Tag Archive: trade

What’s Going On with Asia Supply Chains

June 25th, 2020

 

Supply chains are quite tenuous, and China drives the most volume:

  1. Coronavirus: Beijing is under a soft lockdown with a surge of virus cases. Although Beijing doesn’t impact trade, it is another sign that China vastly under reported previously and it is likely to have a new surge of coronavirus and plant closures.
  2. Manufacturers in China: Small and medium size manufacturers are not doing well. They are struggling to keep up since they had to continue paying people even when they weren’t producing. Are you watching your quality and cash?
  3. Vietnam: so far, they are faring pretty well and companies that moved prior to coronavirus and quite happy with service; if they hadn’t yet moved prior to coronavirus, it is likely on hold due to the disruption.
  4. Global transportation: Volume has picked up at all 3 ports in China (although they are dealing with a short-lived vessel shortage) and we aren’t seeing goods movement issues.

International rates are rising: they are up a hefty 12% from Asia to Northern Europe & 32% on the Transpacific route. They have taken capacity out and are slow to add it back. We’ll have to stay tuned to see what will happen.

 

 

Are you taking the continued disruption into account in your supply chain plans?

 

What Should We Consider and/or What Impacts Could Arise?

Undoubtedly, you should be thinking about how to proactively manage your global footprint:

  1. Re-evaluate your sourcing strategy: as many are already doing, the least you should do is re-evaluate your sourcing strategy. Generally speaking, the total landed cost for non-commodity products is less expensive in the U.S. than in China. Check your total cost and review multiple sourcing alternatives.
  2. Review your customers’ needs: Undoubtedly, consumer and business buying behaviors are changing during these unprecedented times. What is happening with your customer base? What can you do to get in front of the changes and see opportunities for expansion?
  3. Review your customers’ requirements: Understanding where your customers are located is a good start. It can have a profound impact on your supply chain, where you should produce and how you should set up your supply chain infrastructure. In addition, what expectations do they have? Are they expecting immediate delivery? Are their preferences changing to deliver at home? These questions will have a profound impact on your supply chain setup.
  4. Understand your transportation options: Clearly, understanding the speed, cost and effectiveness of your transportation options will be integral to your supply chain infrastructure.
  5. Understand likely disruption: Do a risk assessment to understand the likely disruption and risk associated with your options. You certainly have a different situation in China vs. Europe vs. Brazil.

Read more about this topic as well as your strategy, priorities, key trends, and your restart recipe for success in my eBook,  Future-Proofing Manufacturing & Supply Chain Post COVID-19 . If you are interested in a rapid assessment, please contact us.



The Value of Export

October 18th, 2019

My colleague, Kusum Kavia recommended me for CIEDEC which is the Califorina Inland Empire District Export Council.  So, I attended a meeting as a guest. Export is a vast opportunity. Just consider a few facts:

  • 95% of potential customers are outside of the U.S.
  • 97% of exporters are outside of the U.S.
  • California is the #1 state in exports
  • Less than 1% of American companies export – this is quite shocking. The good news is our clients are clearly outside of the norm.
  • Canada and Mexico are the top two export countries.

Given these facts, looking at USMCA, the U.S. – Mexico – Canada agreement should be of keen interest. The CIEDEC has written letters of support to pass this agreement citing that it will better serve the interests of American workers, farmers, ranchers and businesses; and, it supports mutually beneficial trade leading to freer markets, fairer trade and robust economic growth in N.A. There were $43.6 billion of exports from California to Canada and Mexico in 2017.  The top exports were computer and electronic products, transportation equipment agricultural products, machinery and chemicals.

There is also a heightened interest in export based on Brookings research and the consortium for Advanced Manufacturing Excellence in the Inland Empire. We are excited about the future Are you exporting?

What Should We Consider and/or What Impacts Could Arise?
There is vast opportunity for California manufacturers to export. There are tremendous resources available for exploring markets for your products and services, as well as help in getting started. We have several significant exporters in the Inland Empire.  They have grown their businesses faster and more significantly than the average.

This will be one of several topics we’ll address in our consortium for advanced manufacturing. If you are an executive interested in participating in an advisory capacity on the steering committee for this initiative, please contact me.

Additionally, our APICS Inland Empire Chapter will be addressing this topic as a part of our upcoming executive panel and networking symposium on “Collaborating for Advanced Manufacturing & Supply Chain Success“.

Think about taking one step forward in evaluating whether adding or expanding exports could increase your revenue, profitability and success. Of course, export also provides potential in distributing your dependence on domestic revenue and profitability.  So, it could be another leg in creating a resilient supply chain.



The New NAFTA & What It Means

December 27th, 2018

 

 

 

 

 

 

Recently, the USMCA (new NAFTA) agreement was signed by the U.S., Canada and Mexico.  It still needs to be ratified by lawmakers but several immediate protections went into effect.  Since I am surrounded by manufacturing and supply chain organizations and professionals in terms of clients, colleagues, trade associations and more, I can say that there is largely positive commentary about this partnership in N.A. and the improvements to the old agreement.  Of course, there was a lot of negative commentary and debate about the particulars and the impact on trade (you’d have to live under a rock not to hear them!), but it is a noteworthy step forward from our current position!

