Four reasons a global supply chain can be risky business
Doing business abroad definitely has its benefits, but it’s also risky business as the global supply chain can bring on a slew of unique disruptions, political unrest being a top concern right now for international retailers.
Bangladesh, whose apparel industry accounts for 80 percent of the country’s total exports, just started breathing easy after dealing with the aftermath of a 2013 factory fire. Unfortunately, now a period of intense political unrest is causing major disruptions in raw material supply. The garment industry is experiencing big losses due to a decline in orders from international retailers, order cancellations, soaring air freight charges, production shortfalls and higher transportation costs.
Although it’s impossible to completely eliminate risk from your supply chain, being aware of the possible risks can help to mitigate any issues that may arise. Here are four risks that retailers need to prepare for when doing business abroad; especially in emerging markets.
- Rising Regulations: New regulations continue to pop up along the supply chain, and uncertainty around these new rules can stall decision making and planning. Depending on the region you’re operating in, you’ll face different regulations, which will inevitably pose challenges for compliance. Getting visibility into your supply chain and gaining tighter control over your materials is imperative so you can be agile in complying with new regulations.
- Foreign Exchange: Currency exchange rates are always in a state of flux, causing investment values to continuously fluctuate. Commodity prices are also subject to inflation, which can result in pressure from low cost competitors. Thoroughly analysing spend to see where your money is going gives you an idea of how you can reallocate your resources and lower the costs for consumers.
- Geo-Political risk: When conducting business in emerging markets, it’s very important to conduct an assessment of the current host government, its stability, and overall attitude toward trade and foreign direct investment. Having an alternate list of suppliers at the ready and leveraging E-sourcing to understand what products and price points are out there will help you confidently pull the trigger on a new order should your original list of suppliers be unwilling to trade.
- Extreme weather events: Natural disasters always pose a real threat to the supply chain – shipment disruptions, delayed operations at fulfillment warehouses and increased consumer demand can all result from natural risk. It’s important to understand how likely natural disasters are to impact your suppliers and have a source of backup supply at the ready to bridge against supply shortages and hiccups.
Global business is risky business because the global supply chain can deliver efficiency, but can also increase risk in the process. Although it’s important for CPOs to pay particular attention to reducing costs and generating financial value, especially during difficult market conditions, it’s vital to establish a balance between focusing on costs and risks. Effectively mitigating risk areas can be a pivotal step toward long-term success. How are you bolstering your risk management strategies for global growth?
By Mickey North Rizza, VP of Strategic Services at BravoSolution
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