MoreA recent Mercer report says the problems of supply chain disruption and unpredictability are most acute at companies employing just-in-time delivery, where inventory arrives at the production line exactly when it is needed.
Analysts maintain that heightened security and other measures have caused delays in shipment of critical parts and components from suppliers abroad, which has impaired manufacturing schedules and delivery of products with high "perishability."
Ford Motor Co., for example, shut down five of its U.S. factories shortly after Sept. 11, in part because of late deliveries of components from Canada.
"Although we expect these disruptions to continue, manufacturers should not abandon just-in-time techniques," Mercer says. In the automobile industry alone, it is estimated that companies have saved more than $1 billion a year in inventory carrying costs over the past decade by employing just-in-time strategies. Consultants add that overall benefits in the form of supply chain savings must be weighed against the adverse impact of the recent disruptions and plant closures.
Indeed, Mercer urges manufacturers and others in the supply chain to adapt the way they manage their operations and reassess their inventory management, sourcing and transportation strategies, and to create inventory buffers for critical components-especially imported ones.
"Manufacturers, retailers and suppliers will have to adapt for new contingencies and examine their supply chain design in light of new trade-offs," Mercer analysts conclude.
At the same time, many of our major manufacturing decision-makers are considering new ways of generating efficiencies through work force realignment. The broader cultural implications of such experiments are evaluated in this issue and will continue to be examined as our readers position themselves for the economic rebound.
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