October 2021 - The end of October marks the start of the two-month run-up to Christmas, with some of the busiest shopping days – Black Friday, Cyber Monday and Christmas in sight -. Demand for goods has skyrocketed out of control as consumers divert spending from services to physical products. From fake tan to sneakers – supply challenges have become mainstream – attributed mostly to Freight and Logistics, Component Material shortages and labor.
The Trump-China tariff drove many companies from China to Vietnam. Vietnam has tried to claim the crown of factory to the world, but low vaccination rates, coupled with limited controls has allowed the delta variant to spread, leading to fresh lockdowns. Vietnams’ migrant workforce has returned home, leaving the industrial towns empty! Mass vaccination initiatives have started, but too late to save Christmas. The Apple delivery lead time for iPhone 13 has extended from weeks to months; Bed Bath and Beyond sales are down 29% already. Panasonic plans to being production at a new plant in mid-October – unclear how this will be operated!
The Freight and Logistics industry is also being hit by labor shortages. – While warehouse shortages may be supplemented by Robots, Port labor is a real concern, with the backlog of ships into the US now mirroring that of Asia – with a lead time of 2-3 weeks to unload cargo. With Container shortages and price of oil having already caused significant disruptions this year - Walmart has taken the plunge and has contracted its own ships. With all elements of landed costs rising, measures like this may help with supply but are unlikely to help with corporate profits in the medium term. Asos and Boohoo – online retailers - have already issued profit warnings. Thailand sees an opportunity to become a global trade hub!
Semiconductor supply issues continue and are expected to stretch far into 2022. Vertical integration is now a consideration; - Hyundai announced plans to develop and manufacture chips in house to combat unreliable supply. Announcements from other car manufacturers are expected to follow. Plastic resins, Silicon, Lithium and Coal are all in the short supply, with China coal shortages, causing government mandated factory shutdowns and cost increases! Where and how will it all end? – Inflation in the US is set to sky-rocket, with some analysts suggesting the first action must be to remove the 25% Trump-China Tariff.
Elsewhere in the supply chain sustainability news; BCG says there is money to be made in shipping future fuels, especially with the shipping sector aiming to hit net-zero emissions by 2050. Amazon and Ikea are two of nine major companies committed to 100% zero-carbon shipping by 2040. General Motors and General Electric will co-develop rare earth materials for electric vehicle manufacturing. Research has shown that Africa would need a 2 trillion-dollar investment to implement green manufacturing.
Other miscellaneous news; Amazon India has been caught out by Reuters copying popular competitor products and rigging search results in favor of its own brand - accusations which Amazon strongly denies. Start-ups are rapidly becoming the lifeblood of India. Shein – another online Chinese clothing retailer - exemplifies a new style of Chinese multinational – building its success around an extremely efficient supply chain – much to the dismay of environmentalists. Finally, Lego has solidified its position as the world’s biggest toymaker.