Global supply chains, in their myriad complexities and broad impacts, are a fascinating topic that warrant an in-depth exploration. In the recent episode of our podcast, we dove headfirst into the topic, dissecting the impact of recent high-profile events, legislative updates, and sustainability practices.
Starting with a deep dive into recent events, we discussed potential derailments like the potential abandonment of the UK’s HS2 high speed rail link and the US auto workers’ strike. The potential abandonment of the HS2 link is a blow to the UK’s transport infrastructure and has far-reaching implications for numerous stakeholders. Coupled with the US auto workers’ strike, the impact on the auto industry supply chain is immense. The strike underscores the importance of worker rights and fair labour practices in maintaining a stable and efficient supply chain.
Another pivotal event that we examined is the recent settlement by Amazon with its labor board. The agreement, reached in 2021, required the online retailer to allow its workers to unionize. This settlement not only highlights the increasing importance of labor rights in global supply chains, but also signals a potential shift in power dynamics between companies and their workforce.
The discussion then moved to the implications of current procurement regulations in the UK and Germany. In Germany, the recently enacted Supply Chain Act requires companies to monitor human rights and environmental risks in their supply chains. While it strengthens human rights and environmental protection, it also poses significant administrative and financial challenges for companies. On the other hand, the UK’s proposed Procurement Bill, currently making its way through parliament, aims to consolidate existing procurement regulations into a single regime, providing greater transparency and value for money.
In addition to these high-profile events and legislative updates, we also touched upon the ripple effects of the recent car recalls by Kia and Hyundai in the US. The recalls, due to potential fire risks, underline the complexities and challenges inherent to global supply chains. It demonstrates the importance of stringent quality control measures and the impact of recalls on a company’s reputation and bottom line.
Lastly, the episode consistently threaded in discussions around sustainability and ethical practices in supply chains. The call to unionize Amazon workers, the German Supply Chain Act, and the UK’s proposed Procurement Bill are all indicative of a growing emphasis on ethical and sustainable practices in supply chains. Moreover, when natural events like the historic low water levels of the Mississippi River occur, it becomes increasingly clear that sustainable practices are not just an ethical obligation, but also a business imperative.
In conclusion, this episode of our podcast offers a comprehensive and nuanced understanding of the vast and dynamic sphere of global supply chains. From the impacts of high-profile events to legislative updates and sustainability practices, the intricate web of global supply chains continues to evolve, presenting both challenges and opportunities for businesses worldwide.
GlenFlat Containers Looking Good for Multi Modal Transport
Coming Your Way in April
Super Forecasting and AI
The Role of Management Consultants and Business Schools
Ethical Supply Chains
It’s All About the V’s
In the News this Week
Cyber Attacks
Dodgy Pork Meat hits UK Supermarkets
Asia Pacific Trade Deal
Vegetable seed shortages and EU suppliers
Potato shortages possible as energy prices force farmers to switch land use
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Episodes Coming Your Way in April
Super Forecasting and AI
According to Phillip Tetlock Superforecasters are better than average. A large number of people completed the challenge to forecast a range of issues from the likelihood of launching missiles to predicting the economy. These were not all experts in the field and some outperformed others, So why was this the case? Will AI open up new possibilities?
Listen to find out more and to see how this could be harnessed in supply chain management.
The Role of Management Consultants and the Business School Supply Chains that provide them with staff
Management Consultancy is a lucrative business. The number of management consultants in the UK in 2022 grew by 25 per cent according to the Management Consulting Association to around 63,000. There are more than 700 Management Consulting Firms worldwide and the industry is worth $2.5 billion. The US and UK have signficant hubs. Leading firms such as McKinsey, Bain and the Big Four Accounting Firms dominate this market -PWC, KPMG, EY and Deloittes.
The industry is a magnet for leading business school graduates and Harvard lead the pack. Learn why by listening to this episode.
Ethical Supply Chains
It is almost 10 years since the Rana Plaza disaster in Bangladesh hit the headlines with over 11,000 people losing their lives just going to work in a clothing factory. We ask what has changed?
There have been many initiatives to improve ethical trade but do they work? Both the UN and the OECD have issued guidelines.
Myanmar has also seen a number of infringements of workers rights. Once again women are at the sharp end working in clothing factories where they supply leading brands.
Even tea plantations have hit the headlines about human rights infringements.
We also have concerns about the future beyond the factory in AI. Listen to the epsiode to find out more.
