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Boeing’s Latest Earnings Foretells Increased 787 Dreamliner Cost Pressures

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Boeing reported earnings for its September ending quarter this week that included some further information regarding the troubled 787 Dreamliner program. Revenues for the aerospace provider’s commercial aircraft division rose 15 percent as a result of stepped-up production deliveries.  However, operating margins dropped to 11.2 percent from 11.6 percent a year earlier. In the earnings report, Boeing’s CFO again indicated that Boeing sells each Dreamliner for less than it costs to manufacture this aircraft, and that the program spending broke through the $25 billon milestone barrier this past quarter.  Boeing utilizes accounting measures that allow it to spread program costs and revenues for the 787 program over a longer multi-year horizon. In its reporting, The Wall Street Journal characterized that development as suggesting that reducing costs on the program is taking longer than expected. This news calibrates with reports in June indicating that Boeing has re-negotiated certain long-term component supply […]


Report That Foxconn is Considering the Building of a High-End LCD Plant

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This week, The Wall Street Journal reported (paid subscription) that global contract manufacturer Foxconn is in preliminary talks to build a high-end $5.7 billion LCD display screen factory in Northern China. According to this report, the CMS is in discussion with the government of Zhengzhou regarding potential investment arrangements. According to WSJ unnamed sources, Foxconn and Hon Hai Precision Chairmen Terry Gou visited Zhengzhou in August and met with government officials to discuss an investment proposal.  The Zhengzhou region is also the home of an Apple iPhone assembly facility. This news is significant in that it would represent Foxconn’s largest investment in component manufacturing and would be an additional sign of further diversification within key downstream strategic components of high tech and consumer electronics supply chains. LCD production requires rather expensive capital investments and the business has had its ups and downs in profitability. In its reporting, the WSJ stated […]


Automotive Service Supply Chains Undergo Even More Stress

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In a published Supply Chain Matters commentary in June, Service Supply Chains Put to the Ultimate Stress Test in the Automotive Industry, we focused on General Motors, which after intense scrutiny from U.S. regulators and legislators regarding faulty ignition switches among multiple models, had recalled thousands of vehicles. At that time, GM had announced a cumulative 44 product recalls involving nearly 18 million previously sold vehicles not only for faulty ignition switches but for various other lingering quality problems. Other Automotive OEM’s have also found themselves under intense regulatory scrutiny, and many elected to err on the side of caution and declare product recalls if there were any concerns regarding vehicle or occupant safety. The result led to a Washington Post headline indicating that one out of every ten vehicles on the road had been subject to a recall notice. That amounts to a lot of motor vehicles. Beyond the […]


Results Announced in APICS Student Team Competition

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A little over a week ago, Supply Chain Matters extended praise and an enthusiastic Tip-of-the-Hat to supply chain and operations professional association APICS Supply Chain Council for its efforts in sponsoring, what we believe to be as the first international student case study competition in supply chain management.  This competition has involved 166 university teams from around the world, consisting of 4-5 students per team, competing on their knowledge and enthusiasm in the broad topics related to supply chain management. The Fresh Connection Global Student contest challenged students to improve ROI for a fictional fruit juice company with average simulation results indicating a 24 percent ROI increase. Earlier today we received word of the winners in this student competition conducted on Sunday, prior to the start of the APICS Annual Conference which wrapped-up this evening. An APICS press release reports that the overall student competition winner was the team representing […]


Constellation Brands- An Example of Bold Supply Risk Management Strategy

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There are many ways to remediate a perceived supply risk management problem and Constellation Brands has just exercised its bold and approach. The beer and spirits producer recently reported fiscal 2015 second-quarter results. While total revenues increased 10 percent, the company had to reverse approximately $37 million of net sales in the quarter as a result of a product recall at the height of the seasonal beer consumption period in August.  This recall was prompted by the discovery that some glass beer bottles contained tiny bits of glass. In what the company describes as an abundance of caution regarding these glass bottles, two million case shipments of Corona Extra branded beer were recalled from wholesalers and retailers during several weeks in August. Perhaps some of our readers experienced the effects of this recall, not being able to drink their favorite beer brand. According to Constellation, there have been no reported injuries […]


More Negative Visibility to Product Recalls and One Supplier in Automotive Supply Chains

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In a June 2014 Supply Chain Matters commentary, Automotive Component Supply Strategy Meets Sensitized Regulatory Environment, we called attention to a published Reuters report indicating that product recalls involving airbags supplied by Japan based Takata Corp. would  expand and involve millions of affected motor vehicles and ensnarl many global brands. That situation has become ever more visible in a multitude of cascading product recalls and urgent consumer advisories involving many auto brands from entry-level to upscale luxury. Today, the National Highway Traffic Safety Administration (NHTSA) issued a high visibility consumer advisory, urging owners of over 4.7 million recalled vehicles to act immediately on recall notices and replace defective Takata airbags due to suspected defective air bag inflators.  Brands involve BMW, General Motors, Honda, Mazda and Nissan and the vehicle models date back as far as 2000-2001. While this advisory notes specific urgency for certain U.S. states and regions featuring warm, […]


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