Supply Chains Dr. Ron Lembke

Vertically Integrated World  One company does all processing, from raw material through delivery  Most efficient

Vertically Integrated  Forests, iron mines, rubber plantation, coal mines  Ships, railroad lines, docks  blast furnaces, foundries, rolling mills, stamping plants  engine plant, glass manufacturing, tire plant,  its own power plant  Most efficient: DIY  Why? He was the master of Continuous Process Improvement

Supply Network View of the World Integrated international networks of companies process, produce and distribute products. Efficient, effective partners available

Saturn Layout

Computer Example  Wacker Siltronic makes silicon wafers:  buy sand  grow into long crystals  slice into thin wafers

Chip Production  Chip burned in a $2b “wafer fab”  Wafer cut into chips and “packaged”  2017 – Intel using circuit wiring 10 nanometers wide  Human hair = 75,000 nm wide

Moore’s Law  1965 – Gordon Moore – Computing Power would double every 18 months, for 10 years  Cost of computing speed cut in half  Companies spending billions on factories, wafer fabs, to keep up with the curve 1993

CD Drive  Chip stuffed onto board by Flextronics, Celestica, etc.  CD drive assembled by separate contract manufacturer  Green Printed Circuit Board from different supplier  CD drive, with a brand name on it, sold to Gateway

Apple and Foxconn  EMS elect mfg services  Foxconn:  Shenzhen, mile square  1 million workers  Largest private employer in China  Over 700 million iPhones sold, March 2015  Global CE industry = $285b -PwC  Foxconn = 40% = $114b

First iPhone  2007, Steve Jobs using prototype  Dozens of scratches on plastic screen  “I want a glass screen. And I want it perfect in 6 weeks.”  Shenzhen – built a new factory, engineers in dorms 24/7  Glass arrived at midnight  8,000 workers woken up, given a biscuit and some tea  Within half hour, started 12 hour shift  In 96 hours, 10,000 iPhone a day  3 months later, sold 1 million iPhones  Apple exec: “The speed and flexibility is breathtaking. There’s no American plant that can compete with that.”

Ethics & Headline Risk  10 hour days, crowded dorms  Terry Gou: Clean, affordable  Good food  17 suicides in 10 yrs  ¼ rate US college students  9 in March-May 2010  Below national average  HK ngo:12hr*13days iPad?  Counseling, outsource dorms  10,000 horses galloping

Dhaka, Bangladesh, 2013 Rana Plaza Building  8 stories  1,129 people died  2,515 injured  Walmart, Benetton  Joe Fresh  Children’s Place  April 23, 2013  TV crews find cracks  Evacuated  April 24, collapses  3 stories added without permits  Engineer who declared it unsafe had helped expand it

Supply Chain Design  Efficient – economies of scale.  TP, toothpaste, landlines, routers  Responsive – Changing consumer needs, mass customization, build-to-order  Computers, fashion apparel  Risk-Hedging – pooled resources, multiple sources of supply, more inv., share inv., need good IT  Server parts, some ag products, power  Agile – responsive to changing needs, pooled resources: Foxconn/Apple Efficient Risk-Hedging Responsive Agile LowHigh Low (stable) High (evolving) Supply Uncert. Demand Uncertainty

 Risk – of injury to employees or customers  Finding root causes of defects  Transportation safety – Hours of Service of drivers  FAA rules and the Polar Vortex  Traceability –  Where did it come from?  Social media Other factors

Summary  Supply chains complex  Specialized partners increase efficiency and effectiveness  Examples:  Semiconductors / PCs  Apple / Foxconn  Ethical sourcing: worker safety  Supply Chain Design