Global Supply Chain Review: September 2017

Global weather systems and diplomatic tensions are driving supply chain news this month. As hurricanes and typhoons affect the U.S., Mexico, the Caribbean, and parts of Asia, the tight intersections among supply chains becomes increasingly obvious.



US: Hurricanes Harvey and Irma caused extensive damage to the southern part of the country this month, and the effects will be lasting. Before the rain stopped, supply chains faced intense challenges in bringing food, water, oil and gas, and medical supplies to the region. Now that the storms have passed, global supply chains are feeling the squeeze due to Houston’s pivotal role as a hub of transport, with specialists noting that “while the personal and human costs of the disaster are only beginning to be tallied, supply chain and logistics pictures appear murkier.”


Mexico: Facing its own challenges due to hurricanes and tropical storms along the Caribbean, Mexico has a bit of good news as well. Amazon has announced plans to open a massive warehouse in Mexico City, which is expected to boost the country’s e-commerce industry. Proximity and an extensive shared border make Mexico a logical place to expand in some senses; but Amazon’s project isn’t without complications. The questionable fate of NAFTA, combined with cultural suspicions regarding e-commerce and credit card fraud may prove to be serious hurdles for a company that has yet to turn profit. But Amazon is willing to take that risk as it seeks to outgrow competitor Walmart.


Canada: An economic surge has made national headlines, along with strong reports on consumer spending in retail this month. Malls in particular have been feeling the benefits, bouncing back this year despite competition from e-commerce. Experts warn that major problems are still afoot, however, including growth in household debt. With interest rate hikes in the works, some are optimistic that Canada’s growth will continue while others are keeping their eyes on how the changes will affect housing and real estate markets.


England: The pound continues to rise—a result of questions that continue to swirl around Brexit and the UK’s relationship to the EU and global markets—and Bank of England policymakers are examining the possibility of a rate hike. If interest rates rise in November, the UK residents can expect to pay more on credit cards, mortgages and loans; but the increase may also temper inflation. Meanwhile, England will also need to plan for a changing supply chain post-Brexit, as experts predict friction and complication in customs shipping and transport once England falls outside the EU.


France: President Macron faces protestors and opposition as he seeks to reform national labor models. As he seeks to loosen traditional protections—making hiring, firing, and company negotiation easier—unions are expressing distaste. To date, there are few reports of transportation or supply chain slow downs; but that has not always been the case during times of protest in France. As truckers call for a strike, supply chain challenges may develop.


Germany: With citizens imprisoned in Ankara, Chancellor Angela Merkel has announced new trade restrictions with Turkey, and has placed key projects under review. Political tensions and concerns over human rights violations have escalated in the past year. These new developments are slated to change, among other transactions, the export of weapons and other major arms.


Japan: Facing record rainfall, landslides, and flooding Japan has additionally experienced widespread power outages and grounded flights. Evacuations and rescues are underway, and experts are working to project the supply chain effects Typhoon Talim will have not only on links running through Japan but also Taiwan, where the Typhoon hit next.


Taiwan: Super Typhoon Talim is also affecting supply chain links in Taiwan. With numerous flights canceled, the ports prepared for closure following maritime warnings against embarkment.


China: The government has shut down digital currency exchanges, eliminating the use of BitCoin and its brethren in fundraising and purchasing. By the end of October, all trading between BitCoin and the yuan is projected to end. Britain and the U.S. have also expressed suspicion and concern about such digital currency and its exchange, but Beijing has notably come down hardest. Meanwhile, China and Apple’s supply chain relationship continues to expand with the announcement of the iPhones 8 and X; and Apple seeks to court Chinese consumers to grow its global hold on the smart phone market.


North Korea: Aggressive global sanctions and a ceiling on crude oil imports will have sweeping effects on the country’s supply chains. One area to face challenges is North Korea’s textile industry. Listed among the items banned for export by the U.N., textiles from the region frequently make their way onto the shelves of U.S. and European retailers via China. Reports this month show that strict enforcement has led to business closures in both North Korea and China. But with complex supply chains straddling between the two nations, sanctions will be tough to enforce 100%.



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