It’s All About the V’s
My management thought for the day is “It’s All About V’s.”
Tony Hines speaks about the 7V Framework he developed to create and retain value. The V’s provide structure emerging from research to understand and improve supply chain performance. Find out how you can use this framework to structure value in your supply chains. In difficult times it is important to maintain and build value throughout the supply chain.
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You can listen to any or all of the Chain Reaction Episodes by using the QR Code or by simply clicking on the image link. You will see the full catalogue and of course the weekly Supply Chain News Round Up. This is a great resource for you if you work in supply chains or are a student doing courses in supply chains and business.
We have special editions on a particular topic and we have guest interviews as well as the weekly news about all things impacting global supply chains in that week. So make sure you stay aware, up-to-date and gain useful insights about all things relevant to you.
If you like the Chain Reaction Podcast don’t forget to tell your colleagues and let them share the knowledge. If you are a Programme Leader in charge of a team or have students doing supply chain courses share the links with them so they can learn too. Happy listening!
In the News
This week there has been a lot of discussion in the news media about the potential damage artifical intelligence (AI) might do to society. Some notable voices have suggested that advances are too fast and the dangers might be great. Leading tech influencers such as billionaire Elon Musk, Apple co-founder Steve Wozniak, as well as former presidential candidate Andrew Yang are calling for a temporary halt on AI experiments to address these risks.
The question is of course is it too late to address these concerns? Many commentators think that a lot more has to be done with regard to address ethical concerns. Is it enough or even wise to attempt to turn back the tide of change – Remember King Canute. It maybe an impossible task.
Cyber attacks on supply chains are back in the news this week. A number of security firms including Sophos, CrowdStrike and Sentinel One sounded the alarm about 3CX’s widely used voice and video calling client targetting downstream customers. The software is used by more than 600,000 companies including American Express, BMW, McDonald’s and the UK National Health Service.
The trojan malware is capable of harvesting system information and stealing data stored in credentials from browsers inculding Google Chrome, MS Edge, Fire Fox and Brave.
Listen to the News Round Up to find out about all things impacting Global Supply Chains this week. Every week we cover the top news stories impacting supply chains. Stay informed.
Best of the rest this week:
Pork Meat from South America and Europe has found its way onto British Supermarket shelves wrongly labelled as British Pork. Rotting meat with dubious country of origin credentials was mixed with fresh meat Criminal investigations underway. Public health risks included Listeria and Ecoli. This has been going on for the past two years.
UK Government claiming credit for Pacific Asia Trade deal with 11 countries many it already had deals with. Likely to increase GDP by 0.08 per cent. So only another 3.92 per cent to make up for Brexit.
Looming potato shortage in the UK as farmers reduce land use for the crop by 10 per cent due to rising energy costs.
Shortages of seeds from the EU for many popular varieties of vegetables – French bean ‘Aquilon’, courgettes ‘Parthenon’ withdrawn by breeder along with chillies, peppers, beans, peas and potatoes. Post Brexit phytosanitary certificates are the problem. Suppliers complain that minor errors stop supplies in their tracks and many have withdrawn from the UK market.
Resilience is more than risk management. It is a capability to get to the future by limiting the impact of disruptions. Risk management is necessary to manage particular supply chains as well as the supply chain system. Anticipating risks from disruption is an important skill. Assessing risk and assigning probabilities to manage risk are parts of any risk management system. Beyond the immediate supply chain risks there are risks that threaten the total supply system. It is necessary to take a systems view of risk if you want to build resilience across the total system. An example would be energy supply chains which are made up of entity supply chains (e.g.extractors, refiners, generating companies) linked to buying organizations (re-sellers, business and consumer suppliers) which are linked to business supply chains and consumers at some point in the chain. The total supply system would consider risk at each node from source to consumption. This means not simply managing risk in the organization supply chain it means managing the risk in the system which has many supply chains. Resilience requires steps to manage beyond the immediate supply chain, beyond intra and interorganizational supply chains linked in the total system. Resilience capabilities have to be developed to manage systemic risk.
We cannot solve a problem with the same thinking that created it.
Albert Einstein
As John Maynard Keynes noted markets do not always work as expected when this happens it may be necessary for government to intervene to correct the problem. Governments have a responsibility to secure strategic assets that may include: energy, food, water, public utilities, banks, defense and other resources. These are the resources that are needed to maintain life and provide security for the population. Yergin and Stanislaw (1998) refer to these resources as the ‘Commanding Heights of the Economy‘ after Lenin and Marx.
