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2013

    Rare earths are highly sought after, and the search for locations to mine them continues to take interesting twists. The metals, a group of 17 elements with names such as yttrium and dysprosium, are used in everything from cars and missiles to smart phones and green energy products.

 

     The problem is that China mines more than 90 percent of the world’s rare earths, and also accounts for 60 percent of the world’s consumption by tonnage. At the same time, China has imposed significant quotas last year to limit exports of rare earths. Finally, China also raised export taxes on rare earths to as much as 25 percent, on top of value-added taxes of 17 percent.

 

     Some critics say Beijing’s strategy is to drive up global prices of the metals and force foreign firms to relocate to China to access the metals. But at the same time, Beijing says the restrictions are necessary to conserve the highly sought-after natural resources, limit harm to the environment from excessive mining, and meet domestic demand.

 

     So the search for rare earths and viable sites to mine them continues. As has been previously noted, space has already been targeted, and remains a possible, and increasingly discussed, location. Indeed, the moon and asteroid mining are lucrative prospects, according to researchers and tech firms gathered in Sydney for the world’s first formal “Off-Earth Mining Forum,” reports IndustryWeek. Most of the technology already exists, but there needs to be a business case for it, says conference convenor Andrew Dempster, of the Australian Centre for Space Engineering, in the article.

 

     More easily reached, is the bottom of the ocean, which presents its own challenges. An article in The Telegraph explains that Japanese scientists recently discovered vast reserves of rare earth metals on the Pacific seabed. Leader of the team, Professor Yasuhiro Kato from Tokyo University, says the deposits are just two to four meters from the seabed surface at higher concentrations than anybody ever thought existed—and they won’t cost much to extract.

 

     The latest discovery is in Japan’s Exclusive Economic Zone in deep-sea mud around the island of Minami-Torishima at 5,700 meters below sea level. Although it is very deep, the deposits are in highly-concentrated nodules that can be extracted using pressurized air with minimal disturbance off the seafloor and no need for the leaching, Professor Kato says. The exploration will continue for another two years before scaling up towards production, he predicts.

 

     Other sources aren’t quite so distant, and mining won’t be so difficult. Indeed, Wired explains that according to the findings of a Japanese mining company, Jamaica may be home to a large source of rare earth minerals. Other sources reported on remarks from Jamaica’s science, technology, energy and mining minister, Philip Paulwell, who said that Jamaica’s red mud contains “high concentrations of rare-earth elements.”

 

     After gaining independence in 1962, Jamaica’s economy experienced an initial period of extremely high growth, driven in part by the mining of bauxite, which leaves behind large quantities of red mud that can now be reappropriated as a source of rare earth minerals. That’s good news for the country, the article continues, because Japanese firm Nippon Light Metal is willing to invest $3 million in buildings and equipment for a pilot project to see if it can extract a hoped-for 1,500 tons of rare earth oxides each year.

 

     Finally, other possible sources are even closer to home. Newsminer.com reports that, following up on promising geological surveys of Alaska’s rare earth elements, the Alaska Senate passed a resolution aimed at promoting the in-state exploration and production of elements critical to building high-tech consumer electronics, military, and clean-energy technology. Even closer, federal government has approved an Arkansas company’s plans to drill for rare earth minerals along the Idaho border in western Montana, according to an article that ran in The Missoulian. The article notes that U.S. Rare Earths said it will begin core sample drilling in the Sheep Creek area on Lemhi Pass in May.

 

     While promising, it will still take years for the rare earths mining efforts to yield results. In the meantime, has your company been effected by rare earths’ shortages?






  In a widely reported story, which I saw on IndustryWeek earlier this week, Boeing announced that a test flight of its troubled 787 Dreamliner went “according to plan.” The 787 successfully traveled for two hours and nine minutes, departing and returning to Everett, WA, a company statement said. The test flight is Boeing’s latest step in returning the 787 fleet to service.

 

     “Today’s flight was a normal Boeing production check flight intended to validate that all systems function as designed,” Boeing said. “The crew reports that the flight went according to plan.”

 

     The FAA and other regulators grounded all 50 Boeing 787s that had been delivered worldwide in mid-January after batteries overheated on two separate aircraft. The first incident occurred on a 787 parked at the Boston airport after a flight. The second incident forced pilots to make an emergency landing in Japan.

