3M Deals with Supply Chain Problems
3M (www.3m.com) manufactures 65,000 products, ranging from Scotch tape to fi lm for solar-energy panels to dental braces. It makes these products in 214 plants located in 41 countries. Over the years, 3M had developed long, complicated supply chains for many of its products. One reason why the supply chains became so complicated was the company's risk-averse culture. Specifi cally, the culture at 3M is "make a little, sell a little."
That is, do not buy new machinery and construct plants until a product has proved itself in the market. Instead, 3M product developers would utilize existing machines and expertise even if they were located hundreds of miles away. This strategy enabled 3M to keep its machinery running around the clock, thereby achieving effi ciency. It also resulted in higher shipping costs and longer production cycles. Let's take a look at two 3M products with convoluted supply chains:
Command picture-hanging hooks and Littmann stethoscopes. 3M's Command picture-hanging hooks are made of plastic and strips of sticky foam, and they do not look complicated. However, as recently as 2010, the Command production processliterally wandered more than 1,300 miles through four factories in four U.S. states. The Command production process began at a 3M plant in Springfield, Missouri, which made the adhesives. The plant then shipped those adhesives about 550 miles to a 3M plant in Hartford City, Indiana, where they were applied to polyethylene foam. Next, the foam was shipped 600 miles to a contractor's plant near Minneapolis, which imprinted the product with the 3M logo and sliced it into the standard sizes.
Finally, the product was trucked about 200 miles to central Wisconsin, where another contractor bundled adhesive foam with plastic hooks and enclosed the product in blister packaging. Littmann stethoscopes also had a convoluted supply chain. Until recently, the stethoscopes were produced in steps involving 14 outside contractors and three 3M plants. When 3M became aware of these problems, it developed a strategic plan to simplify its supply chains, in order to reduce costs and increase flexibility in the company's manufacturing processes and along its supply chains.
Long, convoluted supply chains increase inventory costs because each separate production stage maintains a buffer stock of unfinished items to cope with any disruptions in the flow from another plant or from suppliers. Holding that inventory is expensive in terms of space and cash spent for materials waiting to become merchandise. 3M set out to speed up production when it has a hit product and to avoid convoluted supply chains. 3M has also developed 10 larger, more efficient plants, called super hubs, that are capable of making multiple products for a particular region of the world. Six of these hubs are located in the United States, and the remaining four are situated in Singapore, Japan, Germany, and Poland. By moving production closer to its customers, 3M can reduce shipping costs and currency risks while customizing its products to match regional tastes. Essentially, 3M wants to improve efficiency in the manufacturing of its major products. To accomplish this goal, the company plans to reduce cycle times-the period needed to complete the entire manufacturing process from ordering raw materials to delivering fi nished goods- by 25 percent. In 2010, 3M consolidated the steps involved in producing Command hooks at a super hub located in Hutchinson, Minnesota.
This plant also produces Scotch tape, Nexcare bandages, furnace filters, and other items. In addition to creating fi nished Command products for the Americas, the Hutchinson plant exports giant rolls of unfinished sticky foam to Singapore and Poland, where they are tailored for Asian and European markets. The cycle time for making Command has dropped from 100 days to 35. And the Littman stethoscopes? All production is being centralized in a plant in Columbia, Missouri. The cycle time has fallen from 165 days to 50. Sources: Compiled from S. Culp, "Supply Chain Disruption a Major Threat to Business," Forbes, February 15, 2013; "3M to Establish Super Hub in Turkey," Hurriyet Daily News, October 10, 2012; "Industrial Giant 3M on Mission to Remove Its Supply Chain ‘Hairballs'," Supply Chain Digest, June 6, 2012; J. Hagerty, "3M Begins Untangling Its ‘Hairballs'," The Wall Street Journal, May 17, 2012; M. Mangelsdorf, "Understanding the ‘Bullwhip' Effect in Supply Chains," MIT Technology Review, January 27, 2010; www.3m.com, accessed March 15, 2013.
Questions
1. Describe how large, complex organizations such as 3M can develop large, complex supply chains. Can this situation occur by accident? By design? Support your answer
2. Describe the advantages of 3M using "super hubs."
3. Describe disadvantages of 3M using "super hubs."
4. Is 3M experiencing the bullwhip effect in this case? Why or why not? Support your answer.