SUPPLY CHAIN MANAGEMENT
All Shook Up
From automobiles to Apple iPads, quake rattles global supply chain
When the earthquake and subsequent tsunami struck northeast Japan on March 11, manufacturers in the region were hit hard. Now, the aftershocks of those events and of the subsequent nuclear incident are being felt throughout the global supply chain.
Immediately following the catastrophe, the focus was on the loss of life and physical damage inflicted by the disasters. But it didn’t take long for organizations across Japan to realize that the battered infrastructure—from damaged roads to disruptions of electricity—would have an impact on a wide range of industries.
In the automotive industry alone, the list of companies that put the brakes on production included Toyota, Nissan, Honda, Suzuki, Mazda and Mitsubishi. The reasons included the rolling blackouts implemented to conserve energy, as well as transportation issues that, according to auto analyst Paul Newton of IHS Global Insight, affected "everything from parts delivery, personnel mobility and shipping activity at the country’s ports."1
And the ripples spread from there. General Motors opted to temporarily shut down a plant in Shreveport, LA, because of a shortage of parts for the two pick-up truck models assembled there.2 That shutdown, in turn, led to the partial closing of a New York manufacturer that provided the engines for the trucks.3
"We’ve already seen production at GM, Ford, Renault and Peugeot being disrupted," said Christopher Richter, a Tokyo-based auto analyst for the Hong Kong-based CLSA investment group. "The auto supply chain is a bit like a house of cards; and there are going to be some surprises popping up in the form of sudden shortages down the line."4
Those shortages won’t be few and far between, either. A month after the disaster, Toyota announced it would reopen its factories sometime between April 18 and April 27—but even then, production would remain at 50% capacity. Nissan and Honda followed suit, saying their facilities would reopen at about the same time, also at half their normal rates.5
The impact of Toyota’s announcement April 8 was felt on the other side of the Pacific, where North American factories were informed of their short-term fates. The automaker said it planned to shut down its plant in Georgetown, KY, for at least four days and its other plants for at least five. It explained the move by pointing out that for the 12 models assembled in North America, 85% of the parts and materials are sourced from within Japan.6
But automakers aren’t the only ones stuck in neutral as a result of the supply chain shakeup. Pick any piece of technology in your home—from your smartphone to your shiny new tablet computer—and you’ll find semiconductors at the heart of the device. Japan is responsible for producing 20% of the world’s supply of semiconductors, and analysts are predicting it’ll be six months before production is back to full capacity.7
That has forced some companies, such as Apple, to shift more of their sourcing to South Korea and its tech stalwarts, including Samsung and Hynix—already the two biggest chipmakers in the world. But even that move carries risk, according to Mike Howard of IHS.
"Nearly half of all global production of DRAM [dynamic random-access memory] occurs in the Seoul area," Howard told Logistics Manager magazine. "If manufacturing were to be disrupted by some event occurring in this small geographic area, the impact on the global electronics supply chain would be devastating."8
—Brett Krzykowski, assistant editor
- Neil Irwin and Howard Schneider, "Japanese Manufacturing at Risk," Washington Post, March 15, 2011.
- Reuters, "GM to Shut Louisiana Plant Due to Parts Shortage," March 17, 2011.
- Elaine Kurtenbach and Sharon Silke Carty, "As Japan Shutdowns Drag on, Auto Crisis Worsens," Associated Press, March 27, 2011.
- Gavin Blair, "Cars After Japan’s Quake," Christian Science Monitor, April 5, 2011.
- Nick Bunkley and Bettina Wassener, "Automakers Adjust Production to Quake-Related Shortages," New York Times, April 8, 2011.
- Bryan Kay, "South Korea Tech Companies Pick Up Slack Left by Japan," Christian Science Monitor, April 8, 2011.
Survey: Manufacturers Remain Optimistic About Growth
Recent survey results show people that are senior managers at U.S. manufacturers are more optimistic about their own companies’ growth than they were in November.
Nine in 10, or 91% of respondents, are optimistic about their companies’ growth in the next six months, up from 81% in November, according to Grant Thornton LLP, an accounting and consulting firm that conducted the survey.
The results also show that 60% of respondents believe the U.S. economy will improve in the next six months, up from 49% of respondents who had that viewpoint in November. Those manufacturers planning to increase hiring in the next six months dropped from 49% in November to 44% in February, when the survey took place.
