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Update on Delta Airlines Supply Chain Vertical Integration Strategy

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In the airline industry, the largest cost of services rendered is the cost of aviation fuel followed by direct labor costs. Profitability and overall business financial results are therefore highly dependent on a predictable cost of fuel.   In May of 2012, Delta Airlines made what Supply Chain Matters viewed as a bold initiative in practicing supply chain vertical integration. At that time, Delta purchased a previously idled Trainer Pennsylvania refinery from Conoco Phillips for $150 million. Plans called for an additional $100 million to retrofit the refinery to optimize its ability to refine jet fuel and Delta would subsequently enter into marketing and sourcing agreements with both Phillips 66 and BP PLC to exchange gasoline, diesel and other refined products additionally produced at this refinery for distribution in other retail markets. Delta’s plan was to eventually reduce its annual jet fuel costs by $300 million, along with having the […]


More on a Not So Good Week for Airbus- Open Debate on Product Strategy

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In our previous posting yesterday, Supply Chain Matters highlighted the sudden delay in first customer ship of the brand new Airbus A350. Launch customer Qatar Airways announced that it was delaying delivery of the launch A350 XWB aircraft without citing a specific reason for the postponement. Reports seem to indicate that rather than a major setback, Qatar, an influential and highly demanding airline customer is exercising its negotiating powers. We further echoed reports that a new era of air travel has facilitated a shifting of influence among global airlines in favor of deep-pocketed Middle East based carriers such as Qatar and Emirates. News of this week’s sudden announcement caused Airbus stock to drop over 10 percent on the Paris exchange immediately after the announcement.  It would appear however, that there was other related news that might have prompted the selloff, namely the Airbus investor conference in London where other announcements […]


A Sudden Delay in First Customer Delivery of the Airbus A350

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In our ongoing Supply Chain Matters coverage of aerospace supply chains, we have provided commentaries related to the unique and often demanding challenges of this industry, particularly when it involves the intersection of new aircraft program launch and supply chain management. Thus, we along with others in the business and aerospace community were somewhat taken by surprise with today’s news regarding the new Airbus A350 program, and the planned first customer delivery of this aircraft which was scheduled in just a few days. Launch customer Qatar Airways announced today that it was delaying delivery of its new A350 XWB aircraft without citing a specific reason for the postponement. News of this announcement caused Airbus stock to drop over 10 percent on the Paris exchange. Just last week, Qatar issued a press release setting the date for the exchange of title as December 13. The airline has ordered 80 A350 in total. […]


Ex-Apple Procurement Manager Sentenced- Have We Learned Anything?

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In the summer of 2010, a global supply manager at Apple was charged with wire fraud, money laundering and unlawful transactions in an alleged kickback scheme that involved multiple Apple suppliers. In our Supply Chain Matters commentary in August of 2010, we highlighted the alleged scope of the conspiracy along with a report indicating that the kickback scheme was believed to have dated back as far as 2006. The elaborate scheme was believed at the time to have involved at least three Apple suppliers where confidential information would allow such suppliers to negotiate on more favorable terms with Apple.  The suppliers in question provided mechanical parts, tooling and fixtures related to the manufacture of Apple iPads and iPhones. Information allegedly shared included Apple’s planned sales volumes, product specifications, competitors target prices and bids, which in essence provided overall intelligence on how to best bid for Apple’s business. In late February […]


Report Card on Supply Chain Matters 2014 Industry and Global Supply Chain Predictions- Part Five

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We continue with our series of Supply Chain Matters postings reflecting on our 2014 Predictions for Global Supply Chains that we published in December of last year. Our research arm, The Ferrari Consulting and Research Group has published annual predictions since our founding in 2008.  We not only publish our annualized ten predictions, but scorecard theses predictions as this point every year.  After we conclude the scorecard process, we will then unveil our 2015 annual projections for industry supply chains. As a reminder, our self-scoring process is based on a four point scale.  Four will be the highest score, an indicator that we totally nailed the prediction.  One is the lowest score, an indicator of, what on earth were we thinking? Ratings in the 2-3 range reflect that we probably had the right intent but events turned out different. In our Part One posting, we revisited 2014 Predictions One and […]


Automotive Service Networks Response to Crisis: Update Three- Expanded Recall Involving Suspected Defective Air Bag Inflators

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Supply Chain Matters provides another update to the ongoing crisis involving the automotive industry as unprecedented levels of product recalls continue to stress auto aftermarket service supply chains to their limits. In our last commentary, we noted the colliding forces of regulatory, political, and capacity-restrained automotive replacement spare parts networks may well continue for many more months, and that appears to be exactly what continues to unfold. Once more, when the dust settles, we believe that the industry needs to take a hard look at lessons learned. This week, there were further significant developments related to recalls of alleged defective airbag inflators produced by Japan based supplier Takata. After undergoing additional scrutiny from U.S. regulators, Takata refused to broaden the scope of the defective inflators recall beyond a select number of U.S. States with high humidity concerns.  That action forced OEM Honda, to expand its U.S. recall of suspected defective […]


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