RESILIENCE
Resilience is not a quick fix
Resilience is a long-term commitment
Resilience requires investment
Resilience requires trained and highly skilled personel
Resilience is the ability to bounce back from disruptions. In supply chains one thing is certain at some point there will be disruption. Something that knocks your plans off track. Those that plan often make plans resilient by adopting ‘what if?’ strategies. This means having plans to get back on track quickly when the unexpected happens.
Resilience is tested when goods being shipped in containers are held up or when there is a labor strike at a port or supplier production unit. It can be beyond supply disruption which is a symptom not a cause of something much bigger. For example, when a pandemic grips the world. This is systemic disruption. What makes for resilience in these circumstances is having the capacity to bounce back quickly. Capacity which has been built through planning and investment to ensure it is present when needed.
Securing strategic assets must be part of resilience. If we think about the needs of a nation state we could produce a list that would include: defense, energy, food, healthcare, materials and technology amongst other things. These are what Lennin and Marx referred to as the ‘commanding heights’ of the economy. We expect governments to secure strategic assets. One of the problems for some nation states is ‘short-termism’. In democratic states governments are elected for 4 or 5 year terms and commitments follow suit. The long-view has been something that eastern countries such as China and Japan have been admired for. Without such long-term views it is difficult to develop continuity for resilience.
In my discussion of the West’s dependency on China I drew attention to the long term planning to acquire rare earth minerals and strategic metals for battery technology. China has built resilience and continues to do so. Western economies have been wedded to the market to solve their problems. I mean that they see the price mechanism as a way to fix disruptions rather than build capacity through investment to achieve it. In essence you assess and balance risk through markets. This will become clearer as I discuss risk.
People and Technology
Creating the right culture is part of building resilience. Expectations have to be set and carefully managed. Developing people and teams to respond effectively when disruption strikes is critical and it requires a mix of people and technology to achieve results. Having data in the right form to signpost what is happening in the supply chain often gives advance warning. It may not always provide signals as soon as you would like but ensuring that teams are trained to interepret data and respond effectively is the key to minimising the impact.
Let me demonstrate using an analogy from Formula 1 racing. A driver may be the first to recognise a problem in the car and quickly signal to the pit team what is happening. Each person in the pit team has a role and knows exactly what to do in the particular circumstances reported. Quick response is necessary to effect a repair or adjustment that will get the car back on track immediaitely after the incident without delay. Supply chains have to become resilient in similar fashion with every team member knowing their role and having a skill set so that each member knows exactly what to do in the specific circumstances.
In ‘Competing for the Future’ Gary Hamel talked about everyone being a prisoner of their experience but this need not be the case if you can learn skills that stretch beyond that experience. You can learn from the best and from the mistakes of others as well as from your own experience.
RISK
Risk is managed through probabilities. This is a first step to map risks that may disrupt supply chains. Time is an important element of this assessment. What is the likelihood of something happening and how long will it last? This is more than probability, it is impact too measured through time. An example such as the Ever Given Container Vessel demonstrates both. If we were assessing the risk prior to occurrence the probability statistic might have been close to zero (.0001), since in the Suez Canal’s history over 100 years of past data there had been no such event. The impact was more than the 7 days the ship was stuck. It took months for ships and container traffic to bounce back to something near normal throughput. So how do you plan resilient strategies for unlikely but possible events? If you do not want to over invest in capacity you have to be agile. Agility depends on thoughts and action. Firstly, you must anticipate such an event. Secondly, you have to think through scenarios and cost the options. Thirdly, make the decision. Necessary but not easy because resilience costs but it will cost less if you anticipate and plan agile strategies.
In supply chains there are many risks which I summarized in my 7V Framework based on more than twenty years researching supply chain risk across different industrial sectors. The factors that create value are also those factors that carry risk. Volatility, Volume, Velocity, Visibility, Variability, Virtuality and Variety are the seven risk factors. The profile of risk is not the same for every organization but the factors are. The question for organizations to address is to identify how each of the factors contributes to that particular organization’s mix profile. Of course even inside organizations there will be different supply chains that are affected differently by the mix elements. A simple example might make this clear. Supposing we operate a supply chain that has regular demand patterns that lead to constant reorder patterns from a consistent supply base. This type of supply chain should not be affected by volume risk or variability. Whereas a supply chain where volumes are less predictable and sources of supply are more volatile will have a very different profile of risk.
