Many industry supply chain management teams have a keen recollection of the aftereffects of the Tsunami that struck northern Japan and the severe floods that impacted Thailand in 2011, especially their implications on automotive supply chains.
In a May 2012 commentary published on both Supply Chain Matters and the Supply Chain Expert Community, we pointed out that while Toyota and Honda supply chains were both severely impacted by the floods, the implied winner turned out to be Nissan, who bounced back the quickest of Japan’s big three auto makers. This same resilience was also reflected in the earlier northern Japan tsunami, where the Nissan supply chain team demonstrated stronger resiliency to supply disruptions. Two weeks after the tsunami disaster, Nissan was able to assess all of its suppliers and was able to be the first to resume volume production.
But, as we all know, in today’s dynamic world of business, no company and no organization can rest on its previous achievements, benchmarks or track record. As the lyrics of that popular Eagles tune laments: “in a New York minute, everything can change.”
Thus, late last week, Nissan reported a 35 percent drop in net profit because of sluggish sales in two of its largest markets, China and the United States. Unlike its Japanese rivals, Toyota and Honda, the automaker was not able to seize on the momentum of increased sales in the U.S. market. Production snafus involving core models in the U.S. and the ongoing political tensions between Beijing and Tokyo effected sales in both countries which underpin Nissan’s operating profits. Profit in Nissan’s North America segment dropped nearly 40 percent in the latest quarter.
The Wall Street Journal reported that miscommunication with suppliers caused snafus in the ramp-up of the newly remodeled Altima sedan, Sentra compact and Pathfinder SUV. A production handoff of the Frontier pickup truck among the Smyrna Tennessee and Canton Mississippi plants also experienced snafus. Supply Chain Matters previously noted a product recall involving nearly 14,000 newly designed Altima sedans caused by four transverse link bolts and two power steering rack bolts that were apparently not torqued to the required specification.
In the WSJ reporting, Nissan Vice President Joji Tagawa was quoted as indicating the following: “In an effort to do a lot of things at the same time, there was a bit of disarray that affected production through the end of the year, not only in the U.S. but also for some models in China.”
Perhaps some of readers can relate. Success brings a culture of boldness and aggressiveness, which can be lead to further success, provided feedback mechanisms are allowed to input given realities. A supply chain that performed admirably in the past, now stumbles because events and internal initiatives perhaps got ahead of control mechanisms.
The takeaway is fundamental. No organization can rest on its past laurels, and every organization needs to have vibrant and open feedback to management. As noted in our commentary last May, we as a supply chain community need to continue to have a more risk-aware perspective, along with the ability to effectively communicate which areas need to be shored-up for mitigating operational risk in the future.
Aerospace OEM Airbus’s competitive response to the Boeing 787 Dreamliner is the Airbus A350.
The ongoing grounding crisis surrounding the Dreamliner program has been precipitated by unresolved issues involving its lithium-ion batteries. It should therefore be little surprise that yesterday, rival Airbus announced that it was dropping its previous choice of lithium ion battery power for the A350, in favor of conventional nickel-cadmium battery systems.
The A350 has had its share of previous program delays brought about by the design of more technologically advanced, lightweight composite materials and by various issues involving the global supply chain. As direct competition to the 787 Dreamliner, it is rather late to market, to state the obvious. Airbus expects first flight of this aircraft to occur sometime this summer, with aircraft certification expected sometime in 2014.
According to reporting in today’s Wall Street Journal, Airbus officials indicate that the decision to move away from lithium ion battery power was prompted primarily by schedule, rather than safety considerations. The aircraft is already configured with four individual lithium ion batteries, with the first flight aircraft utilizing this configuration. Airbus plans now call for certification of the A350 with the conventional battery design.
Our readers will obviously come to different conclusions regarding this decision, depending on context, whether design focused, or program focused. In our view, it is good business sense to make this design change now. We note that conclusion from two perspectives. Depending on the final outcome of the ongoing Boeing investigations, there could be additional implications and/or directives associated with the use of lithium ion technology, implications that could add more supply chain turmoil or delay to production schedules. Airbus product design and supply chain teams can now prepare for conventional battery power. Second, with this decision, Airbus adds an additional industry differentiator among the A350 vs. the 787, more conventional and reliable battery backup power, as well as a clearer path to certification and volume production. Again, depending on the final outcome of the ongoing 787 investigations, that differentiator can loom large for current or prospective airline customers.
No doubt, some within Boeing’s supply chain universe will cry foul with the Airbus decision, kicking a competitor hard in the midst of crisis. However, Boeing’s best option is to continue to work toward a speedy and practical resolution of the current crisis, whether it includes sticking with the current design or moving to a more conventional battery power design. The decisions made at this point in time are very key determinants of how each of these aircraft will ultimately fare in the market.
Meanwhile for Airbus, a practical assessment of risk has led to an asute business decision.