What does this mean for your business?  Are you “ready” to leverage the opportunities and minimize any risks?

What Should We Consider and/or What Impacts Could Arise?
Although most clients and colleagues expected something to work out in terms of NAFTA, many were still in a bit of a waiting pattern.  No matter the final details, it shows that collaboration will take place. I think it is noteworthy that collaboration is an integral part of the business success equation. Many years ago, collaboration was seen as a fluffy topic but it has become key to success. Perhaps we should all think further about how well we communicate and whether we can collaborate with those who don’t see eye-to-eye with us.

From a technical point-of-view, there are bound to be many implications on our businesses,  whether we source materials or products from Mexico or Canada or not. And if you are in another country, there will be an entirely different set of impacts. Think about your extended supply chain, from your suppliers’ suppliers to your customers’ customers and everyone in-between.  Are there opportunities? Risks? Be proactive, and I bet you’ll find at least one opportunity. This is another example of the need for a resilient supply chain.

Check out our new video and article series as well as our soon-to-be offered Rapid Resilient Supply Chain Assessment service:

 



Trans-Pacific Trade Delays – Are You Prepared?

September 16th, 2018

Thanks to Dave Porter for recently sharing: Vessel operations and capacity in the last 10 days have been severely impacted by two typhoons in Asia (Central & North China).  Major ports such as Shanghai have been shut down for 2-3 days which has caused a ripple effect such as roll overs and cargo backlog.

 

In essence, it is creating havoc – vessels are leaving before the entire operation is concluded (leaving many containers behind); port calls are being omitted and/or cancelled; and, heavy congestion and berthing delays are occurring.  If that wasn’t enough, rates are going up again 15-20% as of September 1st!  How resilient is your supply chain?

What Should We Consider and/or What Impacts Could Arise?
Recently, we decided to start a new series of interviews, articles and conversations about “The Resilient Supply Chain”.  This just highlights the critical importance of the topic! Our first video interview will debut in September, so stay tuned.

There is a LOT of conversation about trade wars, tariffs and politics yet what has created havoc this past week is an act of mother nature.  Our clients are telling us they are already experiencing transportation delays and rate increases, and demand is NOT slowing down.  These additional issues are bound to add stress to an already challenged system.  Leaving it to luck and hope that nothing will impact your global supply chain clearly is not the best laid plan…

This reminds me of a situation that occurred when I was VP of Operations at PaperPak.  The city where our largest facility was located went ‘under water’ due to a hurricane.  Even though our facility was built on higher land (thanks to P&G), no one could get in or out and everything came to a stand still.  Materials couldn’t arrive.  Shipments couldn’t leave.  Employees couldn’t get to work.  If we didn’t have backup suppliers and resiliency plans, we would have been down FAR longer even when the facility did start up because our suppliers were impacted.

Have you thought through “what if” scenarios?  Are you willing to invest in them?

 



Keeping an Eye on Global Markets

September 1st, 2018

If there ever was a strategic topic of critical importance no matter your position in the supply chain, it is keeping an eye on global markets.  We’ve worked with clients who ONLY source materials, components and products from U.S.-based suppliers.  Yet, even they must pay attention to global markets to thrive.  Are you making this a priority?

There are countless reasons to stay informed of global markets.  First and foremost, we live in a global society. It isn’t practical to go through a day without coming into contact with products, services, people, currencies and more from around the world.

A few additional reasons to keep an eye on global markets:

  • Interconnected world – We live in an interconnected world.  A political risk in Asia can impact the price of your materials.  Or, a shortage of oil or gas (as an example) in one country can impact the price and availability elsewhere.
  • Economy & currencies – Currency exchange rates will have an impact somewhere in your supply chain whether or not it touches your product or service.
  • Tariffs & trade – Tariffs certainly can have an impact.  The impact can be far reaching and can be from areas that don’t directly touch your organization. In this case, you might have short-term pricing impacts or long-term strategic impacts of where to locate manufacturing or which countries and markets to pursue.  Hopefully, you are considering both.
  • Global customers – There might be unique opportunities in one part of the world to utilize your product or service with a greater benefit realized than in another part of the world.  Are you considering your options and expanding your mind to the possibilities?
  • Risk – There’s no doubt that mitigating risk alone is reason to keep track of global markets.  For example, earlier in my career when there were issues getting materials out of Brazil, we wouldn’t have been able to service customers if we hadn’t planned for a backup supply elsewhere in the world.  Similarly, we would have gone out of business if we relied on only local suppliers when a major hurricane hit our manufacturing plant.  Every local business was under water except us and even with a plan we were affected – were shut down for a short period of time because our employees could not get in or out of our facility.

Keeping an eye on global markets can become a full-time job. Clearly, few, if any, clients can afford that.  Thus, pursue ways to collaborate with customers, suppliers, trade associations and more to leverage insights. Minimally, put aside some time on a daily basis to watch for key trends.