes for upcoming Apple’s iPad products.

The facility itself was reported to under pre-operation inspection and had not started high volume production support operations for Apple.  According to China’s Yi Cai Daily, the Pegatron facility was slated to produce back panel components for the iPad. As reported by Reuters, the incident involves the third explosion in the last 15 months involving Chinese factories belonging to Apple suppliers.  A previous incident in May involved Apple’s prime contract manufacturer, Foxconn, when an explosion killed three people and injured 15 others.  Similarly, the explosion involved the igniting of aluminum dust particles, a byproduct of the manufacturing process.

While some reports speculate a disruption of supply, the real open question is whether this facility was destined to support new product ramp-up for Apple’s pending release of the new version of the iPad.  Pegatron officials report some damage to production equipment but further indicate that adjustments will be made to minimize any disruption. We would concur with other industry analysts that the impact to Apple supply chain flows should be minor.

The explosion however is sure to ignite even more concerns regarding Apple’s supply partners and their track record concerning both worker safety and the safe control of hazardous production processes, and will fuel more legitimate concerns from worker safety groups regarding overall workplace safety.  Apple provides a very high profile target for these efforts.

Apple’s sourcing and procurement teams will no doubt remain busy over the coming weeks in following-up with supplier inspections including reviews of worker safety and handling of hazardous processes. Having been recognized as one of the top global supply chains comes with a responsibility to have teeth to policies directed at supplier responsibility, worker safety and code-of conduct.

Bob Ferrari

The Christmas holiday is fast approaching and we extend to all of the readers of Supply Chain Matters warm wishes for the holiday season, with thoughts of peace and joy for the coming New Year.

In the coming week we will have a limited publishing schedule as we enjoy some down time with family and friends.  We will however pulish some commentary, especially for major supply chain related news.

The holidays provide a great time to pause and reflect on both the current and coming year.  Do take the time to scan Supply Chain Matters for major developments that occurred this year, and our supply chain predictions for 2012 and beyond.

Thank you so much for your loyal readership and continued interest.

Happy Holidays…Feliz Navidad….Buon Natale…Joyeuses Fetes…Frohe Weihnachten…

Bob Ferrari, Founder and Executive Editor

A highly significant supply chain related news story comes this week from Honda Motor Co., one that has the potential to bring significant change to North America based manufacturing.  As the Christmas holidays approach, Honda’s North American and supply chain partner employees will certainly have some cheer.

According to an article published in the Wall Street Journal (paid subscription or free metered view restriction), Honda plans to shift a major portion of its production capacity into North America over the next few years.

The implication for Honda’s current North American production facilities and supporting supply chains are highly significant since the numbers indicate as much as a 40 percent increase in production and the positioning of Honda North America as both a producer for both domestic and global export markets.  If the full plans are implemented, North America would represent more than 50 percent of Honda’s global production capability, with export volumes in the range of 200,000 to 300,000 vehicles annually.

The reasons for this major announcement are fairly obvious and far reaching.  With the continued stubborn strength of the Japanese yen making manufacturing exports highly unprofitable, many Japanese based manufacturers can no longer afford to have the bulk of export oriented manufacturing based in Japan.  This has led to many difficult decisions, not only for Japan’s automotive producers, but high tech and consumer electronics manufacturers as well.  The one high visibility exception has been Toyota, with its chairmen continuing to believe that the company has a commitment to continue to have some export production based in Japan. But even Toyota has begun planning for shifting increased capacity and output to North America and other global based facilities.

The other motivation points to global supply chain risk mitigation. The major disruptions concerning the devastating earthquake and tsunami that struck northern Japan and the monsoon-related floods that impacted numerous manufacturing facilities within Thailand have exposed certain risk vulnerabilities. At the height of the tsunami crisis that impacted Japan, Nissan exported V6 engines from its North America plants to Japan in order to keep its southern Japan plants operating. That action, along with others, caused Nissan to overcome the crisis much quicker than some of its Japan based competitors.

As noted in our 2012 Predictions series, 2011 events have been a wake-up call for globally sourced manufacturers, and global insurance and reinsurance carriers are in the process of re-evaluating high risk geographies, which could result in higher insurance premiums for regions more vulnerable to catastrophic natural disaster.

The prospects for increased manufacturing and automotive supply chain related jobs for the U.S. are obvious.  Supply Chain Matters, however, would add a note of caution.  For North America to become a new source of global export capability there will need to be major investments in supply chain and skills infrastructure.  In the case of Honda, the concentration of North American production and supply chain facilities lies in the U.S. Midwest region (Ohio, Indiana, Ontario Canada), and vehicles will have to be transported to export ports on either the U.S. west or east coasts.  If other Japanese and foreign owned manufacturers also expand, current facilities in the U.S. Southern region would add transportation segments to export-related ports.  With the pending opening of an expanded Panama Canal, U.S. ports could experience a dramatic increase in operations. Air freight hubs such as Huntsville and Nashville would be impacted with increased operational volumes.  With inter-modal trucking and rail capacity currently constrained, port authorities as well as rail, third party logistics and trucking carriers will need to invest in added infrastructure, equipment and productivity tools.  In the area of skills, many U.S. manufacturers complain that they cannot fill existing needs because of a lack of technically skilled people.

Our readers in North America should have one significant takeaway from the implications of this latest Honda announcement.  Now is the time to hold politicians and industry accountable for actively supporting and shepherding the required investments in world class transportation, logistics and skills infrastructure that can sustain North America as a global manufacturing hub and a generator of jobs.

The current Congressional gridlock must move beyond partisan politics and focus on what generating jobs really implies.  Recent opinion polls indicate that the U.S. electorate holds their Congressional legislators in the lowest regards.  News commentators now joke that criminals have higher public opinion ratings.

Supply Chain Matters continues to believe that the U.S. Presidential Commission on Jobs and Competitiveness must include in its recommendations both assessment and specific action plans for needed changes in U.S. supply chain and logistics infrastructure, and Congress and industry should immediately act in concert for active implementation of needs.

As the saying goes, when opportunity strikes, take action!

Job growth is on the doorstep, but it comes with a resolve to action. Get involved and have your voice heard.

Bob Ferrari