"We believe that the decrease in expected hiring—despite an overall high level of optimism—is because manufacturing executives feel some uncertainty about the future of manufacturing in the United States," said Wally Gruenes, Grant Thornton’s national managing partner for consumer and industrial products. "Rather than spending scarce resources on employees, manufacturing executives are spending on capital equipment purchases and technology to improve productivity and lower costs in an effort to be more competitive globally."
Technology consumption up
A separate survey shows manufacturing technology consumption in the United States increased 188% year to date in January 2011 compared with the previous year, a sign that U.S. manufacturers are indeed reinvesting to improve productivity.
"Despite the slight decline in orders from December, the January report confirms that U.S. manufacturers are reinvesting vigorously to improve productivity," said Peter Borden, president of the American Machine Tool Distributors’ Association (AMTDA). "As equipment deliveries grow longer and commodity prices increase, factories may continue to make these investments before inflation and other factors raise prices further."
Companies that participated in the survey—released in late March—said they spent $371.41 million on manufacturing technology in January. That’s down 16.3% from December.
For more details from the report, compiled by the AMTDA and the Association for Manufacturing Technology, visit www.usmtc.com/news.aspx and click on "latest press release." For more information about the Grant Thornton survey, visit www.grantthornton.com/boi.
Honorary Member Dies
Yoshio Kondo, an award-winning quality thought leader and ASQ’s 23rd honorary member, has died. He was 87.
Kondo was professor emeritus of Kyoto University in Kyoto, Japan. Before he retired in 1987, he was professor and dean of the faculty of engineering at the university. He also taught at Massachusetts Institute of Technology during a two-year sabbatical. His major interests were human motivation, creativity, leadership and participation in the practice of quality management.
Kondo was a former president of the Japanese Society for Quality Control and a former president and chair of the International Academy of Quality.
He also was a widely published author, having written more than 500 articles and papers, as well as 12 books, including Human Motivation: A Key Factor for Management and Companywide Quality Control: Its Background and Development.
In the citation naming him an honorary ASQ member in May 2004, Kondo was lauded for his "exceptional contribution to the global quality community as a thought leader in the fields of human motivation and total quality management, and his exemplary personal dedication to the promotion of quality throughout the world."
Read more about Kondo’s contributions to quality at http://asq.org/about-asq/who-we-are/bio_kondo.html, as well as a short profile of Kondo published in QP in February 2001 that can be found at http://asq.org/quality-progress/2001/02/asq-news.html.
Survey Shows Toyota Makes Gains in ‘Perceived Quality’
Toyota’s "perceived quality" score rose 4% during the last six months, according to an Automotive Lease Guide (ALG) survey released this spring. Kia, Lexus and Land Rover all scored well in the survey.
In nonluxury brands, Honda came out No. 1 and Toyota finished second. Toyota’s luxury brand, Lexus, finished first among luxury auto brands.
"The continued rebound of Toyota is a testament to the brand’s solid reputation for quality and ownership loyalty," said Eric Lyman, a director at ALG, which is known for predicting residual values on vehicles in its automotive lease guides "Toyota isn’t out of the woods yet, however, as the company faces the repercussions of another large recall earlier this year."
ALG conducts the study twice a year and surveys 3,000 to 4,000 U.S. consumers to gauge perceptions of mainstream and luxury automotive brands. To see the complete study, visit www.alg.com/pdf/pqs_2011_spring.pdf.
Call for Nominations
QP wants to shine the spotlight on the best and brightest young quality professionals making a difference today.
If you know someone who is a young, passionate and up-and-coming quality leader—pushing boundaries and making a difference in quality—submit your nomination to QP.
Editors are planning a feature on those in this under-40 crowd who deserve the community’s respect and attention. Selections will be made based on criteria determined by QP staff.
Be sure to capture the most significant accomplishments, attributes and observations of your nominee.
Visit http://asq.org/qualityprogress/quality-professional/form.html before May 31 to submit your nomination.
Fellow Awarded Ellis Island Medal
Manu K. Vora, an ASQ fellow who has served on the ASQ Board of Directors, has been named a recipient of the Ellis Island Medal of Honor, an award that recognizes the immigrant experience and individual achievement.
Vora will receive the medal during a ceremony this month on Ellis Island in New York. He is chairman and president of Business Excellence Inc., a quality management consulting firm in Naperville, IL. He is also the founding director and president of the Blind Foundation for India, which has raised more than $3.5 million since 1989.
