In this week's episode we follow up from last time and discuss what went wrong with supply chains in the past eighteen months and how to fix the weakest links in your supply chains.
Tony Hines makes the distinction between two types of problem that disrupt supply chains. His type 1 problem is one caused by issues in a particular supply chain. Type 2 problems are systemic and effect all supply chains. He gives specific examples of the two types he has identified and offers some suggestions on how to deal with them.
Pallet Board Problems Stateside (US) Also in this episode is the problem in the USA with regard to pallet boards and a brief explanation of why it is happening.
Visibility in Your Supply Chain Visibility is of paramount importance if you want to know where everything is in your supply chain to avoid disruptions and to plan for them when the data in your dashboard reveals the signals of trouble ahead.
Labour Problems and Supply Chain Disruption Continuing problems with labour shortages are discussed in the US, UK and EU. The impact this is having on the farm to fork supply chain is permanent according to Ian Wright CEO of the Food and Drinks Federation (UK). Brexit has been the cause of much disruption in the UK Supply Chain and the Norther Ireland protocol is disrupting supplies to supermarkets there.
Since the pandemic began in 2020 disruption to supply chains has become expected. Transport is at the centre of getting the right goods to the customer in the right place, at the right time and at the right price. On time and complete delivery was the mission for those delivering supply chain promises. Retail Logistics has been responsible for some great innovations in combining technologies to deliver goods to stores and their customers. It employs people in farms and production centres across the globe. Goods then have to be transported by road, rail and ship to their market destinations, wholesalers, retail customers and consumers. There are many challenges that retail logistics face beyond the normal supply chain issues such as natural disasters, crop failures, wars and government policies to name but a few. Each challenge brings with it a unique situation that retailers have to vercome to keep supply chains moving to deliver on time and complete. Retail supply chains have to be resilient. When the Covid 19 Pandemic emerged in March 2020 no one realised at that point all the challenges that supply chains would face. By April and May it became clear that there were problems getting personal protective equipment (PPE), Medical Supplies including ventilators and medicines. As people became sick with Covid and lockdowns closed production units and retail stores supply chains became stretched and cracks occurred in the system. The UK was continuing with its never ending saga of Brexit and that caused its own problems for retailers, food supply chains, fisheries and many other categories of goods brought into the UK from the EU or exported to it. Shortages began to emerge in supermarkets and customers began to stockpile food and household items at home. It got a lot worse before getting marginally better. However, by Christmas there were hold ups at UK Ports and the beauracracy introduced by all the new regulations and customs requirements added days to deliveries. Many EU HGV drivers based in the UK retunred home to countries in Europe since they could no longer work in the UK due to the removal of 'freedom of movement'. Today it is estimated that there is a shortage of 100,000 HGV drivers and this is and has caused immense disruption to food supplies and other goods. In March 2021 The Ever Given owned by Evergreen ran aground in the Suez Canal and remained stuck in the middle of the canal for more than a week. It caused massive disruption estimated to be in the region of $10 million (US). Even when the ship moved allowing other ships to pass through they were now off schedule and empty contaner boxes had not returned to their next port for loading. This put pressure on container prices pushing them up by 5-600 per cent from just a year ago. Ships were also in short supply to move goods.Disruption to shipping and shipments of goods from China to Europe and the US has caused major delays for customers getting their supplies. Since 70 per cent of all goods are moved by seafreight this is no small problem. The Pandemic closed some major Chinese ports such as Yantian. It was pleasing to see the Ever Globe travel from Ningbo in China to Felixstowe in just 35 days so some sailings are getting back to normal. Looking at shipping more generally most of the world's big container ships are now built in the Far East in China, South Korea and Japan. These modern container ships are huge with the lates additions to the Evergreen fleet able to carry 23,600 TEUs. A much smaller vessel the MOL Comfort had its hull break in half enroute from Shanghai to Jedda some years back when carrying just 4,300 TEUs half of its actual capacity. So these larger vessels are cause for concern. The ships now being built all run on Diesel Oil so it will be interesting to see if the shipping industry is likely to contribute to the reduction of CO2 emissions by 2050.
