Archives December 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. 

Join us in 2022 and be first to know about new episodes.

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.