Archives for "Industry News"
No capacity for capacitors: How world issues impact product development and supplier selection
I have recently been talking to people in small and mid-size businesses about their goals for this year and the challenges they face. New product development is on many companies’ list of goals, but blocking it—the supply of parts. I expected to hear about delays from suppliers or contract manufacturers (CMs) who reduced capacity during the downturn and are now trying to balance their hiring efforts with returning business. (And I did hear some of those stories.) What surprised me was not that part supply was delaying products, but that the decreased supply is often caused not only by problems like the worldwide economic crisis, but also by global issues like political turmoil in Africa.
I heard about product launches being delayed because of a capacitor—specifically a tantalum capacitor. Tantalum capacitors are common in high-tech devices because of their high reliability, small package size and high maximum operating temperatures. Prices and lead times for these parts are increasing because of a drop in the availability of the element tantalum.
The 2008 closing of an Australian tantalum mine, which contributed more than a third of world tantalum production, was a major cause of that decrease. Those facilities shut down when the market price for tantalum was too low and mining the material was no longer profitable. Although this has happened before, and prices are high enough now that Australian production is expected to restart soon, in the meantime manufacturers are left with a difficult choice.
Tantalum mines are also located in Africa, in a part of Congo that has been politically unstable for a long time. At a minimum, the supply of tantalum from this region is unreliable due to war. Worse, to get raw tantalum from Congo, capacitor companies must do business with brutal militias who do horrible things to women, children and each other.
Minerals like tantalum are being called “conflict minerals” and being compared to the “blood diamonds” mined in other parts of the continent. In a recent blog post and New York Times op-ed piece Nicholas Kristof calls for companies making electronic gadgets to demand that their capacitor manufacturers not only state that they use conflict-free materials, but also provide proof of it. Groups like Run for Congo Women and the Enough Project (with its Raise Hope for Congo campaign) are working to raise awareness about this issue through efforts like this Mac vs. PC video spoof that suggests an unsettling similarity between the two types of computers:
Awareness of the Congolese conflict minerals has reached Washington, D.C. An amendment to the financial reform bill currently in front of Congress calls for companies to disclose any materials in their products that originated in Congo or adjoining countries. If that bill gets signed into law, it will surely help. But will it be enough?
And what about other minerals and other regions? A recently published study shows that war-torn Afghanistan is rich in elements important for manufacturing, including lithium, a primary component for new battery technologies. How will this discovery impact Afghanistan? Tantalum and other key elements for electronics manufacturing could have helped improve the life and living conditions of the Congolese people instead of continuing to promote and perpetuate war. Can the elements found in Afghanistan be used to help bring stability and wealth to the region and not cause further violence?
As end users start demanding conflict-free contents in their devices, manufacturers will want to think hard about the choices they make as they design and source their next product.
AMR Research spotlights supply chain standouts in 2010 Supply Chain Top 25 report
AMR Research has just released its 2010 Supply Chain Top 25 list, and for the third year in a row, Apple is in the #1 spot. The annual report’s goal is “to raise awareness of the supply chain discipline and how it impacts business” by recognizing companies that deliver both operational excellence and innovation excellence. In fact, this year’s report mentions a recent study by researchers from University of Alabama and Texas A&M, led by Dr. Alex Ellinger, that used the Altman Z-score to show that companies in the Supply Chain Top 25 do enjoy greater financial success than their competitors.
To be considered for the Supply Chain Top 25, companies must be large, public companies in the manufacturing or retail sector; most are among the Fortune Global 500. Working from a master list of companies, researchers rank companies with a formula that gives equal weight to financial measures (inventory turns, return on assets (ROA) and revenue growth) and opinion (votes from a peer panel and an AMR/Gartner panel). According to the report’s authors, Kevin O’Marah and Debra Hofman, these rankings help show “which companies are furthest along toward the demand-driven ideal of supply chain excellence.”
