Chain Reaction Podcast Supply Chain News Update

Supply Chain News from around the globe. This week Tony Hines looks at the continuing CO2 production problems for the UK Food Industry returning to a story that hit the headlines back in August 2021. CF a US company has two fertilizer production plants in the UK one at Ince near Warrington and the other in Durham. CO2 which is a byproduct of fertilizer production is sold to the UK Food and Drinks industry. It provides most of the supply. The UK Government provided a financial package back in August that kept supplies moving. The cause of the problem is the high cost of energy forcing CF to stop production of Fertilizer. Now the financial package has ended and there is no sign of lower priced energy CF intend to stop production once again to cut their cost. This will cause problems for the UK Food and Drinks Industry unless a solution is found.

On a visit to his local supermarket Tony Hines noticed that in-store space had been reduced. On further investigation he discovered that this is down to supply chain disruptions as stores are reclaiming more space for onsite storage for goods. He followed up by looking at the demand for warehousing space during the past year. You can find out more listening to the episode.

Inflation is pushing up prices in the US and UK. Year on year at the end of 2021 it was 6.2% in the US and 5.4% in the UK. Supply chain disruptions have added to the woes. This is likely to continue pushing up the cost of goods during the first half of 2022. Production problems due to Covid 19 along with port delays, slow turnaround of container boxes, transportation and increasing fuel and energy costs are likely to ensure inflationary pressures persist in 2022. Added to this is the threat of Russia moving into Ukraine and the impact that this will have on supply chains causing severe disruptions to some critical products including commodities and energy. Wholesale gas prices are likely to remain high as a consequence. For countries reliant on gas for a high proportion of their energy for industry and domestic supply this will cause product shortages and higher costs for everyone. The energy market is what economists refer to as an oligopolistic supply controlled by a relatively small number of organizations. This means that one or a small number of suppliers can have a high impact on prices paid by businesses and consumers downstream. In simple terms governments have put all their eggs in one basket when it comes to energy. A lot more investment is required into finding multiple sources that can spread the risk, maintain price stability and achieve the goal of reducing pollution.

The Northern Ireland Protocol remains problematic with customs checks increasing from January 2022 and mid-year this needs to be given attention if Northern Ireland is not to become a poor relation. Direct shipments to the island of Ireland have increased from European Ports which has impacted the trade conducted between Holyhead and Ireland.The economics of these trade routes have been severely disrupted. Many of the journeys now come directly from EU ports to Ireland to cross the land border to the North. This has added cost to operations.

Inputs of materials are in short supply of between 6-8% and outputs shortages 4-6% as a consequence of supply chain disruptions. Semi-conductors are one item in short supply but there is news of some big investment happening that will improve this situation in the next two years.  We take a look at the likely impact of disrupted supply chains if Russia invades Ukraine.  We also consider the consequences of port delays, increased dwell times and the liklihood of further disruptions in 2022.  

Chain Reaction Podcast Battery Technology And Volatile Energy Markets

In this episode of Chain Reaction Tony Hines takes a look at emergent battery technology for the electrical vehicle revolution. The announcement by the UK Government this week of a new factory in Northumberland will increase capacity and yet the British Volt investment along with the existing plant in Sunderland previously owned by Nissan before it was sold to a Chinese based business will still fall significantly short of supply needed by 2040 to meet demand. So there is more to do. The race is on all over the world to ramp up investment in battery production to service the growth of electrical vehicle demand. The technology is still developing to produce more efficient batteries.

Battery production itself is not as green or clean as you might think. It relies on mining activities to get hold of raw materials sucha as lithium and cobalt used in the production of batteries.  Novak Djokovic is a Serbian professional tennis player who as we know was refused entry into Australia because he had not been vaccinated against Covid 19 but this week Serbia withdrew permission for Australian Companies to mine for lithium in what is thought to be some form of retaliation. This is significant because Rio Tinto Zinc was expecting to harvest significant lithium for battery production. The RTZ share price fell by 123 pence on the London Stock Exchange as a consequence of this decision. As for cobalt that is an expensive metal with 60 per cent of supply coming form just one country the Democratic Republic of Congo. Cobalt mining is a very dirty business as you will discover if you listen to the episode. There is also the big question about what happens to all of these materials when the useful life of the batteries comes to an end. How will the electric vehicle manufacturers deal with waste.

Volatile energy markets have been around for some time and they are not getting any better. If we look at the demand for Gas cold weather in different parts of the world will drive prices up but the capacity to meet demand is limited which means prices per unit increase. Gas wholesale markets have risen consistently in the past year. This has a greater impact on large users and those without capacity to store gas supplies.  Cold weather depletes reserves held in storage facilities. Many suppliers needed to carry out maintenance work postponed during lockdowns and as a consequence supplies were not replenished as normal meaning shortages.  This is significant risk for the UK which has woefully low storage facilities compared to other European countries and it will suffer more as a consequence.  Gas is still the main source of domestic supply in the UK and while all this was happening it wasn't as windy as usual meaning all the wind turbines were generating less energy too. 

