The Carestream Health Inc. CHX, in Xiamen, China manufacturing processes is affected by delay due to dockworker strike in the USA. The China subsidiary is forced to choose an option between airfreight or regular transport via a different route to get the raw materials earliest before the firm completely run out of inventory.
Stephan Vachon, Zhiduan Xu, De Gao
Harvard Business Review (W19686-PDF-ENG)
December 11, 2019
Case questions answered:
- Analyze Carestream Health Inc. using the information from the case study and also from online sources.
- Review the company’s business and competitors. Were other companies affected by the strike?
- Was the company affected by the dock strikes last year? Has the company been affected by Covid-19? What happened?
- What causes variation in the company’s supply chain?
- What were the managerial problems caused by the labor strike? What are the company’s options? What is the feasibility of those options? Provide your reasoning.
- If you were a manager in the meeting how would you decide when to use airfreight and how would you calculate the relative cost of airfreight vs. regular transport?
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Case answers for Carestream Health Inc.: When Disruption Hits a Lean Supply Chain
Abstract – Carestream Health Inc.: When Disruption Hits a Lean Supply Chain Case Study
The Carestream Health Inc. CHX, in Xiamen, China subsidiary consists of a well- planned lean production system and a supply chain with an experienced group of personnel. The subsidiary has faced an issue of bringing down the raw materials from the USA facility to manufacture the final product.
This process is delayed by the dockworker strike in the USA, as that the CHX, China, is forced to choose an option between airfreight or regular transport via a different route to get the raw materials earliest before the firm completely run out of inventory.
With the time constraint, the firm needs to select a suitable option as the subsidiary is in a very competitive market. To protect the market share and to supply the customers without any delays, the best option to choose is airfreight. The costs of it can be higher, yet losing the market share, customer loyalty, etc. are much higher than airfreight costs.
The USA-based Carestream Health Inc., which was earlier known as Kodak Medical Group, is a subsidiary of Onex Corporation. It is a world-leading health imaging product provider that plays a significant role in the medical industry.
The organization is well known for its productions of radiography, computer radiography systems, and prominently the wide rolls of high-quality coated film for X-ray imaging systems while working on business activities through five divisions.
The medical imaging healthcare IT, nondestructive testing, and advance materials and contract manufacturing, dental imaging solutions are some of them. The operations are conducted in North America, Africa, Asia Pacific, South America, Europe, and the Middle East.
The CHX Xiamen subsidiary owned by Carestream Health Inc. withholds 80% of the production in the film, becoming the USA Carestream’s largest buyer. With a well-planned systematic lean production and supply chain, the CHX Xiamen is at a problem of getting supplied the required wide rolls of film from USA Carestream facilities due to the dockworker labor dispute.
Carestream Health Inc.’s disruption has emerged as a result of the dockworker dispute that occurred in October 2014. As mentioned (Scheyder, 2012), American blue color workers are paid very heavily. When the shipping companies are striving to control the costs, including labor, the issues have started to rise.
Compared to the USA, rival ports such as Shanghai use five dockworkers to perform a task where the USA uses twenty dockworkers. Considering the issues between the workers and employers based on payments, automation, and workplace efficiency, the slowdowns and disputes started in West, East, and Gulf coasts of the USA.
The slowdown of the port was initiated by close to 14,000 longshoremen, who are a vital element of the supply chain, caused a cost of 2 billion per day. On the other aspect, this impacted businesses in the USA, such as manufacturing, retailing, and agriculture, as well as the economy in other parts of the world.
The case study flowed as a consequence of the labor dispute that occurred. Its effect on the Carestream Health Inc., China CHX (Xiamen) supply chain is emphasized as the wide rolls of film are the key material needed for the production where the final goods are sold to the hospitals and agents via the Carestream Health Inc. and Asia Pacific internal company.
Based on the situation caused to the company, the managers depend on their successful lean production system. However, if the company does not supply the demand of the hospitals and agents, they can go to the competitors of Carestream Health Inc.
It would result in the loss of market share. This situation is critically analyzed, and the managers are deciding whether the airfreight is a violable option to face the threat overhead of them.
The Business during the strike at Carestream Health Inc. CHX (Xiamen)
The 80% of the USA production of wide film rolls is catered to the Carestream CHX China. Emphasis on their production level consisted of zero defects, no delays, etc., while efficiently managing supply chain and handling 50% of the market share in the industry.
While the firm is dependable on 80% of the production capacity of the USA subsidiary, when there is a hold on the material supply, it can drastically affect the firm and the production system of the firm. The inventory levels have come down to 2-6 days of inventory due to the labor dispute, the fluctuation in the shipping lead time.
The Lean Production initiatives which have been implemented over the last few years have assisted Carestream Health Inc. in reaching an…