Archives 2021

Listen to the episode to find out more about all the major events that shaped supply chains in 2021. You might also want to review some previous episodes that deal in detail with some of the topics discussed. You can also read articles by Tony Hines here.

To say 2021 was a difficult year for supply chains and everyone working in them would be an understatement. Keeping goods moving around the world has been an immense challenge fro everyone with  Covid 19 intervening haphazardly to disrupt those flows. Fortunately, scientists and the medical profession have worked at double quick speed to mitigate the deadliest impact of the virus.  In this episode Tony Hines takes a retrospective view of  the biggest events disrupting supply chains and what governments and businesses have done to mitigate the risks.

At the start of 2021 the UK finally left the EU after five years since the vote to leave. This caused some disruptions and increased the regulatory friction. Albeit some of the worst impacts were delayed as the UK and EU agreed to defer some of the detailed regulations. In the US the Biden administration focused attention on advancing policies to develop resilient supply chains. Supply chains became the central policy platform to strengthen trade and innovation.

 Six days in March saw resilience stretched to the limit. The incident of one of the world’s largest container ships blocking the Suez Canal holding up many other ships and forcing many to take the longer route around Cape Horn to reach European ports. Eventually the ship was freed on 29th March and moved to the Great Lake allowing passage through the narrow straights. At this time about 360 ships were lined up to recommence their journey through the canal. This delay had a knock on effect of disrupting global supply chains for months with boxes in the wrong places and congestion at many ports in the EU, UK and US.

Next was the massive increase in cost of accessing container boxes. Prices increased by 500% on a year earlier. 

There was more disruption to food supplies caused by labour shortages in production and distribution. Agricultural crops were left rotting in the fields in some cases. Many industries were suffering shortages due to Covid 19 and in the UK there was the added impact from Brexit. In August there were a growing number of ships waiting to be unloaded at ports on the West Coast of the US. Los Angeles and Long Beach had more than 76 ships waiting by September queuing to enter the ports. 

More extreme temperatures caused fires in Australia, California, Turkey and floods in Italy and Germany. Further supply chain disruption as a consequence and many people killed or losing all their possessions. 

As we approach the year end Gas wholesale prices have increased by more than 250%. Energy costs for industry and consumers will be much higher in 2022 as a result. Fuel prices for transport had also increased by 33% since January 2021. UK inflation in December was at 5.2% (CPI) and about 7 % (CPI) in the US. 

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In this episode Tony Hines talks about business success. Here is the link to the full text of the talk  Fashioning Business Success | LinkedIn
I hesitate to write or talk about business success. It is like writing about the Holy Grail. There are so many opinions and little evidence to determine what business success looks like. Nevertheless, given this caveat write about business success, I will. In particular, I want to illustrate the central role that supply chains occupy in any successful strategy. Supply chains consist of flows of goods, services, data and cash. People and technology determine the organization of those flows. The simple diagrammatic representation of a retail supply chain on this page (follow link to full text) shows how demand triggers actions within supply chains. It is not comprehensive, simply illustrative. There are design, sourcing and procurement stages that come before where this diagram begins. This part of the chain incurs cost and investment to deliver the rest of it. Without the prerequisites of design, sourcing and procurement there is no business supply chain. Without customers too there is no supply chain. Without people and technologies to produce goods, services, manage data and transport logistics to store, distribute and fulfil orders there would be no supply chain. Success relies on all of these factors to be co-ordinated effectively.

Success is also the name of the game in the Covid 19 vaccine supply chain. The fastest development of vaccines in history are now saving lives. This is when time in supply chains is critical. An article in Nature told the story through eight powerful charts which you can read for yourself by following the link here.

Inflation in the UK is now 5.1% (CPI) which is more than double the Bank of England Target. There is more to come with Factory Gate prices standing at 8%. Fuel and Energy costs are driving it upwards along with rising retail costs in the supply chain.  Labour shortages including HGV driver shortages remain.

Fuel prices for Gasoline and Diesel have risen by 33% or more this year even though in recent weeks the oil barrel price has fallen and supply is up. It is time prices at the pump reflected this reality.  Wholesale Gas Prices have risen by 70% and this will feed into business and consumer costs in 2022.

The Brexit secretary David Frost has resigned from the British Government and Liz Truss has taken this role. There is still much to do on this front with the Northern Ireland  Protocol still problematic.