Article referred to in the podcast:
Brink S. van den, Kleijn E.G.M., Sprecher B. & Tukker A. (2020), Identifying supply risks by mapping the cobalt supply chain, Resources, Conservation and Recycling 156: 104743.

Chain Reaction Podcast Stay Informed About Supply Chains in 2022

If you are a CEO, Supply Chain Professional, Policy Adviser, Academic or Student you should spend some time each week listening to Chain Reaction – All About Supply Chain Advantage; we will keep you updated with what's happening. Listen on your way to work or on the way home. We have regular listeners comprising CEO's, Supply Chain Professionals, Governments, Policy Makers, Academics, Students and Media/Press.  Listeners from 297 cities in 43 countries tune in. So what are you waiting for, stay informed listen to Chain Reaction – All About Supply Chain Advantage.

Listen to this short trailer for the Chain Reaction Podcast-All About Supply Chain Advantage. Join us each week to stay informed about what is going on in supply chains. Follow the trends, listen to how businesses are strengthening supply chains to make them more resilient. Find out how businesses are impacted when things don't go to plan. Learn how consumers are  affected by supply chains. Find out how much waste there is and what supply chain professionals are doing to minimise it. Learn how digital transformation is changing the ways that supply chains work. We cover all business matters across different sectors to understand what's happening with supply chains. We search for ways that organizations can develop strategies that lead to supply chain advantage.

Chain Reaction Podcast Gas Supply, Electric Vehicles, Retail Discounters

Electric Vehicles and concerns about battery power feature in this epsiode. We also take a look at supermarket retailing in the United Kingdom. How discounters are winning market share. Gas prices are rising in Europe and Gazprom is seeking approval to open its pipeline from Russia through Europe. China has announced the removal of subsidies for New Energy Vehicles (NEV's).

Gazprom is the largest supplier gas world-wide. It is Russian owned. It is currently negotiating with the European Union to allow it to run its Nord Stream 2 pipeline through central Europe bypassing  Ukraine and passing through Germany.  Germany said it would give permission back in July 2021 but the EU has to agree. Germany suspended its approval in November 2021 because Nord Strum is registered in Switzerland and not Germany. This will be far more efficient for distribution than loading many ships. However, relations are not as good as they could be and the EU is likely to take time until about mid-year to reach a decision. Gazprom is currently highly profitable with demand for gas up and supply in short measure. As the largest supplier of Gas with a quasi-monopoly position it can virtually write its own profit figure. Wholesale gas prices have increased fourfold in the past year. Consumers in Britain will likely be paying about £700 more per household in 2022. The EU gets about 40% of its gas from Russia. UK supply is much lower (5%) but as wholesale prices increase in the market the UK will pay higher prices too even though much of its supply comes from Norway.

How has the UK’s departure impacted the EU? Since the 1st January 2022 there are further delayed bureaucratic checks at borders and there is little understanding of this in Europe. This is likely to cause further disruptions in the first part of the year.  Listen to the special edition of the podcast on Tariffs, Trade and Policy.

Have you ever wondered why discount retailers might be doing better in the current economic climate? Listen to what is happening in the UK retail market. 

Governments are pushing for people to make the switch to electric cars sooner than later. Listen to the snippet about some of the problems that need to be resolved before this can happen. Battery technology is something that needs further innovation and there needs to be better coverage of charging points. Battery capacity, charging speed, vehicle characteristics and range are all part of the equation. 

Finally, listen to the report of withdrawal of subsidies for new electric vehicles in China. 

 

 

Chain Reaction Podcast Tariffs, Trade Policies and Supply Chains – Special Edition

