Supply Chain Disruption Breaks Honda’s JIT Methodology
Renowned Japanese automotive company, , has announced that today, Wednesday 9th December, it will pause production of vehicles at its manufacturing plant based in Swindon, United Kingdom. The sole purpose for this? A huge transport-related parts delay, caused by ongoing Brexit-related back-and-forth between the British government and the European Union. That and Honda’s reliance on the just-in-time manufacturing method, which allows the firm to avoid overstocking individual parts through lean procurement and production.
"The situation is currently being monitored with a view to restarting production as soon as possible," Honda said.
"Honda of the UK Manufacturing has confirmed to employees that production will not run on Wednesday 9th December due to transport-related parts delays."
Currently, as UK-based businesses patiently await the result of EU-UK negotiations, there’s a fear that ‘no-deal’ will scupper trading norms across the bloc ─ as a result, companies are pushing exponential volumes of last-minute trade through the ports, causing congestion and delays. Couple that with a large movement to stockpiling, subsequent of the country’s recent stock deficiencies during the COVID-19 pandemic as well as newly-introduced travel restrictions and regulations, and the just-in-time ideology - a spur of the moment stocking method - finds itself, unironically, out of time.
Most years, the UK’s biggest container port, Felixstowe, handles approximately 40 per cent of all the containers coming into and out of the country ─ but this year, workers there have been overwhelmed by the mass influx of product. As a result, shipments have been redirected to London Gateway and Southampton, with the hope of easing the load, but in reality, these alternative ports are also feeling the pressure.
Unfortunately, when it comes to UK deliveries, the new narrative of congestion has prompted vessels to “cut and run” - either partially unloading in UK ports or completely skipping them altogether and dropping cargo at Antwerp, Rotterdam, and Zeebrugge instead.
Representatives of UK ports, shipping and logistics sectors have written to Transport Secretary Grant Shapps to highlight the crisis.
"We recognise government's capacity to step in is limited, but where they can, they should look at ways of increasing the capacity for moving containers on and off ports," said Tim Morris, chief executive of ports' trade association, the UK Major Ports Group.
"That could mean running more and longer trains to and from ports, allowing hauliers more flexibility to collect containers out of normal hours, and for drivers to take on longer shifts where that can be done safely."
Honda hasn’t given up just yet, though, with the suggestion that air freight could be a viable alternative to their usual shipping methods. For now, however, the company will, at the very least, have to pause production ─ a disruption that signals the worrying nature and potential risks of a no-deal Brexit trade deal.
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.”