Resilient strategies require investment in resources to build it. Examples include people, training, technology, systems, sourcing, procurement, operations, warehousing and distribution. Each element forms part of the mix. Resilience extends beyond a single supply chain which means investment in the network is necessary. Supply chains have to be thought of as service systems satisfying customers if we want to build resilience.
Analyzing systemic risk requires constant scanning for threats. In the process of doing so we may also find opportunities to enhance the system capabilities which increase resilience. A similar process can be implemented at organizational level or for a specific product supply chain with the aim of building resilience.
RESPONSIVE SYSTEMS
Supply chains are service systems. We should never lose sight of this fact. Service to customers however defined is central to the supply system. Building resilient supply chains means that customers can be served efficiently and effectively. Service means being responsive to customers at the time service is required. This responsiveness is common to public services and to private enterprise. Time is of the essence.
CONCLUSIONS
Resilience is important in any system. In supply chain systems it is paramount. Supply systems exist beyond immediate firm and intra-firm supply chains. Risk has to be anticipated, assessed and probable outcomes assigned to manage the risk for the system. Within the system organizations are responsible for managing their own intra and inter-organization supply networks. Agile strategies can be employed by firms inside their own supply networks. Responsiveness is an important capability to build. Resilience goes beyond agility and responsiveness by allocating resources to the total supply chain system proportionate to risks identified in that system.
ProfessorTony Hines PhD, writes and talks about supply chain strategies. He is author of Supply Chain Strategies published by Routledge. He presents the Chain Reaction Podcast all about supply chain advantage.
Listen also to the episode Reflections On Resilient Supply Chains which discussed the part geopolitics has played in moving supply chains towards resilient strategies.
Supply chain chaos, additional friction, labour shortages, delays, problems with border controls and the Northern Ireland Protocol. It has been six years since the UK voted to leave the EU. One thing that has become clear since is the woeful lack of preparation and planning by the Government. Listen to why this is so. Things have moved on and we have had disruptions due to the Global Pandemic and the War in Ukraine. The Global Supply Chain Volatility may well remain a permanent feature for the foreseeable future.
There is also an interesting story of how one Welshman, John Hughes built the Russian Iron and Steel Industry in Donetsk in Ukraine formerly known as Hughesovka.
Shanghai has been closed down for the best part of a month now. Listen to how this has and will continue to impact global supply chains this year. It is also taking its toll on China too.
Avian flu, the price of chicken feed, fertilizers and the crisis on the farm and in our food supply chains.
Microbeads in the cosmetic supply chain – do we really need them?
Supply Chains have become critical. They are not yet in the emergency room or on life support but they are severely distressed. One development that will help is the insatiable demand for data since the pandemic began in the first quarter of 2020. Data has become the new fuel to drive decision-making. In the United States the Biden Administration views supply chains as central to the well-being of people and the economy. They have taken steps to gather data to understand data and what it is telling them about supply chains. Just after Thanksgiving weekend President Biden gathered a mixed group of retailers, suppliers and businesses together to ask a number of questions about supply chains.
In the United Kingdom since the pandemic started the Office of National Statistics (ONS) has used regular surveys to understand the pandemic and this was extended to how business has been affected. The Business Insights and Conditions Survey is conducted fortnightly to test the temperature of the business environment. There are a number of questions on the survey that examine the impact of Brexit and how supply chains have been affected by shifts in conditions.
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 orders under 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.”
Source: FTC (see the link in the text)
In the UK Data Are Key To Understand What’s Going On
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.
Nurdles in the Oceans Time For The IMO To Classify As Hazardous Waste?
A few weeks back I 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.
Up Next
A look back at 2021 – Retrospective on Supply Chains – The Ghost of Christmas Past.
A look forward to 2022 – The Future of Supply Chains.
A special edition on Trade Policies and Supply Chains in January 2022
Special Report Examining the Supply Chain for Batteries to power the electric car revolution in January 2022
Catch Up – Listen to All Available Episodes Here…
The Only Way Is UP
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 accounts for 90 per cent of the moveent in gloabl trade and it is still reliant on the dirtiest fuel to drive them around the world. So what can be done to clean up the industry? What will the UK Government decision to pull back from investing in rail infrastructure in the Nort really mean for the economy including future supply chains?