 

     Earlier this month, the FAA agreed on tests Boeing would conduct to return the plane to service. The successful mission means that once data from Monday’s flight has been analyzed, Boeing will be able to prepare for a ground and flight demonstration aimed at certifying the company’s new battery system performs as intended during flight conditions. The system includes a steel box designed to contain a battery explosion and prevent fire, as well as a tube to vent fumes and heat out of the aircraft.

 

     As the Chicago Tribune further reports, resuming flights would be a relief for Boeing, which is losing an estimated $50 million per week in lost income and compensation payments to airlines while the 787 is grounded. Airlines in Japan, the U.S., Middle East, Europe, and Africa that bought the fuel-efficient jet but are barred from using those planes are also suffering. While Boeing is still building 787s, the company cannot deliver them to customers during the grounding.

 

     Some Boeing officials have said the jet could be back in service by May 1 or earlier but some in the industry believe it will actually take longer as there won’t be any quick fixes or compromising on the FAA side. Be that as it may, Reuters now reports that other aviation experts and government officials say the FAA may additionally place a temporary ban on some of the long-distance, trans-ocean journeys that the jet was intended to fly.

 

     Losing extended operations, or ETOPS, would deal a blow to Boeing and its airline customers by limiting use of the fuel-saving jet, which was designed to lower costs on long-distance routes that don’t require the capacity of the larger Boeing 777. Such a loss could even lead to cancellation of some routes. The change would not rule out all international routes, but some specific routes, such as Japan Airlines Co’s Tokyo-to-Boston flight, might have to be canceled, said a Japanese regulatory source in the Reuters’ story.

 

     “If the FAA approves [only] over-land operations it would be a very damaging blow to the 787 program,” says Scott Hamilton, an aviation analyst with Leeham Co., in the Reuters article. “Depending on how long that restriction remains in place, it would completely undermine the business case for the airplane, which was to be able to do these long, thin intercontinental routes” over water, he said.

 

     So this continues to be an interesting process to watch because it effects much of a supply chain. First of all, because of the implications for not only Boeing, but also carriers such as All Nippon Airways and Japan Airlines which are barred from using their aircraft. Then there are Boeing suppliers: Thales SA of France produces the battery system and the batteries in question are made by Japan’s GS Yuasa Corp. Finally, it will be interesting to see what FAA decides after Boeing’s test process, and what, if any, bans it imposes on the aircraft.

     Some recent shipping news has me thinking about getting products and components around the world. For starters, SupplyChainBrain reports that to cope with the larger vessels that will use the Panama Canal once its expansion is complete in 2015, Central American countries must dramatically improve their intermodal road and port network infrastructure, the quality of their trucking services and strengthen their institutional coordination, according to two new reports from Inter-American Development Bank (IDB).

 

     The first study, “Assessment of Port Performance and Port Connectivity Study in Belize, Central America and the Dominican Republic,” evaluates port performance and the connectivity of 18 ports in Belize, Central America and the Dominican Republic. The second report, “Trucking services in Belize, Central America, and the Dominican Republic: performance analysis and policy recommendations,” assesses the trucking industry and makes recommendations for future development.

 

    The IDB calls for countries to establish national logistics agendas to improve policy coordination and address bottlenecks that hurt the region’s ability to compete in the global marketplace. That’s because efficient logistics performance requires the public sector to act at the regional, national and local levels, under a coordinated agenda, with shared priorities and objectives. In short, the countries must work together because right now, their infrastructure is insufficient for the expected increase in shipping.

 

     The expansion of the Panama Canal will accommodate post-Panamax vessels that carry 12,600 containers, compared to today’s ships carrying 4,500 containers. Today, only two countries can handle post-Panamax vessels in Central America and the Dominican Republic: the Dominican Republic through the port of Caucedo, and the Panama terminals.

 

    The Panama Canal is also losing business. A Maritime Executive article reports that next week, Maersk Line, the world’s biggest container shipping company, will stop using the Panama Canal to move goods from Asia to the U.S. East Coast. Instead, Maersk Line will begin sending vessels through the Suez Canal, which can accommodate ships carrying as many as 9,000 20-foot boxes at a time, instead of using two 4,500-box-vessels through Panama Canal, says Soeren Skou, chief executive officer of Maersk Line.

 

    “The economics are much, much better via the Suez Canal simply because you have half the number of ships,” Skou says in the article. “One of the reasons for why this is happening now is that the cost for passing through the Panama Canal has gone up. At the end of the day, it comes down to cost.”

 

    Indeed, fees for ships to go through the Panama Canal have tripled in the past five years to $450,000 per passage for a vessel carrying 4,500 containers, Skou says. While the expanded Panama Canal will open by June 2015, whether or not Maersk will use the Panama Canal after the expansion will depend on the economics, Skou says.

