Single Source Single Factory MEGA FAIL

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Despite all the attention that the global supply chain received after the tragic events in Japan last year, the global auto industry is once again scrambling around because a disruptive event has caught them off guard.

When will we learn?

The looming resin shortage resulted from an explosion and fire at a plant that made at least one-fourth of the world's supply of PA12, a key component in plastic fuel lines and other connections. The ingredient is crucial because it helps the tubes resist deterioration from carrying fuel. It is also used in seats and in products for other industries. Evonik Industries said the plant will be out of commission for at least three months.”

Can we ignore for a moment that ¼ of the global supply of this critical resin is made by one factory?  I mean who is watching the store here?  Evonik is probably extremely proud of the fact that they can make so much resin in one place, but anyone who is responsible for reducing risk in the supply chain knows this is a pretty poor idea. The repercussions are staggering.

For at least the next 90 days, at least, 75% of the global supply of PA12 has to be sufficient for 100% of the globally produced products that use it.

Doesn’t this sound eerily familiar?

Oh wait, it does…

Yours truly highlighted an extremely similar scenario that faced Apple last year:

The major resin used in the battery for the iPad 2 is called Polyvinylidene Fluoride (PVDF). 70 percent of the PVDF market is controlled by the Kureha Corporation in Iwaki, Japan, which is 37 miles south of Fukushima Daiichi. Additionally, Kureha’s export hub was the port of Onohama, which was more or less destroyed by the tsunami. The result of the disruption of the supply locale was that the 30 percent of the PVDF global market not controlled by Kureha became 100 percent of the global market, and customers were thrown into disarray as they scrambled to secure additional supply.”

Major earthquake, massive tsunami, nuclear disaster… You can kind of forgive Apple for not seeing that coming. However, a FIRE at a CHEMICAL PLANT seems reasonably predictable, doesn’t it? 

  • What other plants make PA-12?
  • How much spare capacity do they have?
  • How quickly can they ramp production to fill the void?
  • More importantly, did any automotive manufacturer who is dependent on this material to produce their products even bother to ask the question?

Don’t let avoidable disruptions happen to your supply chain. Plan to mitigate disruptions. Test your plans. Be ready, because disruptions are going to happen.

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