In this episode of Chain Reaction Tony Hines revisits some of the stories he covered in the past few months and gives an update on those disruptions in global supply chains. Shipping containers in short supply with sky high prices likely to push up prices at the store. Driver shortages in the UK since Brexit means idle trucks and disruptions to supply. See how labour shortages are affecting food supplies too. The National Farmers Union want the government to allow EU workers to help out in UK farming at harvest time. Empty shelves are a growing problem in the food supply chain. Milk supplies in the UK have been disrupted too with many dairy farmers having to throw it away. We revisit the shortage of microchips and how that is affecting vehicle production supply chains. Will the switch off of the 3G networks disrupt your tracking technology? Will your supply chain still be visible? Carriers have been investing their profits in new container vessels due for delivery in 2023 and beyond see how this is likely to help global supply chains. There are also some tips of how to stay ahead of the game in these volatile times.
In this episode Tony Hines reviews the need to achieve zero carbon to protect the planet for future generations. He examines what this means for supply chains and how supply chain thinking could contribute to help solve the problem. He offers some pointers of what we need to do and how you can play your part in the supply chain.
The problem in a nutshell is human activity and its impact on the planet. There are frequent temperatures rising in excess of 40 degrees causing wild fires in Australia, Greece, California and Turkey. There is a growing inability of the earth to reflect the sun’s rays to reduce ground and sea level temperatures. Deforestation and the imbalances that brings to capturing carbon emissions and excessive waste with chemical, plastic and other waste entering the seas and landfills. Biodiversity is reducing; animals are impacted badly by human activity destroying their natural habitat. Ocean and river fish stocks will be are depleted. Fresh water free from contamination is a problem in many parts of the world. Soil quality for growing crops is under threat as is the amount of arable land to grow food that is free from harmful fertilizers.
Many governments have now committed to achieving a zero carbon future by 2050 including the UK Government. This is an ambition target. Although many activists say it should be sooner. Doing nothing is not an option if we do not want to see average temperatures rise by 2.3 degrees Celsius by the end of this century. In a planned economy with a non-democratic government such a target might be easier to reach as dissenting voices and non-compliant behavior of citizens could be punished and enforced. In a society that is democratic and individualistic in nature it is less clear how the target can be reached in practice. Many of the statistics cited to promote the COP 26 event in Glasgow in November 2021 relate to actions and measures already in the bag. In other words it is not about the future but a record of past achievements to demonstrate the successes of the United Kingdom. While some of these achievements are not to be brushed aside we should now be focusing on the hard road ahead to meet the target of a zero carbon economy by 2050 after all we have just a short time to reach it. Every tonne of carbon emitted into the atmosphere adds to the problem. Greenhouse gases and CO2 in particular is the enemy. It remains in the atmosphere for hundreds of years. Because of this all emissions are cumulative as they stick around unless removed.
Since 1880 carbon emissions have increased average temperatures by 1.23 degrees Celsius. Each decade is hotter than the previous. It is estimated that this will increase average temperatures by 1.5 degrees Celsius in just over 11 years. This is significant because at that figure scientists claim that we will have reached the point of no return. The IPCC Report published 9th August 2021 makes uncomfortable reading about what we already know. COP 26 hosted by the UK Government in Glasgow (31st October through to 12th November 2021) will discuss further what needs to be done and what policies governments in 166 countries members of IPCC should implement.
What happens in supply chains in the production, consumption and distribution of goods contributes to global emissions. A balance has to be struck whereby industrial activity has to reduce the harmful effects of emissions and find new ways to capture carbon emissions as well as prevent them in the first place. Without the planet there is no tomorrow. Planet, people and profit are priorities in that order.
Disruption is the new normal according to Tony Hines. In this episode disruption in food supply chains are discussed in the context of food security, environment and climate change. Defintions of food security are drawn from Tim Lang’s excellent book “Feeding Britain – Our Food Problems and How to Fix Them”. Sustainability means different things to different people. It is a synonym for environment according to Lang in the context of food security.
Food logistics includes transport, trucks, ships, planes and involves distribution hubs and ports. The UK imports 50 per cent of its food supply give or take and it exports food and beverages such as whisky, fish, meat, cheese and other processed food and farm produce.
Three priorities for Government: Healthy food for healthy people; maintaining a healthy environment and ensuring sufficient food is grown for the population. Policies are needed to achieve these goals.
The success of supply chains is in part one of the things that has allowed government to be complacent when it comes to establishing appropriate policies to ensure food security. Much of the responsibility has been developed by large food retailers acting in their own interest.
In this episode Tony Hines takes a look at Kaizen a Japanese word for Continuous Improvement or Change for the Better. This approach was central to the success of Japanese manufacturing systems. Toyota embedded Kaizen in its manufacturing system. The approach is useful for all organizations and as important today as it ever was.
