OM in the News: Manufacturing Capacity Can’t Be Turned Off and On Easily
A shortage of glass is taking a toll on the nation’s commercial building boom, adding millions of dollars to the cost of new skyscrapers and halting some projects midway through construction, reports The Wall Street Journal (Sept. 8, 2015). Demand is soaring for the metal-framed glass panels, or curtain wall, used to sheath skyscrapers. Those buildings need a lot of glass. But glass manufacturers and fabricators can’t keep up. Many mothballed their operations or went out of business during the 2008 recession, which hit the construction industry hard.
Now, however, apartment buildings and office towers are sprouting up at their briskest pace in decades. Restarting idled glass factories is a costly and time-consuming process, a perfect example of capacity planning in Supplement 7. In the meantime, curtain-wall prices, which have risen more than 30% in the past 18 months, are setting records. Glass accounts for 1/4 of a construction project’s budget, so the extra expense can add tens of millions of dollars to a building’s cost.
The glass that ends up on the outside of an office building is manufactured in giant tanks in which sand is melted at 2,000 degrees Fahrenheit. Long ribbons of raw glass are floated down a river of molten metal. This “float glass” is then cut into pieces, customized to order, and the panels are sent to contractors who fit them into metal frames to produce panels that meet the builder’s specifications.
Producers shut 11 out of 47 float-glass manufacturing plants in North America between 2007 and 2014. Building a new plant can cost hundreds of millions of dollars, and restarting an idled line can take months because workers have to jackhammer thousands of pounds of hardened glass to remove it from melting tanks. “Once you take one of those tanks out of commission, you can’t just turn it back on,” said a PPG exec.
Classroom discussion questions:
- Why is the lead time so long in adding glass capacity?
- Which of the tactics for matching capacity to demand (See Supp. 7, p. 302) apply in this situation?