WHEN THE CHAIN BREAKS

PRESENTED BY-: SWAROOP DAS SWATI SAXENA TANIMA KAPUR TARUN SUKHIJA UMESH JAISWAL VAIBHAV MALIK VIDHU LATHER VIKEN PATEL VIRENDRA PRATAP SINGH YOGENDRA SINGH

INTRODUCTION

 It began on a stormy evening in New Mexico in March 2000 when a bolt of lightning hit a power line.  The temporary loss of electricity knocked out the cooling fans in a furnace.  A fire started, but was put out by staff within minutes.

 Eight trays of wafers containing the miniature circuitry to make several thousand chips for mobile phones had been destroyed.  After a good clean-up, the company expected to resume production within a week.

CONSEQUENCES

 Nokia's managers had realized that there was a problem when their computer systems showed some shipments were being held up.

 Limited number of back-up components are usually held to cope with such eventualities.

 Ericsson was content to let the delay take its course.

 Nokia immediately put the Philips plant on a watch list to be closely monitored in case things got worse.

PROBLEMS FACED BY ERICSSON

 That left Ericsson with a serious parts shortage.

 The company decided to simplify sourcing of its components, including the Philips chips, had no plan B.

 This limited its ability to launch new generation handsets, which contributed to huge losses in the Swedish company.

 In 2001 Ericsson decided to quit making handsets on its own and enters into a joint venture with Sony.

MANY FACES OF RISK

 Shippers have gone far implementing the lean supply chain and have found themselves out of business.  In 2003 a number of companies suffered serious disruption.  SARS 8,000 infected & costing an estimated $60 billion in lost output in South and East Asia.  Last autumn some 80m items of clothing were impounded at European ports.  Retailers had ordered their autumn stock well before that agreement was signed.

THE COST OF FAILURE

 Company's share price dropped by around 8% in the first day or two after Sun Microsystems announcements for delay in some parts to Boeing in 1997  Delay in launch of new products cost an average fall of 5%

 Global supply chains today are subject to many more potential holdups specially after 9/11

 Sometimes even computer systems will not alert a company to a problem.

THE LIMITS TO LEANNESS

 Apart from the peripheral activities, some companies have started outsourcing their core activities also  Companies have started loosing their flexibilities due to increasing dependencies  Continental Strategy Not possible for small firms  Companies may consider other options in other parts of the world even though these may look more expensive to make it more robust & reliable  Companies will have to spread their risks more widely

RECOMMENDED RESOLUTIONS
 Excellent communications with the suppliers Multiple suppliers & possibly at different locations Use of advanced & necessary technologies Involvement of suppliers in the process of risk-management All possible support to the suppliers More investments on the alternative supply chains