 

    That doesn’t mean that the Suez Canal doesn’t have its own challenges, however. Another SupplyChainBrain link led me to a report from Drewry Maritime Research about the deteriorating political situation in Egypt. Recent civil riots in Port Said remind observers that while the Suez Canal most likely won’t close, the possibility cannot be ignored.

 

     In the unlikely event of the gateway closing, ships making weekly Asia-North Europe trips would need to sail around the Cape of Good Hope instead of going through the Suez Canal. To continue providing the same capacity per week with a weekly frequency, carriers would collectively need to add 48 additional ships into the Asia-North Europe services, increase the speed of their ships, or a combination of both.

 

     This would, according to Drewry research, result in a 77.5 percent increase in fuel costs, which is the main component of freight rates, up to approximately $8.1 million per round voyage. On the other hand, taking a route around the Cape of Good Hope also would save Suez Canal charges of approximately $1.36 million per voyage along with the cost of anti-piracy measures associated with sailing through the Gulf of Aden.

 

     In the end, rising costs and continued changes at both the Panama Canal and the Suez Canal bear watching.

     An NPR article earlier this year noted that the U.S. Labor Department’s final jobs report for 2012 suggests the jobs outlook is, as John Challenger says, actually “pretty positive.” After 34 straight months of job growth, the positive trend is well established and likely to continue, adds Challenger, chief executive officer of employment consulting firm Challenger, Gray & Christmas.

 

     Be that as it may, the pace of job growth still leaves something to be desired. Furthermore, the results from recent research indicate that global economic challenges and uncertainty will continue to contribute to subdued hiring during the second quarter of 2013. According to the latest Employment Outlook Survey from ManpowerGroup, employers seem to be seeking signs of a robust global economy before labor markets are likely to achieve sustainable traction.

 

     So on the one hand, employers in 32 of the 42 countries and territories surveyed expect to add to their workforces in varying degrees in the second quarter, compared to 29 countries and territories in the first quarter. Nevertheless, employers in 25 countries and territories report weaker hiring forecasts compared to this time last year.

 

     In the Americas, for example, employers in all 10 countries surveyed report positive hiring intentions for the coming quarter, with hiring plans strengthening in four countries but declining in five countries in a quarter-over-quarter comparison. When compared year-over-year, Net Employment Outlooks improve in four countries and decline in six. The strongest regional outlook is in Brazil, while the weakest outlooks are reported in Costa Rica and the U.S.

 

     There is a familiar story in the U.S., and it is that employers are taking a measured and positive approach to hiring, says Jonas Prising, ManpowerGroup President. Companies remain cautious about making any drastic adjustments to their hiring plans but the small steps forward indicate a continued trend of improved confidence, he says.

 

     A recent story in the New York Times explains that not only are companies reluctant to actually hire, many now string job applicants along for weeks or months before they make a decision. And that’s if they do actually make a decision sometime. Some have attributed the more extended process to a mismatch between the requirements of the four million jobs available and the skills held by many of the 12 million unemployed but for a large majority of positions where candidates are plentiful, the bigger problem seems to be a sort of hiring paralysis. Indeed, there’s a fear that the economy is going to go down again, so the message you get from CFOs is to be careful about hiring someone, says John Sullivan, a management professor at San Francisco State University who runs a human resources consulting business, in the NYT article.

 

     As a result, employers are bringing in large numbers of candidates for increasing number of interviews. The problem is that hiring delays make the economic situation worse, the article continues. So, jobless and financially stretched Americans are reluctant to spend, which holds back demand, which in turn frays employers’ confidence that sales will firm up and justify committing to new hires. Additionally, uncertainty about the effect of fiscal policy in Washington isn’t helping expectations for the rest of the year.

 

     If you have an opening and aren’t sure about the economy, it’s pretty cheap to wait for a month or two, says Nicholas Bloom, an economics professor at Stanford University, in the NYT article. But in the aggregate, those little delays, coupled with fiscal uncertainty, are stretching out the recovery process. The result is that the recession seems to drag on.

 

     What about your company? First of all, are you able to find qualified applicants? Secondly, is your company hiring them?

     Fake medicines continue to enter the global market and threaten millions of people. To help fight this problem on a global basis, nearly 30 pharmaceutical companies have joined together to support the International Police Agency (Interpol) in the creation of a new Pharmaceutical Crime Programme (PCP). Interpol explains that the program will further build on the work of its Medical Product Counterfeiting and Pharmaceutical Crime (MPCPC) unit.