Developing teams that understand how they can play their part in achieving cost effective solutions to supply chain problems is key to creating value. In this episode Tony Hines discusses what it means to be cost effective and explains why it is necessary for all organizations.
Being cost effective is a culture that can be developed in any organization achieving more with less. It is a key principle for lean thinking. Everyone in the organization needs to understand cost and their part in the process of using resources wisely. Controlling cost is part of the culture but this is not necessarily just reducing cost. It is about using resources effectively.
Teams have to act and be responsible for cost within their control. To do so they need to know what these costs are and to do that they need data transformed into information. Dashboards often form the basis for action.
Agility is important for responding to the unexpected and to manage risk. Lean principles such as lowering waste is one of the pillars of being and acting responsibly when it comes to cost effectiveness.
The team leader plays a pivotal role in developing and embedding cost effectiveness in their part of the organization. The team leader sets direction in line with organization policies and cost effectiveness is a practice. Shared understanding comes from discussing and working with team members to achieve goals. The leader is a motivator and a coach. Find out more when you listen to this episode.
In this episode of Chain Reaction Tony Hines discusses cost concepts that are essential to understand for those managing supply chains. Sources of value and cost in the supply chain and the wider system are examined in the discussions. To achieve supply chain advantage you must understand cost and value. Some of the most important things to understand about costs are direct costs related to the products or activities undertaken and costs that are related to time. Cost elements are materials, labor and overheads. Risk costs, Cycle Time Costs, Conversion Cost, Non-Value Added Cost and Supply Network Cost are all necessary to control value streams. It is essential that every business understands cost concepts and how they impact the supply chain . Value is created by activities but which activities are creating value and which create cost. Do you know the difference between cost, value and profit? Do you know which costs are related to time or products? Know why this is necessary. Do you know which costs contribute to the profitability of the supply chain? Listen and find out more.
Value added is another important concept that all businesses need to be aware of. Identifying sources of value and cost is an important supply chain management issue. The difference between input costs and output costs is a measure of value added. Do you know the difference between cost and investment? It is a distinction that should be made carefully. You invest capital to capture future revenue with the investments made.
The Total Cost of Ownership is another financial concept that all supply chain professionals should have some understanding of. The purchase price of an item is one element of the cost of ownership. There are three elements of cost in TCO which are pre-ownership cost, acquisition cost and post ownership cost. These are examined in the context of supply chains.
Kaizen is briefly discussed in the context of cost in supply chains. Wastage is one of the biggest costs in any supply chain – Mura, Muri and Muda.
If you're wondering what transport at zero mph is listen to the episode. Tony Hines discusses why transport at zero is on the rise. Demand is increasing for goods but supply is often short in the time of Covid. Production capacity is short too as plant closures have occurred on a regular basis. In the last episode we discussed the problems due to shipping transport. This week we take a look at one very important aspect of distribution which is often underestimated but without it we would not be able to get goods on time for business, pleausre or everyday needs. Demand for warehousing is increasing as just in time systems (JiT) falter. In the UK we have turbulence due to Brexit bureaucracy adding to the challenges faced by business. The growing demand for bigger warehouses and the lower demand for retail stores are related. As town centers have seen footfall stall finger action on mobile, PC and tablets have hit max velocity for consumer demand. Triggering demand for space to hold inventories.
Miquel Serracanta Domenech asked me a question last week about my thoughts on the disruptions in global shipping following disruption at Yantian and other ports in China due to Covid 19. A supplementary question was what will the new normal look like? Many businesses are asking the question: Where is my box? This got me thinking more about the problems currently being experienced by many businesses who want to import or export their goods and the knock on effect it has on global supply chains. In this article I want to examine global sea trade carried by containers in a little more detail.
Things are desperate for some businesses attempting to book containers to move their imports and exports. Reports of price increases as much as five times higher than a year ago for containers between Chinese ports and the UK with average box prices up by 400 per cent. Similar price increases are being experienced in the EU and in the United States. The main reasons given by shippers and logistic firms is that there is a box shortage and yet there are now more boxes in the world than ever according to the statistics held by UNCTAD, World Shipping Council and the large shippers operating in these markets. So where are they? Where's my box? Another reason given is that boxes are in the wrong places and the shippers have not been able to move as many empty boxes to the return ports as they would in normal times. Demand for boxes is also said to be higher than normal. While these reasons are plausible it is also clear that the profits earned by the largest players are increasing despite Covid 19. So is it the case that these large businesses dominating the global sea trade have seen an opportunity to clawback some profit by fixing higher prices through a quasi cartel?