- Ford said it may temporarily lay off several thousand workers due to a fire which damaged a parts supplier last week. The Dearborn, Michigan plant will run out of inventory this week, leading to a halt in production, The Wall Street Journal reported.
- The automotive-interiors supplier, Meridian Lightweight Technologies, has caused a disruption in the manufacture of Ford's best-selling F-150 pickup truck. A Ford factory in Kansas City, Missouri has already halted production due to short supply of parts.
- A prolonged shutdown will materially impact the company's second quarter performance. While inventory should remain stable, cost pressures from the idle time and eventual ramping back up in production likely will lead to the temporary layoffs.
A fire at an important single source parts supplier has ramifications throughout the supply chain, impacting upstream and downstream operations. This disruption in the Ford F-150 plant, causing layoffs, is just the tip of the iceberg. Ramifications of this shutdown impact all other parts suppliers … and theirs.
Upstream, customers will not be able to get this product, critical to Ford’s sales effort, impacting their revenue targets and their stock price. Dealers will not be able to get these best selling trucks in stock, allowing even loyal buyers to seek alternative brands.
So in effect, all stakeholders, and stockholders, are feeling the effect of this fire. And we see that other brands will also be affected by disruptions in this supply chain.
We look at supply chain risk as anything that disrupts continuity of supply. While our focus on risk these days has been on natural disasters, geopolitical pressures and cyberattacks, the idea of something as ordinary of a fire can have extraordinary impact on the supply chain.
The automotive supply chain is quite interdependent and fine-tuned. But while this strong alignment works well for an industry that is lean, it exposes how a very tight supply chain can easily be disrupted. There is not a lot of slack, or alternatives, in most supply chains these days, but also it is not feasible to have alternative suppliers at the ready just in case one supplier cannot maintain operations.
So this scenario invites the question, what’s a supply chain manager to do to prevent such massive disruptions?
The textbooks tell us to make sure we have contingency plans for interruptions in supply, and perhaps we do for a handful of critical suppliers. We can also query our suppliers on their plans to overcome disruptions in their supply chain or operations and perhaps we see a nice PowerPoint slide show about how they stay one step ahead of disaster.
But a lightning strike, the careless disposal of a cigarette, or even spontaneous combustion can stop a supply chain in its tracks. Most will ignore the issues at the Ford plant, as it does not affect them. Others may share professional sympathies, knowing what their fellow supply chain managers must be going through. Still others will keep their fingers crossed hoping that this will never happen to them.
Hope is not a viable supply chain strategy.