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OM in the News: How Nylon-12 and Xirallic Haunt Auto Supply Chains

April 21, 2012

For automakers, this past year has been one supply chain trauma after another. Now The Wall Street Journal (April 18, 2012) tells the story of 200 auto execs meeting in Detroit to deal with the looming shortage of Nylon-12, an obscure resin essential to the production of fuel and break lines. Inventories of the resin are being depleted after an explosion last month at an Evonik Industries AG plant in Germany, that killed two employees. Evonik, whose plant will take many months to repair, is the only  maker of the resin. The ricochet effect is global and less than a month’s worth of Nylon-12 inventory exists.

Evonik plant on fire in Germany

Evonik makes 25% of the global supply of the specialty resin and supplies a chemical building block to another company, Arkema SA, that makes a similar amount. Arkema says shortages of the building block means it will not be able to supply customers with the resin. “There will be no quick solutions,” says the Journal. GM has put together a global team from its purchasing, engineering, and supply departments working to allocate resins and prioritize its needs.

Last year, production in Japan of Merck’s Xirallic, the shiny pigment in some automotive paints, was disrupted by the tsunami and subsequent nuclear power plant problems. Auto makers had to limit or stop taking orders for some cars that used the pigment for certain colors because the plant was the industry’s primary supplier of the pigment. The Merck plant was repaired, but disruption rippled through the industry for more than 6 months.

Discussion questions:

1. Why is a replacement for Evonik so difficult?

2. How can global supply chain disruptions be minimized?

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