After Apple, the next companies on the list are Procter & Gamble, Cisco Systems, Wal-Mart Stores and Dell. The figures to the right list the complete 2010 AMR Supply Chain Top 25, along with scores and rankings, while the full report offers a snapshot of each company’s supply chain successes. The diversity of the Top 25’s collective accomplishments is notable and makes the report an interesting read. About Apple, for instance, the study authors say:
“Apple has broken new ground in the area of transforming its supply chain into a value chain, starting with the consumer experience and designing its network to serve that master first and foremost. This means demonstrating some of the behaviors we look for in Top 25 companies, including embedded innovation, networked supply and demand shaping. It’s also instructive that Apple, which most observers think of primarily as a design and software company, in reality has a vertically integrated value chain that reaches from logo-bearing, pure-play retail all the way back to superfast chipmaker Intrinsity, which was recently acquired by Apple to ‘steal a march’ on competitors looking to enhance the performance of mobile devices. Not shying away from any operational challenge, Apple’s value chain controls its most strategic nodes all the way from silicon to synapse.”
PepsiCo (#6) is cited, among other reasons, for the “increasingly high-profile role being played by CEO Indra Nooyi on matters of social justice and consumer health. These initiatives appear to be more deeply embedded in daily operations than what’s typical and may offer benefits in the future as emerging markets increasingly drive profit growth.”
The report lauds Intel (#18) for a new supply chain strategy focused on “cut[ting] cycle times by as much as half and accelerat[ing] planning in order to simultaneously double the rate at which customer requests can be met, while still dramatically reducing unit costs.” In the authors’ opinion, this “is a testament to the potential of applying supply chain principles across the entire business rather than in functional silos.”
While the report focuses on the accomplishments of large companies, it offers a number of recommendations that small and mid-size manufacturers may wish to consider too:
* Apply demand-driven principles to coordinate and integrate the functional areas of supply, demand and product management in order to better sense, shape and respond to changes in market demand.
* Take a cue from the leaders when designing your own supply chain strategy. Think outside in, starting with your customers and working back through your trading-partner network to design a profitable response. Remember that one size does not fit all. Define how many supply chain types you have and design a customized response for each.
* Balance operational excellence with innovation excellence for superior overall performance.
* Focus on acquiring, mentoring, growing and retaining supply chain talent.
* Measure your supply chain as your customer experiences it. Use the right supply chain and product metrics to consciously manage performance, and foster a culture that embraces measurement for continuous improvement.
[source: AMR Supply Chain Top 25 for 2010 report]
To learn more about the study methodology and read about the supply chain accomplishments of the companies on the list, read the full AMR Supply Chain Top 25 for 2010 report on the Gartner website.
New IDC survey cites importance of improving product quality
An article in Supply & Demand Chain Executive reports on new research from IDC Manufacturing Insights and IDC Retail Insights. The “Business Strategy and Supply Chain Innovation” report finds that:
Improving product quality is the top supply chain initiative for manufacturers and retailers this year, a reflection of the growing number of recalls in categories such as automotive, toys and grocery and increasing pressure on brands from retail private label.
IDC surveyed 415 manufacturers and 179 retailers in the United States for the report. A complete summary can be found in the SDCE article.
AMT & AMTDA report first quarter manufacturing technology consumption up 33.7%
The American Machine Tool Distributors’ Association (AMTDA) and the Association for Manufacturing Technology (AMT) report that March U.S. manufacturing technology consumption (USMTC) totaled $258 million. According to the AMT website:
This total, as reported by companies participating in the USMTC program, was up 58.1% from February and up 49.5% from the total of $172.59 million reported for March 2009. With a year-to-date total of $548.53 million, 2010 is up 33.7% compared with 2009.
The USMTC report provides regional and national U.S. consumption data of domestic and imported machine tools and related equipment. It’s considered a leading economic indicator, as investments in capital metalworking equipment are generally made for the purpose of increasing capacity and improving productivity.
More details can be found on the AMT website.
Don’t let a natural disaster spell disaster for your business
As a business headquartered in California, disaster preparedness has been a must since our earliest days in operation. Yesterday’s tragic earthquake in China and the spate of recent earthquakes in Haiti, Chile, Taiwan, Turkey, Indonesia and Mexico—not to mention the blizzards, extreme weather and power outages that affected nearly every part of the U.S. during the winter—are reminders that every company should have a plan for how to continue its most critical operations in the event of a natural or other type of disaster.
Many companies already know what they’d need to do to ensure continuous operations, but if yours doesn’t, the best way to start is to identify your most important priorities and figure out what steps you can take to make sure no disaster will prevent you from delivering on them.