There is a tech battle going on with NVIDIA trying to takeover ARM a UK company that designs microchips for $80 billion. This is reported in this episode. The FRC in th US is concerned and both British and EU regulators are not happy either.

Covid 19 with the new Omicron variant is causing more closures. The only way to keep supply chains moving is to get everyone working in those global suppl chains vaccinated.

A further look at the cost of getting container boxes to move goods reveals price rises in 2021 have hit 500% more than a year ago.

Don't forget to listen to the Christmas Special Editions on the Ghosts of Christmas Past, Present and Future.

In this Christmas Special this is the first of three episodes looking at past, present and future of supply chains. In this episode Tony Hines looks at the road travelled by supply chain professionals over the past half century and more. Noting  that the phrase supply chain itself was only coined back in 1982 and then it was simply looking at what went on in a single firm. It is remarkable to think of all the parts that had to come together to make up the total supply chain system we recognise today. Re-organizing production flows, seeking efficiency and focusing on customers has led to the many developments discussed in this episode.

Time is money. If you can reduce time in processes in the supply chain then cost is taken out while output is constant. Therefore, productivity increases. Since Henry Ford developed his automobile company owners and managers sought ways to achieve this. Frederick Winslow Taylor (1856-1915) ‘Speedy Taylor ‘was Ford’s consultant engineer studying and observing time taken for activities in production systems and seeking ways to reduce it. Taylor developed the principles of scientific management. Engineers had always searched for efficiency in developing machines and now this skill was applied to organization and management processes. His ideas led to surge in work-study-engineers across manufacturing industry and his legacy can be seen in the International Standards such as the ISO 9000 quality standards. Standardization for routine repetitive activities meant that times could be set determining production times and line flow speeds. These ideas were applied and developed in military production making machinery including vehicles, planes, ships and weaponry for two world-wars. Efficiency is the focus for the production and supply system. Peter Drucker (1973) said “On Taylor's `scientific management' rests, above all, the tremendous surge of affluence in the last seventy-five years which has lifted the working masses in the developed countries well above any level recorded, even for the well-to-do.”

Many of the ideas developed to improve efficiencies in supply chains had their roots in Taylor’s legacy of scientific management in the first decade of the 20th Century. We can list a litany of techniques and tools that have been developed following through on Taylor’s ideas: Workflow O&M,Capacity Planning,Throughput Measures, PDCA, RBV,DRP, MRP, Inventory Management, CPR,  JiT, TQM, Kaizen, Quality Standards, Standard Costing, BPR, Lean, Agile, Leagile, Time-Based-Competition, Standard Time Measurement, TACKT Time, Value Added amongst them.

The purpose of a supply chain is not simply to be efficient although that is a good start it is to focus on the customer. “It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or for services converts economic resource into wealth…what the business thinks it produces is not of first importance. What the customer thinks he or she is buying, what he or she considers value is decisive – it determines what a business is, what it produces and whether it will prosper.” (Drucker 1973)

The two key messages from the Ghost of Christmas Past are that efficiency and effectiveness are the key aims of all supply chains. It is at our peril we lose sight of that.