 

     BBC News reports that the 29 drugmakers—including Amgen, AstraZeneca, Bayer, Eisai, GlaxoSmithKline, Johnson & Johnson, Eli Lilly, Merck & Co, Novartis, Pfizer, Roche, and Sanofi—are contributing $5.9m over three years to the PCP. The program will focus on the prevention of all types of pharmaceutical crime, including branded and generic drug counterfeiting as well as the identification and dismantling of organized crime networks linked to this illegal activity—which generates millions in illicit profits every year, Interpol explains.

 

    With no country, drug, or medical product immune from counterfeiting, a global effort is needed to combat this threat, says Interpol Secretary General Ronald K. Noble. The support from these pharmaceutical companies forms a bridge between the public and private sectors and will help Interpol and each of the 190 member countries more effectively tackle the problem of medical product counterfeiting, he says.

 

     An essential part of the program is to raise public awareness of the dangers of fake drugs, particularly for people buying medicines online. The World Health Organization estimates that more than half of the medicines purchased over the Internet from illegal sites that conceal their physical address are found to be counterfeit.

 

     Last fall, the FDA announced that it, in partnership with international regulatory and law enforcement agencies from 100 countries, took part in the Interpol-supported Operation Pangea V initiative aimed at disrupting the organized crime networks behind the illicit online sale of medicines. The initiative took action against more than 4,100 Internet pharmacies that illegally sell potentially dangerous, unapproved drugs to consumers. The result was the shutdown of more than 18,000 illegal pharmacy websites and the seizure of about $10.5 million worth of pharmaceuticals worldwide.

 

    Internet pharmacies that illegally sell unapproved, counterfeit, or potentially adulterated or substandard drugs are an inherently international crime problem, said John Roth, director of the FDA’s Office of Criminal Investigation. Because these criminals don’t respect international borders, the international coordinated law enforcement response represented by Operation Pangea demonstrates that international cooperation is the best way to protect the American public from the risk of unsafe drugs, he said.

 

     The problem is that pharmaceutical crime is not only widespread on a global basis, there also are a staggering number of activities. For example, it involves the manufacture, trade, and distribution of fake, stolen or illicit medicines and medical devices. But pharmaceutical crime also encompasses the counterfeiting and falsification of medical products, their packaging and associated documentation, as well as theft, fraud, illicit diversion, smuggling, trafficking, and money laundering.

 

     In the end though, in the case of drug counterfeiting, it can mean the difference between life and death for a patient, says Christopher Viehbacher, CEO of Sanofi. He explains that it’s estimated that 10 percent of medicines are fake, and in some poorer countries, it’s possible for as much as half of all medicines to be counterfeit. That’s why it’s so important for industry members to partner with Interpol to coordinate law enforcement operations around the world—it will help curtail the threat of counterfeit medicines online and at the retail level, Viehbacher says.

 

    I’m glad to see news of this type of initiative as well as that FDA makes a number of resources available on its website to educate consumers purchasing medicines over the Internet. I’m also interested to learn about the internal efforts at companies such as Pfizer, as detailed in a recent BusinessWeek article. I do wonder though, what else can be done?

 

     What are your thoughts on battling counterfeit medicines?

     Cyber security continues to be on my mind, particularly after seeing an article running in the Wall Street Journal. It notes that while Silicon Valley may have some of the world’s most sophisticated developers and users of technology, that expertise doesn’t necessarily prevent companies from being cybercrime victims.

 

     Indeed, research presented at the recent RSA security conference in San Francisco shows the latest security breaches are disproportionately effecting technology companies, the article continues. Such attacks can have an outsize impact on consumers due to the types of data stored by tech companies and their customers.

 

     For example, one study released at the RSA event by KPMG LLP shows that technology ranks only behind government and education among sectors hit by hacking incidents recorded in the first half of 2012. The attacks on tech companies also effected the greatest number of people over the five years ending in 2012, with 266.8 million personal records compromised, or nearly 24 percent of the total reported.

 

     Conference participants also discussed new techniques to stop new malware from taking root, including studying patterns of user and file activity to identify suspicious behavior, and broader use of encryption. Unfortunately, hackers, many of whom are increasingly believed to be agents of foreign governments—are equally adept at developing malware and other attacks that are harder to stop.