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. There are uncertainties 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.
Cargo
Take the current issues in global supply chains with ports experiencing delays in handling cargo. Satellite 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 raised 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 positive 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. Coca 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 38 department stores, 12 at home stores and about 338 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
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 there to China but Vietnam is now opening up again.
Driver Shortages
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 largest container ports. This week the reintroduction of cabotage by the UK Government means that EU drivers can do more pickups in the UK but this has not gone down well with UK hauliers who fear their work will be taken away by EU firms.
Planning and Control
Planning and control are two concepts to employ across supply chains if you want to deliver on time, every time. On time delivery is always important but with some categories it is not just important it is essential e.g. medicines, fresh food and ambient goods. To plan effectiveley you need systems, processes, technologies and people working seemlessly together across the supply chain. Visibility across the system for all parties that are partnering in that system is essential. Communicating information that is timely to take action to control the system is essetial.
Time is of the essence. It is about perspective. Time in supply chains is critical. The faster you can move goods from point of origin through to customers means you incur less cost, there is lower risk because you do not have to store goods longer than required. Goods in transit are always better than goods in storage. Warehouses are stuck in time. They are a place where goods travel at zero miles per hour.
Are you working on monochronic time? Put differently does everyone in your supply chain work to the same timescale? To be efficient everyone has to work to the same timescale. If your supply chain works on polychronic time you need to correct it. Time is of the essence. All goods have some type of time criticality. Of course not all goods are time critical in terms of perishability as food is but they all require management to deliver on time.
Political Time
Political time is often short. Governments are voted in to office for specific time periods usually 4 or 5 year terms of office. Decisions taken by government are not always in the interests of the population or indeed the state. Government’s are populated by people with different interests and priorities and they do not always act or behave in democratic ways even in a democracy. Factions emerge and sometimes they become dominant sometimes this can be good and other times not so. Governments in a democracy are supposed to represent the views of the people being governed. In a party system that is usually but not always limited to people who voted for the party in government. Time is of the essence. To get things done within their term of tenure governments have to act quickly. This often limits their time horizons on what to do, which means they will action what they can do within time. In this decision algorithm they will limit policy choices. Implementing only those they can within time, with maximum gain meaning they will have one eye on the impact this will have on attracting sufficient votes to stay in power for another term.
Just-In-Time
Just-in-Time is what it says something that arrives just-in-time and not too late. It is in the ‘nick of time’. For politicians it might be the introduction of a policy to correct some injustice or inequitable allocation and distribution of resources. It might be an action to prevent something from occurring which is harmful or undesirable. If it is just-in-time it may stand a chance of working when it is too late it does not.
In supply chains just-in-time (JiT) is a system to move goods from one point to another as they are required. An example might be a material planning requirement to get materials just when they are needed. This way inventory risks and the cost of holding stock just-in-case is minimized. It means that working capital requirements are significantly lowered. JiT supply lowers carbon footprints by reducing waste as well as time in production and distribution. Thus, increasing throughput in a shorter time. Just-in-time systems are efficient. You only produce what you need to. JiT supply systems can of course be disrupted in the same way that other supply chain systems are. When this happens they can appear less resilient than supply systems holding buffer inventories to mitigate risk but there is nothing stopping JiT system adjustments to mitigate some risk by holding a minimum risk level of inventories. This is the premium for resilient supply chains. This will work most effectively for non-perishable goods. After all there is a limited time to hold perishable goods in any supply system. The bland criticism in the press that JiT systems are to blame for supply chain problems is just not true. How well these JiT systems are managed is the issue. Any friction in the supply chain such as additional time delays at ports for any reason will impact JiT systems. If you know this is likely in your supply chain you can take steps to mitigate risks. JiT supply chains work most efficiently when friction is removed. Sometimes unforseen frictions occur causing disruptions e.g. volcano eruptions, floods, adverse weather conditions, cargo lost at sea or delays due to other causes that are not known in advance. In the case of goods disrupted at UK ports because of increased time taken with border checks and administration after leaving the EU (Brexit) then this is bad planning and preparation either on part of government or by businesses. Most examples I am aware of have been because government did not plan particularly well and was unclear about processes. Furthermore, processes were not only unclear but were not clearly communicated to those who were bound by them in time to prepare and act. It was a case of too little, too late.
