China disaster could deal fatal supply chain blow
The Japan Disaster rocked supply chains earlier this spring. The summer season’s monsoon floods pushed a reeling logistics industry further toward destruction.
Like a boxer up against the ropes, one more big punch could send the global supply chain down for the count. While history has taught us that a natural disaster will strike again at some part of the world, the FM Global Supply Chain Risk Study pinpointed the exact location that would cause the most problems.
According to the study, which surveyed 100 financial executives within North America, a natural disaster in China would disrupt the most business around the world. Any impact to China’s huge manufacturing sector would cause significant sourcing problems for supply chain managers.
Placing an importance on Chinese products is particularly risky given that the nation is prone to natural disasters such as earthquakes, floods, tsunamis and windstorms. Adding to the growing concern is the fact that China has yet to embrace risk management practices that the United States and Europe have incorporated into their own supply chains.
“A secure and resilient supply chain creates a competitive advantage,” says Ken Davey, senior vice president, FM Global. “Delivering products and services when others can’t results in satisfied customers and opportunities to secure new ones. A fragile supply chain is clearly a competitive disadvantage if a disruption occurs.”
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The FM Global research also uncovered the following:
- Twice as many companies surveyed (86 percent versus 43 percent) say they are more reliant on China as part of their supply chain for their key product lines than they are on Japan.
- Eighty-three percent of companies surveyed consider supply chain disruption a moderate to great risk.
- Ninety-five percent of companies reliant on China for their supply chain are concerned about natural disaster-related disruptions.
- Sixty-five percent of companies surveyed are considering “increasing collaboration with suppliers on mitigating risk at their locations.”
Many are pointing to the study as a wake-up sign for China to get its supply chain in order should disaster strike.
“A natural disaster-related supply chain disruption in China would have far-reaching and long-lasting negative economic impact,” Vinod Singhai, a professor at the Georgia Institute of Technology’s College of Management said. “It would slow down the global economy because China is not only a major exporter of goods, but also a major importer of goods. It would cause shortages in many consumer and industrial products that could lead to inflation and devastate the share price of companies.”
Elon Musk's Boring Co. planning wider tunnels for freight
Elon Musk’s drilling outfit The Boring Company could be shifting its focus towards subterranean freight and logistics solutions, according to reports.
A Boring Co. pitch deck seen and shared by Bloomberg depicts plans to construct wider tunnels designed to accommodate shipping containers.
Founded by Tesla CEO Musk in 2016, the company initially stated its mission was to offer safer, faster point-to-point transport for people, particularly in cities plagued by traffic congestion. It also planned longer tunnels to ferry passengers between popular destinations across the US.
The Boring Co. completed its first commercial project earlier this year in April. The 1.7m tunnel system is designed to move professionals between convention centres in Las Vegas using Tesla EVs. It says the Las Vegas Convention Centre Loop can cut travel time between venues from 45 minutes to just two.
Boring Co.'s new freight tunnels
The Boring Co.'s new tunnel designs would allow freight to be transported on purpose built platforms, labelled as “battery-powered freight carriers”. The document shows that, though the containers could technically fit within its current 12-foot tunnels, wider tunnels would be more efficient. Designs for a new tunnel, 21 feet in diameter, show that they can comfortably accommodate two containers side-by-side, with a one-foot gap between them.
The Boring Co.’s new drilling machine, dubbed Prufrock, can tunnel at a rate of one mile per week, which is six times faster than its previous machine, and is designed to ‘porpoise’ - mimicking the marine animal by ‘diving’ below ground and reemerging once the tunnel is complete.
Tesla’s supply chain woes
Tesla is facing its own supply chain and logistic issues. The EV manufacturer has raised the price of its vehicles, with CEO Musk confirming the incremental hike was a result of “major supply chain pressure”. Musk replied to a disgruntled Twitter user, confused as to why prices were rising while features were being removed from the cars, saying the “raw materials especially” were a big issue.
Car manufacturing continues to be one of the industries hit hardest by a global shortage in semiconductor chips. While China’s chip manufacturing levels hit an all-time high in May, and the US is proposing a 25% tax credit for chip manufacturers, demand still outstrips supply. Automakers including Volkswagen and Audi have again said they expect reduced vehicle output in the next quarter due to a lack of semiconductors, with more factory downtime likely.
Top Image credit: The Boring Company / @boringcompany