Chrysler making progress to improve supply chain

[NINETY EIGHT REGENCY]

Chrysler making progress to improve supply chain

Shutdown due to parts shortage prompts scrutiny of management to make changes

Alisa Priddle / The Detroit News

Chrysler Group LLC temporarily closed a plant this week due to a parts shortage, but avoiding this kind of supply issue is a priority and the automaker says it is making progress.

The company's Belvidere, Ill., plant that makes the Dodge Caliber and Jeep Compass and Patriot closed Tuesday and will resume production Friday, affecting about 2,300 employees.

While the part in question is used by other vehicles as well, only the Belvidere plant closed, said Chrysler spokeswoman Jodi Tinson, who declined to identify the part or supplier.

Parts shortages have plagued the industry, and Chrysler in particular, in the past year as plummeting sales forced production cuts and then sudden ramp-ups to meet demand. Suppliers in turn have struggled to keep up and to finance the fits and starts in a tight financial market.

While most issues don't result in a plant shutting down, Chrysler last month also shut down the minivan plant in Windsor, Ontario, for a week due to a parts shortage. Union officials said that shortage and shutdown was due to a plastic portion of a key fob.

Managing parts flow is a daily preoccupation of Dan Knott, head of purchasing, who said the number of supply issues he's dealing with on a daily basis has decreased from last year and he anticipates a return to relative normalcy by the end of March.

Chrysler's financial woes and 36 percent sales drop last year forced many temporary plant shutdowns in 2009. The automaker ceased production April 30 when it filed for bankruptcy protection and plants saw a staggered resumption when Chrysler emerged from Chapter 11 in June and formed a new company with Fiat SpA.

The "cash for clunkers" incentive program also caught Chrysler with low supplies of its smaller and more fuel-efficient vehicles, prompting a need for a sudden uptick in production.

The fluctuations are a problem because stability is critical for suppliers, Knott said. Sudden increases in volume are not always easy to accommodate and many parts makers "can't just ramp up and down quickly," he said.

Some shortages, such as steel, were an industrywide problem last year, said Jim Gillette, supply analyst with CSM Worldwide in Grand Rapids. It is expensive to start up a furnace and many steel companies wanted to wait until they were more assured there was demand.

But Chrysler also needed to improve its internal forecasting for suppliers, Knott said. In June, CEO Sergio Marchionne created a new management position to oversee supply chain management and named Mike Keegan to the post.

Knott said he and Keegan speak daily to try to ensure a steady supply of parts and make adjustments.

Assembly lines can be slowed, for example. Or, if multiple vehicles need the same part, decisions are made to idle the plant with the most unsold inventory.

Knott said daily production rates at many plants were adjusted in December to manage shortages but by mid-January the number of daily issues to juggle had dropped off by about 70 percent.

"We've made good progress but there is more to come," he said.

This year, Knott said Chrysler will assess its suppliers quarterly, which should continue to weed out poor performers.

Meanwhile, the situation at the Belvidere plant is being monitored daily and work is expected to resume Friday.

Workers also were reassured the second shift, which added 850 workers in October, is safe for the foreseeable future.

From The Detroit News: http://detnews.com/article/20100218/AUTO01/2180375/1148/auto01/Chrysler-making-progress-to-improve-supply-chain#ixzz0ftd9sfRs