In this epsiode Tony Hines discusses procurement and supply relations. These are two areas in which significant value can be created in supply chains. As Edward Deming noted for continuous improvement you must constantly improve supply relationships. It is through those relations that reputations can be developed, responsiveness improved and reliability is built in. You could also construct resilient supply chains through developing effective supplier relationships. You can read more about this topic in my Supply Chain Strategies book where I have a chapter on this topic. For those new to the field there is also a useful glossary of terms in the book.
When storm clouds gather we need a plan to confront the storm. In this episode Tony Hines investigates the root causes disrupting supply systems.
Identifying underlying causes are the key to resolving obstacles. The major root causes are energy and fuel costs. Both of these costs drive the input costs upwards, increasing production and distribution costs. Instability is directly attributable to Russia's war in Ukraine. Uncertainties introduced into global markets add to the extant problems of Covid 19 and the disruptions caused to global supply chains prior to the invasion in February 2022. Countries in the EU have seen Russian Gas and Oil supplies fall as a consequence. The reliance on Russian energy sources has been exposed. The uncertain times we live in with rising inflation are reminder of the 1970's when the Oil Crisis drove up prices fast and caused uncertainties. So how can Western Economies address the instabilities?
The question addressed here is how healthy is the Western Economies' dependency on China as the 'workshop of the world'?
Waking up to reality- the world's dependency on China continues despite disruptions due to Covid19. China dominates manufacturing in electronic goods and in processing metals that are needed to produce batteries for Electric Vehicles (EV's) such as Cobalt and Lithium. China is regarded as a middle and upper income country according to the World Bank. China is responsible for over 30 per cent of all goods manufactured. China has 133 companies in the world top 500. China has a population of 1.4 billion and has trasnitioned rapidly from an agrarian society to industrial economy. It is now the number one economy overtaking the United States in terms of global market share. China has talented scientists that continue to improve and innovate technologies to support industry and the energy ecosystem.
China has committed to reach Net Zero Targets by 2060. China plans to increase its use of fossil fuel consumption up to 2030 and rapidly reduce that with clean energy up to 2060. China's entry to world markets in recent times began in 1978 as it opened up its closed economy. It contued to transition with entry to the World Trade Orgainzation (WTO) in 2001. During the past twenty years it has set about building ots resource base particularly in metals from the Central Africa Copper Belt – Cobalt in particular is such an important resource eminating fro the DRC.
China has been engaged in a trade war with the US during the past couple of years. This becasue it has access to US markets but continues to deny access to US companies. It also has ambitions to dominate the South East Asian region and continues to claim territories particularly Taiwan.
All things affecting global supply chains this week from around the world.
Energy costs are the number one priority to get supply chains back on track. Followed closely by a swift end to Russia's invasion of Ukraine.
Fertilizer costs hit farms all over the globe.
CF producers fertlizer in the UK and this week announced closure of one of its two plants despite increased demand and shortages of supply.
Target has too much inventory.
Tessla steps back from its China recruitment drive.
Fuel prices continue to rise in the US, UK and throughout the EU.
Tax in the form of fuel duty makes it more problematic un the UK.
China has strongly developed networks in South East Asia and this helps keeps prices low and a reason why it has become the supplier of choice.
South Korea has HGV driver strikes disruptibg supply chains.
The OECD said the UK economy would grow 3.6% this year but may move to zero next year with higher interest rates, postBrexit trade issues and the War in Ukraine with Russia.
Rail strikes in the UK could impact food supply chains.
Russian oil continues to flow into Europe despite the ban which only applies to seaborne crude and petrolium.
India has increased its intake of Russian oil as has China. Russia probably has increased its take from these transactions. It is also pushing up prices on world markets.
Listen to the midweek edition about Western Economy Dependency on China.
The Apple iPhone is one of the world's most successful products. A great deal of that success beyond design has been how Apple has been able to configure its' supply network to leverage global expertise and assemble products at low cost to sell at higher prices. Profits generated have enabled Apple to reinvest capital and innovate new technologies to develop more products. As the number one smartphone company it draws more than 40% of the total smartphone industry revenue and more than 50% of the profits. The question is how long can that continue?
In this episode Tony Hines reviews current trends in talk and thinking around supply chains as economies recover from the pandemic. Disruptions have caused nervousness in global trade. Talk is focused around change and if there is a new normal or more settled times ahead.
This is why you should listen to the Chain Reaction Podcast – All About Supply Chain Advantage. Evidenced based opinion delivered directly to you about everything happening in supply chains affecting business. Stay informed about supply chains by listening to Chain Reaction – subscribe today.