Too Little, Too Late
Too little, too late, is a political malaise when governments either do too little or are too late to act. This type of malaise can occur when governments fail to recognise their responsibilities or decide that something is not their responsibility. Complacency or indecision is another reason for delays in taking action. It can affect business too. This malaise of too little, too late will be recognised by business leaders. In supply chains those that act fast are the one’s to succeed. Procrastination is not an option. ‘Procrastination is the thief of time’ meaning you will always be too late.
The list of supply issues in the UK grows ever longer: Labour shortages in food processing, shortage of butchers in abatoirs, shortage of C02 for stunning animals, putting fiz in drinks and in food packaging, fuel shortages because of a shortage of HGV drivers, Food shortages at supermarkets and retail stores because there is a shortage of 100,000 HGV drivers after many returned to their home EU countries after Brexit, Builders and other construction workers and materials, doctors and nurses, medicines, microchips, shipping and shipping containers, not enough farm labourers, flower pickers and crop pickers with daffodils left to rot, blueberries too, courgettes, lettuces, tomatoes and potatoes also left in the fields. The PM said he wants a high wage economy and we are going through a period of adjustment but this belies the facts. Many of the daffodil pickers for example earn £200 per day if they pick around 1600 bunches and many do, so that is already decent pay. Some sectors in which there are skill shortages are already by most standards highly paid such as doctors. Migrant workers have always travelled to pick crops so there is some fundamental misunderstanding by many, that people just sit and wait for the work to come to them, it doesn’t work like that. The impact of the pandemic is one issue but the elephant in the room is Brexit restrictions on the movement of labour and a failure to act quickly to issue work permits to allow skilled people to do the work when needed. Even when the UK government did act timely they were swallowed up in their own post Brexit red tape. Employment licenses were too slow to be enacted. There was said to be a shortage of 20,000 HGV drivers five years ago when the UK was in the EU. In China there is a reported shortage of HGV drivers – 20,000 – for a completely different reason – increasing demand for goods. In the UK prior to the pandemic this number of HGV drivers had swelled to around 60,000 a substantial number returning to their home countries prior to Brexit. After the UK left the EU on December 31st, 2020 it became impossible for many EU nationals to remain and a further 20,000 are said to have returned in the run up to that. Growing demand during the past few years accounts for the remainder.
At present the labour shortages in many supply chains have become critical. This despite the UK Government issuing 5,000 short term visas to attract HGV drivers – apparently only 27 people have applied so far. The time limits and restrictions on the visas were set too tightly to be of much use in encouraging people to apply. Also, in some quarters the loss of self-employed status for some contractors including HGV drivers (and IT professionals) has been blamed with HMRC pushing contractors to employed status through the IR35 rules. This moves those contractors to PAYE tax at source and an inability to claim expenses against income which some relied on. There are 5,500 visas available for food processing workers.
Supply Chain Disruptors
Time To Put Things Right
Who is responsible for putting things right? As with many things this answer is not straightforward. Government have a responsibilty to ensure that citizens have security. This security extends from personal safety through to other securities inter alia including, cyber, health, welfare, energy, food, financial and employment. So when it comes to managing the infrastructure to achieve such security the government has a clear responsibility. Government has a responsibility to take action, implement policies and put in place regulatory frameworks that ensure security in these matters. Governments are not responsible for disruptions due to matters beyond their control such as accidents or what insurance companies refer to as ‘Acts of God’. Labour shortages in an industry are caused by many factors including pay and conditions of work. It is up to government to ensure safe working conditions through legal protections and law enforcement. It is up to government to put in place arrangements that make it easy to employ people and minimise the impact of bureaucratic arrangements that impede employment opportunities. For example, if a government department is unable to issue driving licenses to HGV drivers in time then that is down to government to act. If a government is slow to carry out a responsibilty to test HGV drivers in order to license them through DVSA then that is down to government to take corrective action. Actioning work permits in a timely manner when necessary is a government responsibility. These are matters that firms have little control over but they can be badly impacted by too little, too late. Time is of the essence.