Supply Chain Critical could well describe many supply chains around the globe right now. In this episode Tony Hines takes a look at US food and other supply chain disruptions following President Biden's initiative to get parties around the table to discuss issues. On November 29th the Federal Trade Commission (FTC) issued an order to discuss what's going on in those supply chains.  The FTC stated “Supply chain disruptions are upending the provision and delivery of a wide array of goods, ranging from computer chips and medicines to meat and lumber.” Price hikes and anti-competitive practices are also under the spotlight. With US inflation at 6.2% and some goods coming in at higher than that for consumers this is cause for concern. Availability of products is also of concern. Ranges have thinned and there are reported shortages in specific categories. “The FTC is issuing the ordersunder Section 6(b) of the FTC Act, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose. The orders are being sent to Walmart Inc., Amazon.com, Inc., Kroger Co., C&S Wholesale Grocers, Inc., Associated Wholesale Grocers, Inc., McLane Co, Inc. Procter & Gamble Co., Tyson Foods, Inc., and Kraft Heinz Co. The companies will have 45 days from the date they received the order to respond.”
  In the UK inflation is 4.2% and on the rise. There is also concern about shelf availability for many goods. The Office for National Statistics has been gathering data fortnightly from businesses in the UK. We take a look at some of the findings from the data and what it means for supply chains. The ONS Business Industry and Conditions Survey reports on 'the impact of challenges facing the economy and other events on UK businesses.' The survey is based on responses from the voluntary fortnightly business survey (BICS) including financial performance, workforce, trade, and business resilience. Businesses currently trading who reported that the prices of materials, goods or services bought in the last month had increased compared with normal expectations for this time of year was 38%.   In the last month, 17% of businesses reported they were either not able to get the materials, goods or services they needed from within the UK, or had to change suppliers or find alternative solutions to do so.  A few weeks back we reported the distressed ship Xpress Pearl was on fire and sinking off the coast of Sri Lanka with diesel and other chemicals on board the vessel leaking into the Indian Ocean. Since then it has come to light that nurdles were also on board, Nurdles a small plastic pellets that are used to produce packaging materials. Being plastic they are of course produced from oil (fossil fuel). However, nurdles are not classified by the International Maritime Organization (IMO) as hazardous waste. The damage to the local ecology and economy from the leakage has been devastating to livelihoods of fisherman in Sri Lanka. Listen to the episode to find out more.
Notes:
1.  250,000 tons of plastic pellets known as nurdles pollute our oceans every year.  https://cbsn.ws/2QXCkxO Trillions of small plastic pellets have been escaping from petrochemical plants into waterways and oceans for decades.
2. The IMO is aware of the problem but so far has not classified nurdles as hazardous waste which they clearly are.

Inflation in the US is at a thirty year high standing at 6.2% and in the UK the Consumer Price Index stands at 4.2% in November up 1.1% from a month ago. As demand goes up and supply remains short inflation is one consequence. In this episode Tony Hines discusses cause and effect and what it means for supply chains.

Shipping is such an important part of global supply chains and 90 per cent of global trade is moved at some point by ships. As container vessels get bigger and bigger what is the shipping industry doing to lower carbon emissions? Also what other impacts does this growth in shipping have for the planet and people as well as for profit? Is the shipping industry on track to play its part in a greener, cleaner more sustainable world?

In the UK this week apart from some disturbing inflation measures we had news that the UK Government would not be proceeding with part of its investment in the rail network for the High Speed 2 Project (HS2). This has major implications for the North of England particularly the North East where the Government had previously indicated it wanted to invest to level up. If you don't have the investment in infrastructure it is unlikely you will develop the economy to do that.

In this episode Tony Hines provides a short summing up of the recent COP26 event in Glasgow UK and discusses what's next for supply chains beyond COP. He also takes a look at the importance of supply chain partnerships and the benefits they bring to organizations. It is a way of accessing complementary skills. He revisits some early lessons that he thinks are just as important as ever for supply chain professionals and businesses that want to improve performance.  Cost, Time, Quality, Capabilities, Capacities, Experience and Expertise are all part of the rich mix that organizations manage to improve supply chain performance. This is discussed in the context of his 7V Framework used to do just that. He takes a look at some of the early lessons managing inventories and what it means for profitability. 

In this episode Tony Hines discusses greener, cleaner, frictionless trade as well as catching up on some news issues. The fire on the container ship off the coast of Victoria British Columbia is another reminder of the hazards involved in transporting chemicals. A new way to produce electric vehicles is discussed focusing on Arrival's Oxfordshire site. Some interesting innovations point to the green vehicle revolution and how it will differe from anything the industry has previously seen. It promises to deliver some real benefits. Moving freight by rail is discussed as a future option that has some environmental benefits too. Transaction costs causing friction in supply chains is discussed in the context of the UK's departure from the European Union and why friction is bad for supply chains. Externalities and the cost of pollution moving from producer to consumers and public clean up operations. Eighty per cent of the world's plastic bottles end up in land fill, in the oceans of the world or are burned releasing Co2 in the process. Producers keep the profits and externalise their costs.

In this episode Tony Hines discusses why supply chain research is such a rich area of knowledge generation with both practical relevance and academic rigour. The episode will be of particular interest to those doing research into supply chains as well as new entrants to supply chain management.

