Global Supply Chain Review: July 2017

Global Supply Chain Review: July 2017

Climate change, ethical supply chains, and east-west cultural negotiations shape this month’s supply chain news…

 

U.S.: In an effort to increase revenue and tap into growing international markets, e-commerce giant Amazon is reaching toward South East Asia. Announcing Prime Now in Singapore, Amazon aims to access a small group of higher-spending consumers. The question remains how much strain this new endeavor will put on Amazon’s supply chain, which is already struggling with delivery costs and revenue.

 

Germany: Chemical titan BASF is advancing its plan to use Blockchain for streamlining and tracking its supply chain. Working with technology startups to introduce the technology into its organization, BASF has suggested that what seems like a small move forward could revolutionize the company and the industry.

 

France: Returning home from this month’s G20 summit, the host nation of the Paris Climate Accord has gained new allies in the U.S. A coalition of States, calling themselves America’s Pledge have committed themselves to the international agreement; these 227 cities, 9 states, and over 1,600 businesses will work to reduce emissions and slow climate change.

 

Mexico: In the face of slowdowns in the U.S. and Canada, Mexico increased its auto manufacturing output in 2017. The almost 16% increase positions Mexico as a North American leader in auto-making, moving it ahead of the U.S., where production dipped by 17%. The majority of vehicles originating in Mexico are sedans and compact cars, while the U.S. continues to produce the highest numbers of trucks and SUVs.

 

Venezuela: Political instability continues to shake supply chains in Venezuela, where the results of an upcoming vote could lead to U.S. sanctions. If sanctions are imposed, they would particularly affect oil refining, cutting off significant supplies to two US Citgo refineries based in the country.

 

Brazil: The beef industry is taking blame for massive deforestation – and the resultant climate issues – taking place in Brazil. The 29% increase in forest loss is of concern to U.S. companies such as McDonald’s and Walmart, which have set aggressive goals for improving ethical and green sourcing by 2020. The companies hope that pressure, including reduction in purchases from offending farmers, will lead to change.

 

China: For decades, China has been the world leader in metal manufacturing and particularly aluminum. Responsible for 50% of global aluminum output, it supplies not only for itself but across the globe. But with suspicions rising about some smelters nearing or hitting “illegal capacity,” Beijing is curtaining production by 30% in four provinces. It’s yet to be seen how this will affect global supplies.

 

North Korea: Nuclear weapons and hacking are the catchwords of the month in this region. In addition to the recent nuclear weapons tests, North Korea has also amped up its cyber crimes programs. Notably, the programs are less focused on espionage than on economic and financial gain. These efforts, which have massive financial benefits as was the case in an $81 million cyber heist from Bangladesh, are critical for a country under economic sanctions from most nations in the world.

 

South Korea: At a time when western alliances are in doubt, South Korea is considering amping up its own nuclear weapons program to counter threats from the north. The nuclear program, which was shut down in the 1970s following mutual defense agreements with the U.S., has become a popular subject among citizens and leaders troubled by the current U.S. administration’s suggestion that eastern nations manage their own defense. Sourcing uranium and plutonium, however, would open South Korea to global sanctions, damaging ties with both the U.S. and China.

 

Japan: In line with Japan’s goal of becoming a “hydrogen society,” a consortium of Japanese companies are forming the first ever hydrogen supply chain project. Over 200 tonnes of liquid hydrogen will be imported, to be used as fuel at power plants in an effort to cut down emissions. Difficulty of processing, as well as high cost will be hurdles; with some risk mitigated by the Japanese government subsidies supporting the project.

 

Qatar: Helium, an element critical for production of a wide range of products from MRI machines and computers to rocket fuel and scuba tanks, is now in short supply. This is because Qatar, the source of 25% of the world’s helium, is at the center of regional crisis. Unable to send its helium supply through Saudi Arabian channels as usual, Qatar’s supply chain routes have been cut off. Production has slowed as a result, and new, more complex routes have yet to be identified.

 

Iran: Western food franchises are making their way into Iran, replacing the likes of “Mash Donalds” and other faux brands. But overcoming cultural differences and building efficient supply chains will not be easy. U.S. banks in particular are wary of funding franchises’ Iranian expansions, and some locals view the brands’ arrival as a dangerous western infiltration. Will the expansion of job opportunities ultimately outweigh these concerns?

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