Time Enough
It was 2016 when the UK voted to leave the EU. More than five years have passed which you might think is a good length of time to plan and prepare effectively for a smooth exit to minimize the impact on businesses and people who have to adapt to different systems that affect their daily lives. Governments are responsible for conditions created by their actions or inaction. How come five years was not long enough? Well maybe because much of the available time to negotiate an exit deal was wasted and wasteful in negative rhetoric. Government did not really get on with it despite the rhetoric. The vote may have taken place but the fights were replayed in Parliament, in every newsbite, soundbite and political meeting. Without going into great detail not much was done in that period to secure a smooth exit to reduce risk and minimize the impact of all the necessary changes that would come into play after Brexit. The task was grossly underestimated and the detail was thin. Many of the claims and promises made to persuade people to vote to leave the European Union by the ‘Vote Leave Campaign Group’ melted away as positions on both sides of the vote became frozen, hardened in the passage of time. Not a great deal of thinking about what future arrangements between the UK and EU might look like was given mind space or indeed communicated to the nation who would have to pick up the pieces later. Signals of future disruptions were coming from industries who had benefited from frictionless trade with the UK’s biggest trading partner, the EU. Not enough time was set aside to deal with the detail of these real issues until it was too late to act and get a deal in the best interests of the UK. Despite all the rhetoric about ‘an oven ready deal’ the reality was different. The eleventh hour trade deal struck by the government in December 2020 with a few January tweaks did not give sufficient time to communicate with businesses about what they needed to do to prepare and plan by putting appropriate systems and procedures in place. Inevitably, the chaos emerged with hold ups at Dover and other ports and the fiasco to build a lorry park at Dover to store the delayed trucks waiting to move cargo to Europe. Many businesses incurred additional costs that they had not been able to budget for because of the failure to plan and prepare properly. Each transaction now had to contend with extra bureaucracy that added a minimum of £180 to a consignment. Some businesses rapidly began to seek out premises in the EU to move their operations outside the UK to lower their costs. There were ludicrous examples of small consignmnets perhaps worth only a few pounds having to pay a hundred pounds or more to export the low value item. Many smaller firms gave up. Others made big investments in facilities in the EU. Although initially this might cost substantially more by way of investment they were planning to reduce the cost of supply chain friction longer-term.
Covid Time
In the first quarter of 2020 it became clear that we were all entering a strange period threatened by a virus that had started in Wuhan, China, Covid 19. A virus that began to infect and kill people at scale. The whole world was caught short. Apparently back in 2016 the Government in the UK had simulated the impact of just such a threat to the environment and concluded the UK was not particularly well prepared to meet all the challenges. There were some damming reports about a lack of any follow-up regarding the simulation failures. How true this prophetic conclusion became as equipment shortages in the form of ventilators in Intensive Care Units (ICU) and Personal Protective Equipment (PPE) were all difficult to source and procure. There was also no antidote to the virus and epidemiologists, immunology experts and virology researchers started to cooperate to find one. This was done in double quick time. Within a year there were several vaccines including the Oxford Astra Zenica, Pfizer and Moderna vaccines. From March 2020 the UK Economy locked down under governmnet directives. The impact on businesses and people’s livelihoods were to some degree mitigated by government funding but not everyone was protected. As a vaccination programme was rolled out by the National Health Service (NHS) in the UK early in 2021 the worst of the pandemic began to ease and restrictions were slowly and painfully in many cases lifted. There were some false starts until pressure on the NHS were lowering. Non Covid Health Services during the pandemic had been badly impacted and many patient treatments were postponed. As with all bad news stories there were many other failures blamed on the pandemic to deflect attention away from the real cause of problems such as underinvestment in health and care services. Not enough was done quickly enough to protect the elderly in care homes and medical staff were at high risk on a daily basis because of a shortage of PPE. Time is always of the essence in these circumstances. Unfortunatley time had passed to invest in resources that might have achieved better outcomes in this pandemic. This week a joint report from the Commons Science and Technology and Health and Social Care Select Committees said government had “made big mistakes” in handling the pandemic. They cited ‘Group Think’ among ministers and scientific advisersers preventing lockdown sooner. Poor performance of Test and Trace and social care not prioritised. Maybe next time we can learn the lessons from this experience.
As people became ill with Covid 19 supply chains became disrupted. Ports in China were closed as outbreaks occurred sporadically and elsewhere in the world too. Factories had to close or reduce their output and materials were often late or difficult to procure due to Covid.
