The mission for the Supply Chain Matters blog is to be constantly alerting our readers to industry examples of where supply chain internal and external business process and information technology capabilities due matter in business outcomes.
In today’s published edition of the Wall Street Journal, (paid subscription or free metered view) the Marketplace section features two side-by-side articles they depict the crucial importance of supply chain capabilities.
One of these articles, Honeywell Takes Lesson From Japan, depicts how that company’s System Sensor business unit which designs and produces smoke and carbon-monoxide detectors for commercial buildings. The article’s focus is on the transformed results from its 1000 worker St. Charles Illinois factory, a facility inherited with many operational challenges. The subject plant was part of Honeywell’s 2000 acquisition of Pittway Corp. which WSJ describes as a well-regarded product line but high industry costs.
This facility was one of the first to participate in Honeywell’s Operations Systems (HOS) improvement framework, modeled from tenets incorporated in the well-known Toyota Production System. The plant previously struggled to align production output with product demand and was described as stacked with inventory. Honeywell Chairmen and CEO David Cote is quoted as indicating that in the first two years of the transformation he wondered aloud about the challenge undertaken. Honeywell maintained its investment in U.S. manufacturing because of the power of ideas generated by the workforce. Assembly lines were replaced by empowered production cells. Production workers were cross-trained on producing multiple products along with the elements embedded in the HOS.
The result is described as a plant that can produce four million units a year with a defect rate that has fallen 80 percent. Production can be flipped readily to accommodate changing product demand and common parts make-up the bulk of various products. The required to develop and produce new products has been reduced from three years to 18 months. Profit margins for the System Sensor business unit are reported to have risen from 17.7 to 19.4 percent since 2009.
A contrast to that article is Chrysler Says Initial Supplies of New Jeep Cherokee Are Limited, which describes how U.S. automotive OEM Chrysler continues to deal with market introduction setbacks for its new smaller Jeep Cherokee model. This model was originally scheduled to arrive at dealers earlier this year to coincide with the market introduction of the completely re-designed Jeep Grand Cherokee, but production start-up setbacks at its prime manufacturing facility have delayed volume shipments until August. The slower than anticipated product launch leaves Chrysler temporarily without a contender in the mid-sized U.S. SUV sector dominated by the Honda CR-V, Toyota RAV-4 and Ford Escape.
This new Cherokee was designed to share the same product platform as the Dodge Dart but utilizes other newer components including its transmission. Production was originally scheduled in May, then pushed to June, and apparently now likely to be August, because of various start-up challenges, with the implication that pipeline inventory ramp-up will not be ready for dealers until the fourth quarter. In its article, the WSJ points out that the delayed launch already has hurt Chrysler’s first quarter earnings with not much of an offset impact expected until the third quarter. A senior Chrysler sales executive is quoted as being optimistic that sales and profit targets for the fiscal year will be met despite this model setback.
How would you like to sit-in on Chrysler’s S&OP planning team process in the next few months? We speculate that the conversations are rather dynamic among sales, marketing and supply chain operations teams.
In one WSJ page there are two contrasting examples of how supply chain business process capabilities have the potential to impact business outcomes.