(1) Supply Base: The place supplies come from
Car companies try to keep their supply base close. If possible, suppliers are located next to the car factories.
(2) Break Even Point: The point where sales and costs are the same.
Our break even point is a lot lower due to the fact that our currency is weak these days.
(3) Buyer: Someone who makes purchases for a company.
Buyers who work for Toyota make decisions about which parts to buy and how much to pay for them.
1. Why do car companies have supply problems?
a. They’re suddenly ordering a lot more parts.
b. The recession caused many suppliers to go bankrupt.
c. New cars need new types of parts.
2. Why did suppliers’ break even point go down during the recession?
a. They became more efficient to survive hard times.
b. Their taxes went down.
c. It’s a mystery.
3. Which industry is the coffee industry starting to resemble?
a. The car industry.
b. The beer industry.
c. The wine industry.
By Jeremy Schaar
In today’s lesson, I’ll share a couple news stories. For a short lesson, you can just read the summaries and answer the questions to the left. For a longer lesson, click on the links and read the stories in full.
First up is an article in the USA Today: Could automotive supply chain snap?. During the recession, suppliers had the problem of not enough demand. But with the improving economy, car companies are launching more new cars and sales of cars increasing. So now suppliers have a new problem: too much demand. While this might sound like a nice problem to have, it is creating stress on the supply base.
After the Japanese Tsunami, we saw how difficult it can be to get more parts. Often just one or a few companies supply all the parts. So if everyone is expanding at the same time, suppliers might not be fast enough. So far things have been OK, but suppliers are still a little afraid to expand. They’ve lowered their break-even points and feel like healthier companies.
On a side note, the suppliers might use this chance to negotiate better prices. Traditionally, car companies and suppliers work very closely together so that everyone feels secure. Car companies need to make sure suppliers have a good business or they’ll disappear. Still, the size of car companies generally lets them win negotiations. Now might be the suppliers chance.
In other news, this is a cool article about the “third wave” of the coffee industry. Read the first few paragraphs to learn about what it means to find a supply of coffee beans these days. Executives are travelling all around the world to find the perfect bean for their coffee. They’re doing it to meet a new demand for “slow coffee”. It seems like the coffee industry is becoming more like the wine industry. Companies will need to adjust to more specialized suppliers.