Businesses exist in a system that is subject to regulation by governments. Institutional arrangements determine how businesses behave and act within the system. It is not simply possible to trade freely with businesses either inside the system managed by a national government or to trade internationally without being subject to regulatory frameworks put in place by governments. Even trading groups such as the EU and NAFTA have regulation so called free trade areas. This regulation is a form of protectionism. Any free market is regulated. It is the degree of regulation that gives consideration to calling it free or not. Communist states were said to be planned economies which somehow suggests that market economies are not planned when in fact they are. Both types of economy are regulated and government control ranges from total to some point on a measuring scale that is less so. If markets were completely free a business would simply hire labour from anywhere at a price it was prepared to pay for that labour without any regulation or control from government. Taxation and public spending would not be necessary if markets were completely free. Clearly they are not free if the aim is to protect industry and to provide public goods because to do that we need government to generate taxes to fund the administrative structures, regulations and investment required. There is somehow a myth of time that once upon a time we had free markets without government regulation. In this polemic it is up to merchants to manage markets and for government to manage affairs of state and never the twain shall meet. The reality is very different there has been some degree of regulation in international trade since the emergence of nation states through quota restrictions and tariffs. All forms of economic activity – feudal, agrarian, industrial, service – were subject to regulation be it manorial, guild, community, state, national and international. The pre-industrial age relied much more on local arrangements than national and international regulation. The rise of nation states gave rise to international regulations. Regulations were designed to protect a nation state from other nation states; a means of security. In England it took the form of what came later to be described as ‘Mercantilism’. It is in these roots we find discussions of trade, health security, food security and security of other national interests. In 1563 the ‘Elizabethan Statute of Artificers’ ensured overseas trade was subject to State control. Today the World Trade Organization (WTO) administers the rules by which all nations trade with each other. This regulatory authority was set up by the Bretton Woods Agreement in 1944 setting out a General Agreement on Tariffs and Trade (GATT). Trading Blocs too like NAFTA and the EU have to abide by WTO rules.
Regulation of trade has given rise to wars between nation states. When Britain tried to impose taxes on the tea trade in Boston 1773 it caused the American Colonies to break away from British rule. It was said to be “Taxation without representation.” Quota restrictions and tariffs where there are imbalances seen as unjust by one party can escalate. Others have resulted in bitter trade wars between nation states such as the Smoot-Hawley Act 1930, The Chicken Tariff war in the 1960s, The US 1987 trade war with Japan related to cars, electronic goods and motorcycles, Canada-US lumber wars, the 1993 Banana Wars betwenn the US and Latin America and the current episode between the US imposing 19 per cent tariffs on China.
Time is Money
The one thing that most business people and governments would agree upon is that time is money. The faster business can produce outputs, supply goods to customers and get payment for their service means they will generate profits to invest. The shorter these cycles become the more money they accumulate. This is capitalism. Governments too know that time is money as they collect taxes within time periods to ensure they have sufficient funds to pay for public services and affairs of state. Given that time is money it is incumbent on government to act fast to solve problems that affect the business environment and the livelihoods of citizens. It is incumbent on businesses to act fast to solve their problems too. Agility, responsiveness and resilience is an investment required by government as well as businesses if we are to increase national income in a global economy and improve the wellbeing of citizens and maintain security. Put differently, businesses can only be as good as the systems and environments they operate in. Individul businesses cannot maintain the regulatory frameworks and the business environment in which they find themselves.
Out of Time…
Below you can play an audio transcript of this article TIME in the Tony Hines Blog
The next episode of the Chain Reaction Podcast ‘A Bevy of Black Swans’ discusses disruptions in supply chains and reflects on the causes. Some really are black swan moments beyond the experience of people while others might have been avoided through better planning and execution. To some they give the appearance of a black swan ( an unusual event beyond experience) but really in substance they could and should have been predicted. The data are present and events predictable. You may want to go back and listen to the Chain Reaction Podcast about ‘Predicting the Unpredictable’ by way of introduction to supply chain disruptions. Listen to ‘Energy Cost and Food Chain Disruption’ this weeks episode too.
Retrospective
This episode takes a retrospective view of supply chain disruptions during the Pandemic. In it we examine the rhetoric of policy makers and the realities of disruption and in some cases the supply chain chaos caused by a failure of planning and execution. Evidence for the claims is brought into focus. Some of the unusual events were certainly that but were they really ‘Black Swans’. One could argue that if it is something beyond experience it is rightly described as a ‘black swan moment’ and yet we also see failures of adequate planning and execution that caused disruptions that might have been avoided.
Ever Given – Supply Chain Disruption in the Suez Canal
Supply Chain Resilience and Risk
Post Brexit Supply Chains UK-EU
Value, Customers and Service
Complexity and Disruption
7 V’s Explained
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