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GE Jet Engine Component Involved in Chicago Explosion Incident Had Manufacturing Flaw


For highly engineered performance products, product design along with sourcing and procurement teams are always attuned to component quality and performance trending or abnormal incidents. ge-cf6-80c2

Late last week, General Electric Aircraft and the National Transportation Safety Board (NTSB) issued a joint investigative update regarding an uncontrolled fiery and explosive failure of a GE CF6-80 engine that occurred on October 28 involving an American Airlines 767-300 aircraft at O’Hare International Airport in Chicago. According to an NTSB release, the aircraft right-hand engine’s stage 2 high pressure engine disk fractured into at least four pieces with the metal fractures being consistent with an “internal inclusion.”  The subject disk fractured into at least four pieces, two which landed upwards of a half-mile from the aircraft.

Source: NTSB

Source: NTSB

Published reports over the weekend point to the possibility of foreign debris somehow being embedded within the special alloy that made up the specific engine disk. It is now being described as a manufacturing flaw. According to a published Bloomberg report, GE believes it has identified a “limited number” of disks manufactured at the same time that may have had the same flaw and further indicates its determination that only one other remains in operation. A letter obtained by Bloomberg notes: “We are currently working with the operator to accomplish removal of the remaining part in service.”  GE indicated in a statement that the company and an unnamed supplier of the Inconel 718 alloy are now reviewing production records for NTSB investigators. GE further indicated that the engine manufacturer has not experienced such a failure for parts made with this same alloy in more than 30 years. More than 4000 of various CF6 engines are in current operating service.

While this remains an ongoing investigation, some observations clearly come to mind.  First, the speed in which GE could trace the production lot origins of the alleged defective disk is a testament to the maturity of existing quality management and control processes. That will surely help in ongoing investigation and determination if other operating engine disks need to be further examined or remediated. Second, the notion that a component alloy has not demonstrated a tendency for failure in over 30 years is a reminder that for highly engineered or high performance components, manufacturers should likely continue to assume that never is never a given.

Detailed component records are mandated among aerospace and commercial aircraft supply chains because of the possibility of incidents that occurred with the Chicago incident. It serves a reminder to all other precision manufacturing supply chains that process control and traceability are necessary investments.

Some Positive News- Samsung Invests $1 Billion in Austin Texas Semiconductor Facility


The news surrounding Samsung to state the obvious has been somewhat negative of late. There is the Galaxy Note 7 smartphone product recall and suspension debacle because of exploding and fire-prone devices. Today there is a U.S. government recall announcement involving 34 models of Samsung laundry washing machines representing upwards of 2.8 million top-loading devices whose entire top control consoles can potentially detach and cause injury.

Not a good time for Samsung public relations.

Supply Chain Matters thought it would perhaps be good to share some positive news.

This week Samsung announced plans to invest an additional $1 billion by the first-half of 2017, in its existing semiconductor operations located in Austin Texas. According to the announcement, this investment will help to meet expected demand for more advanced system-on-chip products, particularly mobile devices.

According to this announcement:

With about 3,000 employees and 2.3 million square feet of space, Samsung Austin Semiconductor (SAS) is one of the largest and most advanced semiconductor manufacturing facilities in the United States. Since 1997, SAS has been at the forefront of manufacturing technology, enabling the world’s digital devices to operate at their highest performance. Today, SAS produces digital large scale integrated components for tablets, smart phones and other mobile devices at its 300-acre northeast Austin manufacturing complex

The announcement includes testimonials on the value that SAS has brought to the Austin community including skilled jobs, education, workforce development and community contributions, and thus we pass that along.

Too often business media tends to emphasize strategic product design and manufacturing investments in emerging or low-cost manufacturing regions, and its sometimes wise to amplify investment commitments in established high-tech regions as well.

As for the newest consumer product recall, that is yet another critical challenge for the Samsung brand among consumer audiences.

Bob Ferrari


Another Quarter and Ongoing Financial Setbacks for a Noted Restaurant Chain


Supply Chain Matters has provided ongoing commentary and has pledged to keep our readers updated regarding the ongoing brand and supply chain related challenges that have impacted Chipotle Mexican Grill. Specifically, we refer to the past series of food related illnesses including E-coli, salmonella and norovirus that date back to 2015.

