Recent world events continue to reshape supply chains and reinforce the need for greater control, speed and resilience. In this Supply Chain Byte, Lisa Anderson explains why manufacturers must think seriously about reshoring, vertical integration and strategic relationships to fast-track supply and secure the end-to-end supply chain.
Since the closure of the Strait of Hormuz, it is clear that evaluating geopolitical and supply chain risk must become a strategic priority. Oil and natural gas supply are in short supply for much of the world. Although the U.S. has plentiful supply, it has been impacted by the cost increases due to the global price of oil. However, Asia, Australia, and Europe are struggling. Countries like Japan are transitioning a portion of their purchases to the U.S. to gain a more reliable source of supply.
However, fertilizer is derived from natural gas and is causing a far greater issue to the U.S. since we import 50% of our supply. Thus, the U.S. is easing transportation rules (to move it easier within the U.S.), opening up supply from Venezuela, and fast-tracking permits within 45 days to CF Industries so that they can expand domestic supply. CF Industries is opening the largest ammonia plant in the world and vertically integrating it. Natural gas is turned into hydrogen, combined with nitrogen into ammonia, and then processed or converted into nitrogen fertilizer.
What should we be thinking? Reshore, near-shore, evaluate positioning supply close to manufacturing and/or customers, and ensuring you can secure your end-to-end supply chain to provide security, reliability, and resiliency for your customers. These strategies can help companies reduce risk, improve responsiveness and better prepare for whatever comes next.
If you are interested in reading more on this topic:
Resilience in Supply Chain of Paramount Importance