The National Ethnic Coalition of Organizations sponsors the Ellis Island Medal of Honor, which has 102 recipients this year and more than 1,600 since the award’s inception in 1986.
Scholarship Named After Past ASQ President Awarded
Vinod Prabhu has been awarded the Harrington Best Total Quality Management Thesis Award for his MBA thesis, "Six Sigma Report on Reduction of Medication Delivery Turnaround Time for Newly Admitted In-Patients."
The annual award is named for former ASQ President H. James Harrington and was established by the Hamdan Bin Mohammed University in Dubai and the European partner universities.
New ASQ Honor to be Unveiled at World Conference
A new ASQ honor named after Frank M. Gryna will be awarded at this month’s ASQ World Conference on Quality and Improvement in Pittsburgh.
The Gryna Award will recognize the largest contribution to the philosophy, principles or methods of quality management during the past year.
The award’s first recipient is Deborah L. Hopen for her article, "The Changing Role and Practices of Successful Leaders," which appeared in the April 2010 edition of the Journal for Quality and Participation.
Gryna, an ASQ honorary member and the recipient of ASQ’s Distinguished Service Medal in 2002, was an industrial engineer, author and consultant. He’s probably best known for collaborating with Joseph M. Juran on the Juran Quality Handbook and Quality Planning and Analysis.
In addition to receiving the new award, Hopen will participate at a networking session from 10:30 to 11:30 a.m. Monday, May 16, at the world conference, which features nine of this year’s ASQ medalists. Each of the award recipients will present on topics ranging from statistics to lean Six Sigma to standardization.
ASQ’s Education Division is sponsoring a brainstorming session on Baldrige in education at the world conference from 3:30 to 5 p.m. Sunday, May 15. The session will center on strategies for promoting use of the Baldrige education criteria for student success in K-12 schools, colleges and universities.
To help conference-goers plan their days at the conference, ASQ has launched a special mobile website for this month’s world conference. The website, which can be accessed at http://m.asq.org, contains the same information on programs, speakers and exhibitors posted at http://wcqi.asq.org, but its format is more user-friendly for smartphones.
QP ONLINE ON PAPER
Quick Poll Results
Each month at www.qualityprogress.com, visitors can take an informal survey, and we post the results.
Here are the numbers from a recent Quick Poll:
"Where do you stand on the future of the Baldrige program?"
- Fund it privately. 48%
- Federal funding should stay at current levels. 25%
- Federal funding should be increased. 15.5%
- Get rid of the program entirely. 9.5%
- Federal funding should be cut. 1.9%
Visit www.qualityprogress.com for the most recent poll question:
"How does social responsibility factor into your organization’s business plan?"
- Already included.
- In the process of integrating it.
- Thinking about it but want to learn more.
- We don’t plan on including
To help celebrate ASQ’s 65th anniversary this year, each month QP spotlights classic content online. This month, download A.V. Feigenbaum’s 1971 QP article, "Quality Strategy for a Full-Employment Economy."
Word to the Wise
To educate newcomers and refresh practitioners and professionals, QP features a quality term and definition each month.
A term used to illustrate an obstacle to achieving quality or the supposition that quality and productivity improvement are achieved quickly through an affirmation of faith rather than through sufficient effort and education. W. Edwards Deming used this term in his book Out of the Crisis. It was coined by James Bakken of Ford Motor Co.
Source: "Quality Glossary," Quality Progress, June 2007, p. 48. (http://asq.org/quality-progress/2007/06/quality-tools/quality-glossary.html)
Who’s Who in Q
NAME: Chris McLeod.
RESIDENCE: Woodlands, TX.
EDUCATION: MBA from Regis University in Denver.
CURRENT JOB: Vice president of operations at Houston Wire & Cable Co.
PREVIOUS EXPERIENCE: McLeod spent most of his time working in the area of logistics, starting with Pier 1 Imports and Kimberly-Clark Healthcare. In 2001, he joined Houston Wire & Cable Co.
INTRODUCTION TO QUALITY: McLeod’s formal introduction to quality occurred at Kimberly-Clark.
ASQ ACTIVITIES: Participates in ASQ’s Houston section activities and related events.
OTHER ACTIVITIES: Hiking, biking and quality time with family.
PERSONAL: Married to Ivy; one daughter and two sons.
FAVORITE WAYS TO RELAX: Home improvement projects.
QUALITY QUOTE: Right product. Right time. Right place.