Timing is everything says Tony Hines when it comes to achieving supply chain advantage. Whether it is how long it takes to procure goods, process work-flows or transport goods (raw materials, work-in-progress or finished inventories) to the customer. Time endows advantage. Of course time can also be a problem if you do not manage it well. Managing time in supply chains is a risk. Ther are uncertainities beyond your control that give rise to risks that you may not have factored in. Even the most savvy supply chain professionals are subject to it. Take the current issues in global supply chains with ports experiencing delays in handling cargo. Satelite pictures of ports in California showed about seventy ships lining up waiting to discharge containers at Los Angeles. Long Beach too has delays. About 40 per cent of US Container traffic passes through these two ports. In the UK too at Felixstowe which handles about 36 per cent of the UK container traffic there are similar problems. In the US it has been taking up to 14 days to get ships into port and in the UK 6 days. There is also increased dwell time in turning around containers. It has risen form 4 days to 10 in the UK. The Biden Administration brought those involved in the US crisis to the table to discuss practical solutions and gain commitments.  This is seen as a postive move and parties are keen to operate ports 24/7 to get the job done. In the UK the underlying problem is the shortage of 100,000 HGV drivers to clear the ports and get containers in the right places. Time is everything because these delays are costly for everyone the shippers, the ports, the hauliers, the customers and those managing the various operations. A number of large retailers have been agile in trying to manage the risk by hiring their own vessels to move goods. These are generally smaller ships to weave in between the larger ships and to drop cargo at smaller facilities to avoid the backlogs. Home Depot's Sara Caliga said the idea started as a joke saying they would charter the ships themselves to get the job done but that's exactly what they have done. Wal-Mart said their strategy was to hire smaller ships to move goods more quickly. IKEA, Target and Costco are all doing something similar. Cocal Cola said it was using smaller vessels usually used for grain or coal to move their products around. In the UK the John Lewis Partnership runs 34 department stores and about 374 Waitrose Stores and it too committed to charter ships on 16th September to ensure they had supplies for the run up to Christmas. Hiring ships is not cheap. It is also not a skill expected of retailers to run the shipping operation so it will be interesting to see how they do. These retailers are looking to secure the high velocity inventories the goods that make them most profit. Listen to the podcast and find out more.

Electricity shortages in China have impacted production capacity as factories in some of the biggest industrial areas have had to close. This is in addition to the problems experienced from the pandemic shutdowns that occur with China's no tolerance policy to Covid. This will mean more disruptions to some goods. Recent closures in Vietnam have also seen some production move from their to China but Vietnam is now opening up again. 

The UK is still impacted from the HGV driver shortage (100,000) meaning goods are not moving as quickly as they should. This is impacting the UK's largets container ports. This week the reintroduction of cabotage by the UK Government means that EU drivers can do more pick ups in the UK but this has not gone down well with UK hauliers who fear their work will be taken away by EU firms.

In this episode Tony Hines looks at the troubled waters everywhere in supply chains. As the world is slowly opening up trade again excessive demand for energy, shipping and other goods has put pressure on struggling supply chains grappling with labour shortages. In Europe wholesale gas prices increased by 60 per cent in just one day before falling back. This was a result of Russia controlling supplies into the EU. In the United Kingdom the rocketing price of energy has resulted in industries that are big energy users such as steel, chemicals, aggregates, ceramics and glass asking for the government to help out. Government policies to decarbonize and to switch to renewables and greener sources have put energy supplies at risk because they have not developed sufficient green and clean energy capacity at the same level that they have removed fossil fuels sources and nuclear. 

Shortages are everywhere in supply chains from supermarket food supplies through to fuel for transport and energy. This week in the UK David Lewis a former CEO of Tesco was appointed by the UK Government as an adviser on supply chains so let's hope he can bring some order to the chaos. Meanwhile the PM is on holiday not playing his fiddle but painting in Spain.  

In California we still have ships lining up to be unloaded at ports and now in the UK too at Felixstowe ships are waiting six days to get unloaded. Some large container vessels have been rerouted to Rotterdam and Antwerp and cargo is being sent to the UK on smaller vessels to avoid the queus. It is also taking 10 days to move boxes whereas this dwell time usually averages just 4 days.

Government in the UK are under pressure to introduce policies to hel out some industries that are big energy users. All in all we have troubled waters in supply chains.