Supply Chain Roundtable
Lorcan Sheehan, ModusLink’s Senior Vice President of Marketing, was kind enough to give us his Top 5 Supply Chain Trends for 2012. We asked Dun & Bradstreet’s Jim Lawton to provide his analysis to Sheehan’s views.
1.) VUCA – The overall macroeconomic environment (Volatile, Uncertain, Complex and Ambiguous). One of the things we’ve seen is a lot of volatility in the last few years, and it looks like it’s here to stay.
Lawton: “Companies are looking for control over their supply chain so they can insulate themselves from much of the macroeconomic environment. The challenge has become as companies have pursued these strategies, they have put themselves in the line of fire for problems. We’ve seen much more complex supply chains with materials coming from a wide variety of different places. Supply chains are now dependant on this international, interconnected network of all of these players.”
2.) China's Changing Role in the Supply Chain – Inflation and rising wages have changed the landscape a bit, and made China less desirable of a location. We’re seeing a lot of people examining the role of China in the global supply chain.
Lawton: “I continue to believe that we’re going to see more and more of an emphasis with China on the global stage. One of the issues is that it’s a much more complex situation than companies were envisioning. The original driver was simple, but the current situation is much more complex. Lowering expenses on supply chains by reducing labor costs in the manufacturing phase of supply chains is changing because of the labor conditions in China. Aggressively outsourcing might not always be the most logical option.”
3.) Risk Management – Major natural events impacted supply chains in 2011. Management of Tier 2 and Tier 3 suppliers must become a priority.
Lawton: “A company can’t afford for risk management to not be a major focus. If it wasn’t as a result of Japan, the flooding situation in Thailand is one more example. The reality is that it’s not going to change. You can’t anticipate a flood, or a fire, or an earthquake, but you do need to understand the significance of a disaster on the supply chain. That level of exposure is just too great.”
4.) Retail Channel Changes – The increasing percentage of online channels, something that traditional retailers need to learn to cope with from a supply chain perspective.
Lawton: “I suspect if you ask Wal-Mart who their biggest competitor is, they wouldn’t say Target or Kohl’s. They would say Amazon. In terms of the impact of the supply chain, there’s a very tactical and mechanical element. It’s a different type of supply chain that you need to optimize for a different type of business, and we’re clearly seeing that shift.”
5.) How can Supply Chains be a revenue enabler? Additional products that can help with the uncertainty of the market. Seeing more of those conversations happening now, but there’s only so much that this can do.
Lawton: “There are a couple of things there. One is if I’ve got the product and you don’t, I’m going to make the money. If I can do this by having a better understanding of my supply chain, that sort of capability and competency are going to allow companies to obtain revenue while others are going to be left out. The other piece is finding ways to drive your supply chain and fine-tune the processes. If you can move people to support demand better, you can manage demand as a margin enhancer.”
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