Lean supply chains in the automotive industry have been based on reducing inventory levels, using just-in-time (JIT) shipments and consolidating purchases from suppliers (i.c. reducing the number of suppliers). However, recent events are causing many car manufacturers to rethink the way they design and manage their supply chains. For decades, car manufacturing companies have been working on improving the efficiency of their supply chain through lean operations but two recent events showed managers that being too lean" might be risky for companies. One was the devastating earthquake and tsunami that took place in Japan in March of 2011. This natural disaster caused many Japanese automotive suppliers to stop their production activities, sometimes for months, resulting in worldwide shortages for some key components. The other event was a devastating explosion in early 2012 at a key German chemical plant that produced a special type of resin used in fuel lines. Because many automotive companies had been studiously eliminating redundant suppliers from their supply chains to reduce complexity and costs, suddenly there was no backup plan Tragedies such as these could negatively impact the operations of several car companies, resulting in model shortages and idle assembly lines if alternative suppliers cannot be found. Another aggravating factor has been the consolidation of several car component suppliers and the reduction in supplier number. Many of the smaller suppliers simply do not have the money, labor, and capacity to deal with last-minute orders or large fluctuations in demand. Other suppliers have gone out of business because of an inability to deal with the fast-changing competitive global landscape. The automobile industry is not alone in dealing with supply chains that may have been cut too lean, In November 2011, severe flooding in Thailand impacted the supply chains of many high-tech companies. Although not all companies were directly affected by flooding in their production facilities, most found that the suppliers for their key components were. For example, Seagate, a provider of hard drives for PCs and servers, was expecting that disruptions to its operations might not get resolved until 2013. Apple, Hewlett Packard, and Intel were just some of the other companies expecting negative earning impacts from the natural disaster. Realizing the fragility of their Realizing the fragility of their lean supply chains and supply networks, some carmakers are thinking of implementing the unthinkable, that is going back to the bad old days of stockpiling inventory and keeping large numbers of vital components on hand. This would overturn almost 30 years of industry practice and conventional wisdom. With more extreme weather expected in the coming years, companies might need to rethink the balance between cost effectiveness and the potential for lost profits due to disruptions of their supply chains. But what actions are available to managers who want to increase the robustness of their facilities and their supply chains? A possible course of action carmakers could consider would be judicious and well-thought-out increasing of inventory levels of some (but not all) critical components. They also might want to develop relationships with alternative suppliers or have several backup suppliers in place. Yes, this could increase the cost of inputs somewhat, but the possible benefits of increased customer satisfaction and reduction of lost sales might well compensate for any increase in cost. Ultimately, some manufacturers might want to bring some fabrication work back in-house, or at least develop the capacity to do some in-house work. Another possible solution might be to avoid the common industry practice of "clustering." whereby a group of similar industries and manufacturers locate their operations in a common geographical area. Clustering has its benefits, namely increased technological expertise, rapid learning effects, economies of scale, and economies of scope, all of which are important in today's dynamic global environment. But, if a massive earthquake or storm hits a geographically centralized cluster, a large chunk of a company's supply chain can be wiped out. Richard Little, Director of the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California, believes that "Companies need to rethink the clustering model . Yes, you get benefits but you also have common vulnerabilities for an entire industry or sector As always, managers will need to weigh the pros and cons of him supply chain against the consequences and inventory levels of some (but not all) critical components. They also might want to develop relationships with alternative suppliers or have several backup suppliers in place. Yes, this could increase the cost of inputs somewhat, but the possible benefits of increased customer satisfaction and reduction of lost sales might well compensate for any increase in cost. Ultimately, some manufacturers might want to bring some fabincation work back in-house, or at least develop the capacity to do some in-house work. Another possible solution might be to avoid the common industry practice of "elustering," whereby a group of similar industries and manufacturers locate their operations in a common geographical area, Clustering has its benefits, namely increased technological expertise, rapid learning effects, cconomies of scale, and economies of scope, all of which are important in today's dynamic global environment. But, if a massive carthquake or storm hits a geographically centralized cluster, a large chunk of a company's supply chain can be wiped out. Richard Little Director of the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California, believes that "Companies need to rethink the clustering model. Yes, you get benefits but you also have common vulnerabilities for an entire industry or sector." As always, managers will need to weigh the pros and cons of having a lean and efficient supply chain against the consequences and costs of building in some supply chain redundancies and flexibility. In the end, in order to avoid shutdowns and disruptions, those costs might be worth incurring in order to provide higher levels of customer service. 1 1. According to the article, what are the main principles of lean supply chain? 2. According to the article, how being "too lean" can be risky? Expand your answer using the Covid19 pandemic as example. 3. In the article, it is explained that car manufacturers using lean strategy faced many difficulties in the 2011 Tsunami and after the German factory explosion. Do you think that if these companies had used an agile strategy, they would have faced the same difficulties? Give a detailed justification to your answer. 