As an example, at Arena we provide software for capturing product data and managing product development. After the safety of our people, what’s most important is making the Arena service continuously available, and we’ve gone to great effort to make sure this happens. Our primary site has full internal redundancy with automated recovery mechanisms, and we maintain a full-capacity disaster recovery site. We choose vendors carefully and fully qualify their products before relying on them in production. (Our collocation providers, for example, are officially designated as “critical infrastructure” and thus have priority for resupply in a disaster.) The bonus is that by building a system to withstand a catastrophic occurrence, we’ve built a system that’s largely immune to minor incidents and as a result has had 99.98% lifetime uptime.
If manufactured products are your business, your first priority is most likely being able to continue supplying those products to your customers. You should have a detailed business continuity plan that’s specific to your company’s situation, but here are some fairly universal steps that can help you mitigate, avoid and/or overcome several of the major causes of disruption. Even better, you can start benefiting from these measures long before any disaster occurs.
- Make sure your engineers and designers can access their work-in-progress even if they can’t get to their desks. You can do this by managing drawings, models and other CAD files in a vault (for instance, a product data management (PDM) system) and standardizing the configuration of your desktop machines. New product introduction schedules rarely have room for delays, and you don’t want your global launch threatened by a local disaster.
Bonus: When the lead designer’s hard drive crashes, you won’t lose weeks of work or fall weeks behind in development.
- Know which critical components of your product are difficult to source, know which ones have long lead times—and know at least one alternate supplier for each. You don’t want to have to stop the manufacturing line just because a supplier’s operations are knocked out or its regional transportation systems are compromised.
Bonus: You may identify new sources that can provide critical components faster or less expensively.
- Make sure your product information can’t get wiped out if a single facility is wiped out. Yes, not a surprise that we recommend managing mission-critical data in an on-demand (SaaS) tool like Arena, which has fully redundant systems and multiple sites backed up with its own continuity plan. But if you’re managing the data yourself, make sure you have the hardware and processes in place to regularly perform full backups, store them offsite and use them to periodically run test restores.
Bonus: When the power goes out at the office, your team can access information managed in the cloud from anywhere.
- Have your bills of materials (BOMs) and assembly instructions in order in case your contract manufacturer (CM) or another critical supplier is hit by a disaster and you need to move production to another location. Again, Arena makes this easy by collecting information in a central location and allowing you to invite multiple partners in to get it, but you can also try to replicate this centralization with shared servers, a well-organized (and well-labeled) system of web folders and a designated person whose role is to consolidate the pieces and keep them updated as changes are made.
Bonus: When business is good and demand is high, you can quickly and painlessly bring on an additional CM or supplier to increase capacity.
In a true disaster, a well-constructed, well-executed business continuity plan can mean the difference between success and failure. These suggestions are not a substitute for that plan, but they’re relatively simple measures that will help position your company to withstand a disaster. And when you’re prepared for the big problems, you’ll find that the disruption and inefficiency caused by the small ones are dramatically reduced.
Cloudy…with a chance of clearing
There’s a lot of talk these days about the cloud…some of it from us even. However, we can’t help but share the concern Kenneth Wong expressed in a recent blog post, where he asserts that the term ‘cloud’ is being “interpreted, reinterpreted and misinterpreted (sometimes deliberately) till it becomes a fuzzy buzzword.” So we were glad to see Kenneth go on to offer a list of criteria for what sets true cloud computing apart from the impostors. The main items he cites are: where cloud software program files reside (on remote servers), how the software is accessed (via network–most commonly internet–protocols) and how that access is granted (through a subscription, not a license).
Read Clearing Up Cloud Computing — Before It’s Too Late for Kenneth’s complete definition of cloud computing and his thoughts on where cloud solutions are best applied.
Thanks for helping clear things up, Kenneth!
December 2009 PMI shows 5th straight month of manufacturing growth
The latest Institute of Supply Management (ISM) report on manufacturing, issued last week, finds that the PMI rose for the 5th consecutive month in December 2009 to 55.9%. New orders, production and employment were up, while inventories contracted and supplier deliveries slowed. The full report can be found on the ISM website.
Long considered one of the leading economic indicators, the PMI looks at the state of new orders, production, supplier deliveries, inventories and employment. ISM collects data in each area from supply executives at more than 400 industrial companies representing 20 industries across all 50 states, and then analyzes it to determine whether each area is improving or worsening. A PMI of 50% or above is generally considered a sign that the manufacturing economy is growing.
The Overview of the Manufacturing Report on Business (ROB) on the ISM website offers a full explanation of the PMI.
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