Covid turmoil still puts pressure on over-expanded supply chain

Keeping the wheels turning: Will Butler-Adams of Brompton Bicycles has adopted air transportation of parts © Charlie Bibby/Financial Times

The limited supply of small innovative metal tubes made in Taiwan, at a price of just a few pounds, has threatened the suspension of production at the Brompton Bicycle factory in London.

“This is great-the smallest things can trip you up,” said Will Butler-Adams, the company’s managing director, which has taken parts to fly to keep the production line running.

and Problems with bicycle manufacturers Emphasize the pandemic’s extensive experience of chaos in the complex global supply chain. Rising costs, delivery delays and economic uncertainty have prompted the company to carry out extensive reforms of its suppliers, which has had an impact on the logistics industry.

In response to a series of shocks ranging from port congestion to semiconductor shortages, manufacturers and retailers are seeking to increase inventories, increase the number of suppliers, achieve geographic diversification and substitute parts.

Richard Wilding, professor of supply chain strategy at the Cranfield School of Management in the United Kingdom, said: “The supply chain must reshape itself to focus on flexibility, flexibility and robustness.”

Lars Jensen, container shipping analyst and chief executive officer of consulting firm Vespucci Maritime, said the pandemic has transformed logistics from sourcing into a competitive advantage that drives success for certain companies. Footwear manufacturer Crocs benefited from the simple design of its rubber clogs, which enabled it to transfer production globally.

“All companies compete on a set of parameters,” Johnson said. “The one thing they haven’t competed in in the past ten years is logistics. Companies that are good at logistics now have a competitive advantage.”

During the Covid lockdown, the boom in online shopping will only magnify the importance of logistics, as shipping goods to many consumers’ doorsteps is much more complicated than shipping them to warehouses and then distributing them in bulk to stores.

Wilding stated that supply chains have been experiencing “birth pains” as they try to modernize and catch up with the leap in demand for logistics networks caused by the pandemic.

During the pandemic, consumers are increasingly turning to online shopping © SOPA Images/LightRocket via Gett

“The supermarket says’people don’t want to come to our store’, and so does a large number of online products,” he pointed out. “They are using existing infrastructure and processes to achieve this goal. The problem is that the efficiency is incredibly low.”

As multinational companies reconfigure their distribution networks, Kamala Raman, an analyst at consulting firm Gartner, said that the logistics industry-covering everything from third-party contractors to shipping, rail, and transportation companies-has the opportunity to expand its services, not just It is “From A to B”.

Raman said that for larger groups such as DHL Supply Chain and DB Schenker, this could include adding analytics, visibility tools, and network design—almost making them rivals for management consulting firms. She added that logistics groups are increasingly outsourcing work to them in the context of general labor shortages to ensure the ability of manpower.

Large companies such as DHL have used analytics to better ensure delivery during the pandemic © Bloomberg

“Logistics companies, contract manufacturers and large service delivery companies have the ability to share risks [of investment in resilience] In many of their customers, some features are provided at a better price than what they provide alone,” she said.

But Raman warned that relying on logistics contractors has disadvantages, which many people discovered during the pandemic: “You are subject to other people’s priority lists.”

For this reason, Steve Feinig, an operating partner of the US private equity firm Blackford Capital and an Asian purchasing veteran, said that his main recommendation to the company is to “become a better customer for factories and freight forwarders.” He is telling his portfolio companies, such as Aqua Leisure, which produces swimming accessories including 12 million goggles in 45 factories worldwide every year-to provide longer demand forecasts and to ensure suppliers and logistics groups Get a fair profit.

In most cases, recently Supply chain disruption It can be traced back to when the lockdown began at the beginning of last year, and the decision was made to close the factory based on false expectations of a decline in demand.

But many people believe that decades of efforts to reduce logistics costs have laid the foundation for these crises.

“In the past 30 years, the supply chain has become globalized, combining low-cost freight, simpler trade barriers, and a focus on reducing costs,” said Emil Naus, a partner at the consulting firm BearingPoint. He pointed out that this has caused them to become “longer, more fragmented, and more fragile than ever before.”

In 2020, US companies’ transportation expenditures are more than twice the amount of inventory holdings; the two are equivalent in 1980. According to the United Nations Conference on Trade and Development, the reason is simple, because transporting goods has become so cheap.

Jan Hoffmann, head of trade logistics at the UN agency, predicts that the soaring transportation costs during the pandemic will remain high in the next few years.

This is because environmental legislation will slow down the speed of ships and limit capacity. Hoffman added that, coupled with the supply barriers of the pandemic, this could reshape trade flows. He said: “Manufacturers and retailers want to diversify and reduce the depth of the supply chain.” “But it is still cheaper to ship goods from China to the EU than from Lagos to Europe.”

Some people believe that some predicted changes are over-predicted. Jensen said that as the pandemic subsides, additional stocks will decrease.

“Over time, these buffers will disappear,” he argued. “Buffer zone is a good word for overcapacity”-this development is important for future warehousing needs such as Seko or GXO Logistics.

Doug Sheppard, Parvalux’s director of operations, agreed that the company produces British geared motors for robots and stair lifts, saying that the company initially needed additional inventory to ensure continuity, but “we are in Unsustainable level”.

Even so, many people say that the supply chain is becoming more regional, purchasing more goods closer to consumers in order to reduce the risk of future freight bottlenecks and longer delivery times and emissions.

Flex is one of the world’s largest electronic contract manufacturers, and its chief procurement and supply chain officer Lynn Torrel (Lynn Torrel) stated that many companies “are considering which parts of their supply chain and manufacturing can be closer to the end customer “.

The assembly of the final product is usually easier to relocate, but the parts manufacturing and raw materials may be more difficult.

“The components of ordinary products that consumers buy come from 10 different countries-I don’t think this will change fundamentally,” said Jeremy Nixon, CEO of Ocean Express, one of the world’s largest container shipping companies. .

However, Parag Khanna, managing partner of the consulting firm FutureMap, said that a psychological shift has taken place to diversify the geographic production of important components such as semiconductors.

“Due to geopolitics, this time is different,” he said. “Regional access to key components has real strategic motivation.”

Although the advantages of having a global digital platform to track and verify goods will only grow, he said: “The logistics industry will have to consider less global and more regional.”

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