4. In the article, it is said that clustering has benefits like economies of scale and economies of scope. Please make a quick search online to explain the difference between these two concepts. Clustering could also be a risk driver, could you explain how? Lean supply chains in the automotive industry have been based on reducing inventory levels, using just-in-time (JIT) shipments and consolidating purchases from suppliers (i.c. reducing the number of suppliers). However, recent events are causing many car manufacturers to rethink the way they design and manage their supply chains. For decades, car manufacturing companies have been working on improving the efficiency of their supply chain through lean operations but two recent events showed managers that being too lean" might be risky for companies. One was the devastating earthquake and tsunami that took place in Japan in March of 2011. This natural disaster caused many Japanese automotive suppliers to stop their production activities, sometimes for months, resulting in worldwide shortages for some key components. The other event was a devastating explosion in early 2012 at a key German chemical plant that produced a special type of resin used in fuel lines. Because many automotive companies had been studiously eliminating redundant suppliers from their supply chains to reduce complexity and costs, suddenly there was no backup plan Tragedies such as these could negatively impact the operations of several car companies, resulting in model shortages and idle assembly lines if alternative suppliers cannot be found. Another aggravating factor has been the consolidation of several car component suppliers and the reduction in supplier number. Many of the smaller suppliers simply do not have the money, labor, and capacity to deal with last-minute orders or large fluctuations in demand. Other suppliers have gone out of business because of an inability to deal with the fast-changing competitive global landscape. The automobile industry is not alone in dealing with supply chains that may have been cut too lean, In November 2011, severe flooding in Thailand impacted the supply chains of many high-tech companies. Although not all companies were directly affected by flooding in their production facilities, most found that the suppliers for their key components were. For example, Seagate, a provider of hard drives for PCs and servers, was expecting that disruptions to its operations might not get resolved until 2013. Apple, Hewlett Packard, and Intel were just some of the other companies expecting negative earning impacts from the natural disaster. Realizing the fragility of their Realizing the fragility of their lean supply chains and supply networks, some carmakers are thinking of implementing the unthinkable, that is going back to the bad old days of stockpiling inventory and keeping large numbers of vital components on hand. This would overturn almost 30 years of industry practice and conventional wisdom. With more extreme weather expected in the coming years, companies might need to rethink the balance between cost effectiveness and the potential for lost profits due to disruptions of their supply chains. But what actions are available to managers who want to increase the robustness of their facilities and their supply chains? A possible course of action carmakers could consider would be judicious and well-thought-out increasing of inventory levels of some (but not all) critical components. They also might want to develop relationships with alternative suppliers or have several backup suppliers in place. Yes, this could increase the cost of inputs somewhat, but the possible benefits of increased customer satisfaction and reduction of lost sales might well compensate for any increase in cost. Ultimately, some manufacturers might want to bring some fabrication work back in-house, or at least develop the capacity to do some in-house work. Another possible solution might be to avoid the common industry practice of "clustering." whereby a group of similar industries and manufacturers locate their operations in a common geographical area. Clustering has its benefits, namely increased technological expertise, rapid learning effects, economies of scale, and economies of scope, all of which are important in today's dynamic global environment. But, if a massive earthquake or storm hits a geographically centralized cluster, a large chunk of a company's supply chain can be wiped out. Richard Little, Director of the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California, believes that "Companies need to rethink the clustering model . Yes, you get benefits but you also have common vulnerabilities for an entire industry or sector As always, managers will need to weigh the pros and cons of him supply chain against the consequences and inventory levels of some (but not all) critical components. They also might want to develop relationships with alternative suppliers or have several backup suppliers in place. Yes, this could increase the cost of inputs somewhat, but the possible benefits of increased customer satisfaction and reduction of lost sales might well compensate for any increase in cost. Ultimately, some manufacturers might want to bring some fabincation work back in-house, or at least develop the capacity to do some in-house work. Another possible solution might be to avoid the common industry practice of "elustering," whereby a group of similar industries and manufacturers locate their operations in a common geographical area, Clustering has its benefits, namely increased technological expertise, rapid learning effects, cconomies of scale, and economies of scope, all of which are important in today's dynamic global environment. But, if a massive carthquake or storm hits a geographically centralized cluster, a large chunk of a company's supply chain can be wiped out. Richard Little Director of the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California, believes that "Companies need to rethink the clustering model. Yes, you get benefits but you also have common vulnerabilities for an entire industry or sector." As always, managers will need to weigh the pros and cons of having a lean and efficient supply chain against the consequences and costs of building in some supply chain redundancies and flexibility. In the end, in order to avoid shutdowns and disruptions, those costs might be worth incurring in order to provide higher levels of customer service. 1 1. According to the article, what are the main principles of lean supply chain? 2. According to the article, how being "too lean" can be risky? Expand your answer using the Covid19 pandemic as example. 3. In the article, it is explained that car manufacturers using lean strategy faced many difficulties in the 2011 Tsunami and after the German factory explosion. Do you think that if these companies had used an agile strategy, they would have faced the same difficulties? Give a detailed justification to your answer. 4. In the article, it is said that clustering has benefits like economies of scale and economies of scope. Please make a quick search online to explain the difference between these two concepts. Clustering could also be a risk driver, could you explain how