The Long Haul: A Double-Dip Recession?
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We’re in trouble.
That’s the message supply chain expert Paul Martyn sent out in an exclusive interview with Supply Chain Digital.
Martyn works as the Vice President of Supply Chain Strategy for BravoSolution, a leading international provider of supply chain management. Martyn works with scores of Fortune 500 companies, and is noticing some startling trends in today’s slow economic recovery.
“We’re seeing fewer products getting to market in a timely or efficient basis,” Martyn says. “The lead times have become more prominent, back logs are seen more. That’s been this self-fulfilling prophecy that we’ve seen with the slow growth from a macro point of view.”
According to Martyn, companies are desperately holding onto their cash assets as risk preparation should a double-dip recession strike. The decision to not reinvest in supply chains could be a costly one, however.
“It strikes me as an odd period of business, because risk is profit,” Martyn explained. “Had companies been more aggressive in investing their cash, we would’ve seen a more expedited recovery as a result of companies taking more risks.”
The lack of risks being taken in supply chains goes far beyond concrete economical impact of the late-2000s recession, says Martyn. The fear of a double-dip recession exists even though there is little evidence to support that we’re heading down that path.
“There has been a lot of prominence, probably more psychological than the data would suggest, around a double-dip recession,” Martyn said.
If companies fail to invest more in their supply chain and in other places, we could see a mass exodus of suppliers from the market. Large firms would hold temporary monopolies over industries, which, if the current trend continues, would hurt innovation at the cost of saving money.
“If there’s no competition, why are the large companies going to push for innovation?” Martyn wondered.
To counter the effects surrounding a double-dip recession, supply chain firms are talking now more than ever about risk management. Martyn said several companies are moving risk management positions from a mid-level manager to executive-level positions, but more still needs to be done.
“Companies are talking a lot about it, but they’re really not investing a lot of money in advanced solutions of risk,” Martyn said.
That complacency of not investing money has come at a cost of innovation and supply chain excellence, as the spectre of a double-dip recession continues to haunt the supply chain industry.
“We’ve seen operations really focus on the minimum required to deliver their products to market, and not looking to improve the ways they get to market, or the products themselves,” Martyn said. “That’s a dangerous trend, as we look over the long haul here and the potential of a double-dip recession.”
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