Six challenges that could break the supply chain
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You don’t need to be a supply chain expert to know that the sector has undergone some radical changes over the past decade. These have ranged from the onslaught of cheaper manufacturing bases in the East and the lengthening of the supply chain, to the rise once more of traditional manufacturing bases in the West as costs rise in China.
The advent of new technology has further propelled the sector’s evolution. It has enabled the supply chain to become more collaborative, support new specialisms and respond to changing demands. Against this backdrop of continuous change the sector faces the following six challenges which, if not addressed, have the potential to break the supply chain:
- The ‘March of consumerism’ challenge: Consumerism is on the march. Its spread into the far reaches of the world from the BRICS to the MINTS to the CIVETS. The world has become one big marketplace with consumers calling the shots, and so it needs ‘one big supply chain’ to underpin it. You only have to look to the online retail market as an example. While not exactly new, online shopping has reached a point of extreme scale and maturity, with competition constantly increasing. The scene is the same for business to business trading. Supply chains stretch further across the globe than ever before, and the volume of online B2B trading is steadily increasing, leading to some serious operational challenges. Companies that are not ready to tackle these challenges will be left behind.
- The ‘where to source from?’ challenge: Constantly diverging supply chain options are creating more complex sourcing decisions for supply chain professionals. For example, changing factors such as risk, cost, logistics and sustainability all impact the ability to accurately measure the total supply cost of products and services across a global market.
- The big data challenge: Everyone is talking about ‘big data’ and its impact on the supply chain but be aware: it won’t solve all your problems! It is easy to be swept along by the promise that big data is going to answer all of your questions about supply chain performance (and even those you didn’t think you needed to ask) but the reality is that big data, to a degree, is a misnomer. The challenge isn’t managing the data, the challenge lies in realising the insight that the data offers. With the right tools in place organisations can gain visibility into the supply chains to identify areas of concern as well as areas of potential growth in order to make them more streamlined.
- The risks of ‘app-isation’ challenge: The lure of enterprise apps promising to make supply chain operations more intuitive and agile can be attractive, but professionals should also be aware of the risks. Apps for the supply chain need to offer stability, be rigorously tested, undergo stringent security and error testing and integrate with legacy IT systems if they’re to offer value. While apps will help supply chains enormously, supply chain professionals need to weigh up the risk. Apps should not be seen as a replacement for core enterprise supply chain management systems.
- The ‘supply chain inequality’ challenge: While demand planning isn’t getting easier or harder, it does remain challenging. The ability to manage demand as dynamically as possible depends on how strong customer relationships are and how willing those customers are to share their own forecasts with the supply chain. We’ve seen recent, high profile examples of retailers such as Tesco, Premier Foods and Heinz, criticised for holding their suppliers at arms-length. Supply chain professionals should try to spend as much time with their customers as they do with suppliers for this reason. It must be a two-way relationship and customers must appreciate that an arms-length, David and Goliath-style relationship with key suppliers will not pay in the long term.
- The ‘we’re not out the woods yet’ challenge: The downturn caught many organisations out and in general made people more cautious. That risk-adverse attitude and legacy lives on and will continue to do so despite the ongoing signs of recovery. While banks are starting to lend again, it’s with much closer scrutiny of the borrower and their requirements. This means that organisations need to be more innovative in finding ways to fund their supply chain innovations. Equally, supply chain professionals and their customers have learned much from the downturn. They are subsequently asking far tougher questions of their supply chain partners, setting them in good stead for the future.
Craig Stephens is vice president international consulting at Epicor Software Corporation, an ERP software vendor that is focused on supply chain and manufacturing companies. Epicor has approx. 30,000 customers across 150 countries worldwide, most of which are manufacturing and supply chain focused.
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”