In this episode Tony Hines takes a look at tariffs, trade policies and how they impact supply chains. Is managing international trade through the blunt instrument of tariffs and quotas fit for purpose in the 21st Century? Should governments be looking for better ways to facilitate trade? We begin by examining a brief history of tariffs by taking a look at how they developed as an instrument to grow the British Empire in the 18th Century and how tariffs became the genesis for the United States to exist.
When Adam Smith published his influential book the first about political economy Britain had an empire that stretched around the globe. An empire that was protected by favourable trade policies to the benefit of the East India Trading Company established in 1601. There was much interest from France under Napoleon and from Prussia in Smith’s ideas. The system of market regulation based on tariffs and quotas was known as Mercantilism. Governments thought that they could regulate trade to their benefit whilst simultaneously deriving income from taxes. The system developed a complicated elaborate structure of customs duties on imports and exports. What these taxes actually did was create monopolies for certain interested parties particularly the British East India Company.
At the time Smith was attacking the Mercantilist policies there was a dispute brewing in the American colonies over Tea Trade.  A minister of the Crown with responsibility for the thirteen colonies in America wanted to tax tea and enforce regulations on a variety of commodities to the letter so that Britain could make them pay taxes to support the cost of their own defence. These enforced regulations were unenforceable at a distance of 3,000 miles and the states had little ability to regulate them in the ways demanded by the British.  Earlier in the eighteenth century the British Government had implemented a range of taxes on the cotton trade which woollen manufacturers promoted to protect their trade in textiles. Arguments grew louder after the publication of Smith’s Wealth of Nations and free trade became the mantra (Laissez-faire – let it alone). Businesses argued that these were not matters for the state to concern itself with. Mercantilism was abandoned and William Pitt the younger was an outspoken advocate and adopted the policy when he became Prime Minister in 1783. Progress was interrupted by the French War with Napoleon’s army by which time Britain had amassed a large national debt to fund the war. Trade regulation continued until William Huskisson became President of the Board of Trade under Pitt in 1823.
The Free Trade movement set the agenda for economic growth and through it Britain prospered until Chamberlain began to revive interest in tariffs at the start of the wars with South Africa in the first decade of the twentieth century. In 1944 the Bretton Woods Agreement set out to establish a complex system to manage international trade  through a General Agreement on Tariffs and Trade (GATT) .  The agreement  laid the foundations for the establishment of the World Trade Organization (WTO) on the 1st January 1995.  Today the WTO manages a complex system of trade regulations mainly through tariff and quota arrangements in 163 countries. The WTO also deals with trade disputes through its appeal procedures.  All of this despite the fact that most economists think that tariffs do more harm than good. Supply chains work best when there is no friction. Tariffs cause friction through customs checks, bureaucracy and additional costs added to what would otherwise be a simple commercial trade. Supply chains have to establish systems to cope with this. When trade agreements change they cause disruptions and there are inevitably winners and losers in the process.  Read Full Article

Chain Reaction Podcast What’s New In 22?

What’s New In 22?

In this episode Tony Hines sets out his supply chain predictions for 2022.

 What will the supply chain landscape look like in 2022? What will you do in 22 that will make things better for you and your organization? Digital Transformation is top of my list if you are not already there yet.

 Returns are a big problem for retailers online and in store. We take a look at the problem of returns. The growth in E-commerce in 2020 was about 44 per cent and online sales overall climbed to over 21.3 per cent compared to 19 per cent in 2019. Returns are in the region of 25-40 per cent. So what can be done to manage the reverse logistics in supply chains and reduce their impact on profitability? Solutions include return kiosks, specific drop-off points and carrier returns 90 per cent of consumers prefer to return to stores and 70 per cent repurchase. Checking returns and refurbishing if necessary is essential to get goods to a resalable state.

 Brexit raises its head yet again with post Brexit controls with more checks likely in 2022. This has potential for even more disruption than in 2021. New rules, regulations mean more bureaucracy, cost and friction for exports and imports. Smaller firms will likely get caught out. The EU has agreed a deal for steel with the US meaning zero tariffs between the two. Meanwhile the UK does not have a deal and this will likely make UK steel 25 per cent more expensive. This is an early test of the UK Government’s ability to negotiate equivalent or as they are prone to say ‘world-beating deals’. It will be damaging to the UK steel industry if they cannot strike an equivalent deal.

 Zero emissions by 2050 but the UK claims it will be the first country to achieve a reduction for HGV’s less than 26 tonnes by 2035. Listen to the details. Tesco the largest UK supermarket is introducing HGV’s in January 2022.

 There will be continuing shortages in many categories of goods in 2022. Covid 19 is still a major disruption. We can expect delays and factory closures as a result of the pandemic. There are also geopolitical problems between the EU, Russia and the US along with the China and US outstanding issues. We need to begin to resolve differences with the aim of working together co-operatively for the benefit of everyone.

 Fifteen years ago Amazon Prime made headline news offering overnight deliveries. Today the Amazon Innovation has extended to other companies employing digital technologies. Listen to find out more.

 Listen to why Trust is necessary in supply chains.

 Three things that will create advantage in 22 are an ability to mitigate risk managing three things: 1 Volatility, 2 Visibility and 3 Virtuality. You need to develop strategies that will achieve these aims.

 

 

 

Chain Reaction Podcast 2021 A Supply Chain Year In Review – The Ghost of Christmas Present

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.

Chain Reaction Podcast Fashioning Business Success

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.

Chain Reaction Podcast The Ghost of Christmas Past

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.