 

     Experts say attackers now seek user passwords, confidential details about products, and other information that may help breach other companies or government organizations. The rise of social networks, for example, has aided an increasingly common kind of attack known as spear-phishing, says Greg Bell, global service leader for KPMG’s information protection practice, in the WSJ article. Attackers turn to such sites to gain information about individuals to help craft personal-sounding messages with booby-trapped files, which victims click on and unwittingly introduce malware into an organization, he says.

 

    The problem isn’t just limited to tech companies, and as a result, the U.S. economy is vulnerable to relatively unsophisticated cyber-attacks, according to America’s top intelligence officer, reports an article in the LA Times. James R. Clapper, director of national intelligence, told a Senate Intelligence Committee hearing earlier this week that the danger of cyber-attacks and cyber-espionage on crucial infrastructure tops the list of global threats. As a result, America’s intelligence agencies are reevaluating how they operate. Threats are more diverse, interconnected, and viral than at any time in history. Furthermore, attacks, which might involve cyber and financial weapons, can be deniable and unattributable, he says.

 

     Although cyber-threats are first among global perils, Clapper says the likelihood of a major computer-driven attack over the next two years by Russia or China is remote. However, he does say that isolated state or non-state actors might deploy less sophisticated cyber-attacks as a form of retaliation or provocation, reports the LA Times. These less advanced but highly motivated actors could access some poorly protected U.S. networks that control core functions—such as power generation. Even if the attacks start small, the damage could spread because networks are so interconnected, Clapper says.

 

     Finally, in a separate hearing before the Senate Armed Services committee, Army General Keith Alexander, head of the U.S. military’s Cyber Command, said the intensity and number of attacks will grow significantly throughout the year, according to a Reuters story. To battle the threat, Alexander says the military is beefing up its cyber warrior team, adding troops from military branches as well as civilians. He said there would be three teams: a Cyber National Mission force which will deploy teams to defend against national-level threats; a Cyber Combat Mission force in charge of operational control; and a Cyber Protection force which will defend the military’s information systems. The goal is to add the new resources to the teams by the end of 2015, but one third of them are planned to be in place by this September, Alexander says.

 

    In general, however, how secure is your company’s network? What about your suppliers? If they suffered a security breach, what impact would it have on your company?

    You may have seen that a Boeing plan to redesign the 787 Dreamliner’s lithium-ion batteries won approval yesterday from the Federal Aviation Administration. The problem-plagued Dreamliners—delivered more than three years late due to production issues—have been grounded worldwide since January 16 after two incidents involving burning lithium-ion batteries.

 

     The plan, which moves the planes closer to flying passengers again, includes changes to the internal battery components to minimize the possibility of short-circuiting, which can lead to overheating and cause a fire. Among the changes are better insulation of the battery’s eight cells and the addition of a new containment and venting system, the FAA said in a statement.

 

     The FAA statement didn’t provide an estimate for when it might give final approval for the 787 to resume flight. Even then, Boeing will still need to retrofit the 50 planes already delivered to eight airlines in seven countries.

 

     This has been a rocky period for Boeing, it’s suppliers, and customers. An ASQ article reports that, according to The International Herald Tribune, the current delays may dilute the appeal of the 787 for some airlines and further raise the costs of the program for Boeing, which already was unlikely to make a profit on any 787s for at least two years. The company could lose orders and have to pay penalties to carriers if the 787 fails to meet its performance targets.

 

     That may well happen. For example, even though Boeing is working to get the 787s flying again, a certified solution will come too late for one of the highest-demand weeks for Japan’s All Nippon Airways (ANA). Indeed, to reduce uncertainty, ANA has already extended 787 flight cancellations to the end of May, encompassing Japan’s traditional holiday period known as Golden Week, an article in AviationWeek explains. The latest round of cancellations means ANA’s flight disruptions will last at least four months from when the worldwide 787 fleet was first grounded.

 

     ANA was forced to extend the flight cancellations for another two months as a precaution, since the major Japanese holidays of Golden Week fall in late April and early May this year. This follows a school vacation period in late March, when demand will also be high. ANA is expecting a large number of bookings around Golden Week, so it needed to make a decision on canceling flights as early as possible to minimize disruption for passengers. Leaving the cancellations until a later date would mean more passengers would have to be rebooked on different flights.

 

     Eventually, the carrier will negotiate compensation with Boeing, but ANA says it has not yet begun such talks, as its focus is on returning the aircraft to service, AviationWeek reports. The only estimate the airline has released so far is that the groundings cost it ¥1.4 billion ($15.3 million) through the end of January. Furthermore, ANA is scheduled to receive three more 787s by the end of March, which now seems unlikely.

