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Automakers Respond to Resin Shortage

by APICS Staff | N/A 2012 | 0 | 0

In March, an explosion occurred at the German factory that makes much of the world’s supply of PA-12 (also known as Nylon-12), a resin used in the manufacture of fuel lines and other automobile parts. It was feared that many manufacturing facilities would be forced to close due to shortages of the resin. But the Associated Press reports that Ford decision makers are confident that factories will continue production, thanks to substitutes for PA-12.

The German plant, which is owned by Evonik industries, makes about one-quarter of the world’s supply of PA-12, and about 70 percent of the world’s cyclododecatriene, a crucial ingredient in the manufacture of PA-12. As other companies rely on this chemical to make PA-12, the four biggest PA-12 suppliers have told customers they will not be able to deliver. 

However, Ford’s chief financial officer Bob Shanks says his company is working with suppliers to develop alternative materials able to carry fuel and other liquids. Some of these products have been in development for some time. Automotive parts using the substitute resins will be thoroughly inspected. “We think we’re going to get through this without any issues,” Shanks says, adding that consumers are “not going to have any issue in terms of safety or durability.”

Steven Wybo, managing director at industry restructuring consulting firm Conway MacKenzie, says that other automakers and large parts manufacturers are likely to have similar substitutes at the ready. If Ford has alternative supplies, he says, its competitors “are either out in front or right behind them.”

Clothes Retailers Increasing Speed to Market

After years of losing customers to European stores able to provide new fashions quickly, many American retailers are improving their own techniques, Reuters reports. Companies including Gap, American Eagle Outfitters, and Macy’s are using strategies such as placing smaller orders in more factories, waiting until the last moment to provide manufacturers with colors and cuts, and reducing the time clothing spends in warehouses__all in the name of providing the freshest styles to young consumers. 

“Millenials, with their constant fickleness in product selection, speed, newness, and freshness are very important,” says Matt Katz, partner at retail advisory firm Boston Consulting Group. “There is a heightened need for traditional American brands to increase speed.” In recent years, traditional retailers have reduced concept-to-store times from about 12 months to about six to nine months. How much further these companies can go in their quests to create fast fashion depends on many factors, including profit margins, corporate culture, and labor costs and locations.

Yet some competitors are capable of much faster times. “The emergence of H&M and Zara and the ability of these companies to follow fashion trends and produce products in six weeks or less has added to the pressure,” Katz says. Such brands are collectively known as fast-fashion retailers. 

To combat these upstarts, American Eagle will cut down on excess clothing inventory and keep fewer items in stores. And Macy’s plans to speed decision making on clothing for shoppers in the 13-to-30 age range. Some believe these retailers face an uphill battle, particularly in the area of corporate culture.

Indian Government to Boost Domestic Electronics

The Indian government is taking an aggressive approach to its electronics goods industry, reports the Times of India. It has developed a procurement budget for 30 large government projects, each worth about $1 billion. Only goods manufactured within the country’s borders will qualify for these projects. 

Most of the electronics goods Indians consume are imported. At best, about 5 to 10 percent of electronics are manufactured domestically, and demand in the country is skyrocketing. Total electronic goods demand is expected to reach $400 billion by 2020. 

In order to claim “made in India” status, 25 percent of the total value must be Indian in the first year of the project, increasing to 30 percent the second year. Currently, about 90 percent of the value of Indian electronics is imported. 

It’s unknown whether the government plan will provide a significant boost to domestic manufacturing. “In the long run, the policy will give more opportunities for investment in manufacturing. But companies have reconciled to the fact that 25 percent value addition in the first year is not possible” says Alok Bhardwaj, senior vice president of Canon India. The government may be forced to procure in the same manner it does currently for a few more years, he adds.

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