This week, the restaurant chain announced its September-ending financial performance and, according to financial media sub-headlines, the effects of the prior food safety breakouts that sickened restaurant patrons appear to be still evident.  Chipotle logo

On the financial side, the restaurant chain reported that same-store sales fell by a worse-than-expected 21.9 percent in the third quarter. Profitability dropped by 95 percent, yet that is better than previous bottom-line results.

The chain’s Co-CEO indicated on the briefing call: “. while we are on the road to recovery, we’re not satisfied and we’ll continue to work extremely hard to make the necessary adjustments necessary to restore our business and deliver results as quickly as possible.”

Further indicated: We are focused on delivering a safe and extraordinary guest experience in every restaurant, restoring trust and building sales, restoring our economic model and enhancing the guest experience through innovation.”

Announced were several new initiatives directed at broadening menu options, fulfilling online orders including mobile ordering technology, along with consideration for airing more television commercials.

To further efforts in improving food safety in restaurants and supply chain, the chain’s CFO pointed to an established an independent Food Safety Advisory Council made up of some of the country’s foremost experts in food safety and food microbiology. This advisory council is charged with continuously reviewing food safety programs and looking for opportunities to strengthen them even more. Further indicated was significantly expanded training, food safety inspections, third-party and internal audits of individual restaurants. However, there were statements related to need for local restaurant management to maintain “high throughput.”

On the positive side, there were indications that the chain is adding to regional executive leadership to help improve staff training and the individual guest experience. However, there was another statement: “we are keenly aware that safe food alone will not bring people into our restaurants. Instead, they come for delicious food and an excellent guest experience.” Reiterated was a commitment to serving the best tasting food that is made with ingredients that are raised with respect to the environment, animals and the people that produce them.

Our sense is that sales and marketing efforts still prevail over visible efforts directed at improved food safety and quality. To add that impression, the chain’s Vice President of Marketing was part of the financial performance briefing team, somewhat of an unusual occurrence in these types of events.  This executive took the opportunity to outline three major marketing campaigns that occurred during the quarter, each with different but complementary objectives. The first was a food safety advancements campaign designed to communicate what has been done to ensure the safety of the chain’s food. The other two campaigns were directed at love of Chipotle and on the quality of its ingredients. Food giveaway coupons were further part of such campaigns. The chain’s marketing executive further pointed to paid research of loyal patrons indicating a 90 percent sentiment that the chain has appropriately addressed the food safety issues, and that trust has risen to pre-crisis levels.                                                                                                                                                                                                                                                                       In our February blog commentary, we observed that the restaurant chain had entered what we believed was a new critical phase, one focused in rebuilding its brand integrity along with assuring that food safety practices were re-addressed across the supply chain and within its individual restaurants. We had consistently perceived that perhaps the chain was more focused on emphasizing broadened sales and marketing focused initiatives to bring previous loyal patrons back as opposed to efforts at expanding food safety practices across the supply chain. That now appears to be changing somewhat.

One fact remains with Chipotle.  Neither U.S. government regulators nor Chipotle ever definitively identified the specific root causes of the prior disease outbreaks. That is the irony and the ongoing challenge since many suspicions were identified that included food sourcing with the chain’s supply chain. While there have been no subsequent incidents, we continue with the view that prior loyal patrons are obviously either unconvinced or have moved on to other experiences. This author for one, remains of that view,

We all know that supply chain snafus, especially those related to food safety, can and will have a lasting effect for businesses. In the specific case of Chipotle, that effect continues and so does the rebuilding of brand and supply chain food safety trust.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

Volkswagen Reaches Major U.S. Milestone- Financial Settlement Regarding Emissions Scandel


Supply Chain Matters provides an update regarding ongoing brand crisis involving Volkswagen, specifically its customers and franchised dealers over the diesel engine emissions alteration admission scandal that occurred over a year ago, and that continues to move toward action plans and financial compensation.

Yesterday the global auto maker was granted final court approval related to a $14.7 billion settlement with U.S. based consumers, dealers and government agencies.

This agreement allocates upwards of $10 billion to allow the 475,000 existing owners of two-liter powered diesel vehicles the option of either selling back their vehicles to Volkswagen, or wait for a government approved vehicle repair that would allow such vehicles to remain in operation on U.S. roads. The impacted models include Beetles, Golfs, Jettas, Passats and Audi A3’s dating back to model year 2009. Vehicle owners will further benefit from additional cash payments that can range as much as $10,000 per owner. Owners have until September 2018 to make a final decision as to whether to turn-in their vehicles or have them repaired to meet emissions specifications. There are current indications from media and industry sources that most current owners may elect the vehicle return option, which as this blog noted previously, sets-up an interesting reverse supply chain challenge in terms of salvage or recycling of such vehicles for non-affected components.

