In a time of lean manufacturing and just-in-time operations, there are often limited stocks available for supply chain crunches or other sudden shifts in demand. So on Friday March 27, President Trump used the Defense Production Act to compel General Motors to produce ventilators, even as insiders noted that the company was already putting workers on an urgent project to do so.
General Motors, Ford, and others are repositioning their operations to produce or procure through their supply chains the components needed by ventilator manufacturers. They and others are also using capacity made available by reductions in their regular manufacturing operations due to reduced demand or challenges accessing key components.
Because ventilators are complex items produced under strict safety measures that often require medical-grade plastics and cleanroom operations that a vehicle manufacturer may not have, joint ventures are needed. Stop the Spread, a new coalition of volunteer CEOs seeking to connect businesses that can provide different levels of assistance in the production of goods needed to respond to the COVID-19 crisis, helped connect GM with its partner Ventec among other companies that can help GM meet its needs.
Manufacturing firms have long used joint ventures to adapt to changing conditions, improve technological capabilities, and expand production capacities. Companies will need to dive into such operations in more depth to respond swiftly to the coronavirus pandemic. Considering how current capabilities align with the needs of other businesses and how current needs in industry and health align with their operations would be the way to start.
For more information, see The Freedonia Group’s extensive catalog of off-the-shelf research. Each report includes analysis of competitive strategies, including joint ventures and merger and acquisition activity. Freedonia Custom Research is also available for questions requiring tailored market intelligence.