 

     Rival carrier JAL is also suffering from the 787 battery issues, having grounded its fleet of seven aircraft. Because it flies the planes only on international routes, fewer flights are affected. This also means though that it’s more complicated to find replacement aircraft. JAL estimates that the 787 groundings will cost it ¥700 million through the end of March.

 

     Short-term problems aside, the larger question may be whether Boeing’s tight relationship with the Japanese carriers will ultimately suffer. There may already be signs of openings for Airbus in Japanese orders. The AviationWeek article notes that JAL Chairman Emeritus Kazuo Inamori recently revealed in a television interview that he has deep reservations about the carrier’s reliance on a single vendor.

 

     In the end though, it’s likely that the problems will simply be considered teething issues, and that sales of the Dreamliner will pick back up again. Perhaps more interesting however, is that the National Transportation Safety Board will hold a forum on lithium-ion battery technology in April. NTSB has said the forum will help the NTSB and the entire transportation community better understand the risks and benefits associated with lithium batteries, and illuminate how manufacturers and regulators evaluate the safety of new technology.

 

     The proceedings, and findings, should prove interesting for all companies using lithium-ion batteries.

    I was interested to see the results of a survey which found that 2012 was a record year for manufacturing revenues. More interesting, however, was that the survey of manufacturing professionals--conducted by Travelers—found that 67 percent of the respondents indicate their company receives a quarter or more of their supplies from a single supplier.

 

    That was somewhat of a surprise considering lessons learned from the earthquake and tsunami in Japan, and catastrophic flooding in Thailand in 2011. After all, as Jim Mandes, manufacturing industry manager, Travelers Commercial Accounts, says in an IndustryWeek article, if a manufacturer is relying on a small number of suppliers, and those suppliers are faced with a temporary situation where they are unable to provide the materials, the manufacturer can suffer a significant decline in revenues.

 

     With the idea of evaluating suppliers and their performance on my mind, I was also interested to see Supply Chain Digest note that in a recent issue of Inside Supply Management, Linda Michels, vice president of corporate learning systems for ADR North America (an arm of the Institute for Supply Management) wrote that lean staffing and limited travel budgets may be barriers to supplier visits. Nonetheless, it’s imperative to conduct the visits. Some suppliers may rarely require visits and others may occaisionally require visits. Then there are other types of suppliers, which require more frequent visits. "Critical” supplier visits, for instance, should focus on strategies for better mitigating risks. Then there are “strategic” supplier visits which will have the broadest scope--risk, collaboration opportunities, innovation, and so on, Michels writes.

 

     Like most activities, much of the success of supplier visits hinges on up-front preparation. The supply management organization should prepare for the supplier visit by collaborating on specific pre-meeting tasks, such as identifying priorities, Michels writes. Supply managers first should identify the compelling objectives for a supplier visit and then prioritize those objectives. These objectives can include determining a supplier’s costs, assessing its long-term stability or reliability, reviewing the viability of its business, and determining whether the supplier can deliver innovations or cost breakthroughs.

 

     In the end, when key suppliers are visited regularly, it helps to assure that expectations are being met. But that’s not to say it’s possible to always know what’s going on in a supplier’s facility.

 

     An article on ASQ reports that a long-time scheme involving fraudulent parts testing has been uncovered at one of the subsidiaries of the parent company that owns airplane engine-maker Pratt & Whitney Canada. The scheme, believed to have been carried out for more than 15 years, was discovered at Carmel Forge Ltd.--a subsidiary of United Technologies Inc., which in turn, owns Pratt & Whitney. An internal investigation was initiated in June 2011 after an employee anonymously reported that test data had been routinely adjusted during this period at the plant near Haifa, Israel. As a result, the company discovered that employees had doctored metallurgical test results to ensure certain engine forgings appear to meet strict standards when in fact they did not, as part of an effort to minimize more testing.

 

     Transport Canada says it reviewed a summary of the investigation by Pratt & Whitney and was “satisfied” with the corrective actions taken by the company. Pratt & Whitney says Carmel Forge has made personnel changes, established stronger software controls, purchased test equipment, and taken other steps to prevent adjustments to original test data.

 

     I don’t think supplier visits would have stopped the practice in this case, and it also goes to show that you never really know what’s going on in some facilities. But I do agree that supplier visits are imperative, and if companies only rely on a select few suppliers, the practice will grow in importance.


     What do you think? Do you regularly visit suppliers? If so, what are your objectives?