As indicated in our blog posting earlier this month, over 600 U.S. dealers themselves are expected to be compensated upwards of $1.2 billion for the financial hardships of lost sales, damaged reputations and declines in dealership value that has been precipitated by the emissions scandal.

The court settlement further requires the automaker to contribute $2.7 billion over three years to an environmental trust to remediate the pollution caused by the diesel-powered vehicles. According to judge that approved the settlement, the beneficiaries of this environmental trust can include projects that reduce nitrogen-oxide emissions in freight related trucks, buses, ferries or airport ground transportation equipment. That would indicate a bonus for environmental initiatives related to transportation and logistics.

Also included in the settlement is the automaker’s investing upwards of $2 billion over the next decade into the design of zero-emission vehicles. Industry media believes that VW will now concentrate more on electric and hybrid powered vehicles and this may well be the death knell for VW diesel powered vehicles for the U.S. and perhaps other countries as well.

Owners of the larger 3.0-liter vehicles that were impacted by the emissions alternation are still waiting terms of a financial settlement along with an expected repair procedure. That will likely add further financial impacts to Volkswagen, as will be further settlements involving other countries.

As noted in our prior blog commentaries related to this ongoing VW emissions incident, the global automaker will continue to experience painful lessons, both organizational, design and financial related.  The one positive, if there is one, is that management remains committed to addressing the mess created in an expedient manner.

A company noted for a somewhat tops-down management style and an engineering-driven culture and among one of the two top global producers will learn some tough lessons because of this scandal. Further, the industry will adsorb some key learning regarding balancing the pressures to introduce market-leading innovative products on a timely basis with organizational tendencies to cover-up potential hardware or software design flaws.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Wal-Mart, IBM and Tsinghua University Announce Joint Collaboration on Food Safety Tracking Technology


This week, global retailer Wal-Mart along with IBM and Tsinghua University announced a joint effort to improve the tracking and movement of food products across China in an effort to improve overall food safety.  The government of China has identified food authentication and supply chain tracking as a critical concern to quickly find and eliminate sources of food contamination within the country.

This announcement bears watching among consumer goods focused supply chains since this new effort will be leveraging what is termed as blockchain technology. This form of technology is increasingly being identified by supply chain focused technology providers for applicability in providing higher levels of intelligence regarding the movement of materials across a supply chain or B2B network. In essence, it fosters the sharing of data and information across a network of computers and as noted in the announcement, is gaining broader recognition due to its applicability in recording and keeping track of assets and materials. This form of technology currently powers digital bitcoin currency use.

According to IBM, when applied to the food supply chain, product information such as farm origin details, batch numbers, processing data, expiration dates, storage temperatures and shipping details can be digitally connected to food items, and the information is entered on the blockchain at every step of the process.

The technology can further aide retailers such as Wal-Mart in managing the shelf-life of products within individual stores and in having access to the traceability aspects of the product’s supply chain. In the specific applicability to Wal-Mart, the announcement indicates that the retailer plans to utilize IBM Blockchain based on Linux Foundation’s Hyperledger Project, which is an open source software project approach that builds on blockchain tools.

Obviously, the closest applicability for the leveraged use of blockchain technology is in current B2B EDI messaging networks that record various movement and transactions among various supply chain trading partners. While attending the recent IBM Empower 2016 conference, executives made mention of upcoming announcements related to IBM’s Sterling Commerce B2B technology and future applicability for this technology.

OpenText, another major B2B technology network provider has also indicated a development direction that augments existing EDI and transactional messaging with broader analytics capabilities.

The takeaway for readers is to begin to consider the possibilities for utilizing EDI messaging and other transactional, content, and unstructured data passing along B2B trading networks as sources of broader supply chain intelligence and analytics related to needs in regulatory compliance, traceability and reduction of waste.

We believe there will be more initiative announcements forthcoming such as the one from retailer Wal-Mart, initiatives that will leverage B2B trading network information towards efforts to integrate value-chain physical flows with needs for broader intelligence and analytics related to more-informed and timely decision-making.

Stay tuned.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


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