Supply Chain Shifts: Exploring Today's Key Trends

Discover the underlying forces steering today's global economy and supply chains with our latest discussion on Chain Reaction. We promise insights into the labor strikes impacting Boeing, the mysterious £40 billion shortfall in the UK's finances, and the staggering global debt nearing an unprecedented $100 trillion. As we navigate turbulent waters, we uncover the automotive industry's struggle with surging car prices and the pivot to electric vehicles. Listen in as we examine the ripple effects of declining steel production and energy price volatility on the UK's renewable energy goals, while spotlighting industry tremors like LVMH's sales challenges, job cuts at Airbus and Boeing, and Ryanair's revised traffic forecasts.

Journey with us into the evolving energy landscape, where the IEA forecasts a peak in fossil fuel demand, potentially igniting a green energy revolution. We shed light on the declines and strategic shifts at major corporations like ASML and Walgreens, and introduce Amazon's colorful new Kindle. The conversation spans the surge in AI investments in the US and the importance of fairness in agri-food supply chains. We tackle the repercussions of the International Longshoremen’s Association strike, H&M’s sustainability strides, and the latest SAPICS conference theme. Finally, we congratulate Travis Culper on his CSCMP Doctoral Award. Perhaps Travis will join us to discuss his work at a later date. Here at Chain Reaction we love to have episodes packed with crucial updates and expert analyses. Join us for a compelling exploration of the forces shaping our global supply chains today.

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Chapters

• 0:04 Global Economic Downturn Signals
• 7:18 Global Supply Chain Trends Discussion

Transcript

Tony Hines: 0:04

Hi, I'm Tony Hines. You're listening to the Chain Reaction podcast, all about supply chain advantage, and I hope you're going to find out something new today. So stick around, stay tuned, stay informed. This is the news edition. All things impacting global supply chains this week. Chain Reaction Global Supply Chains this week.

Tony Hines: 0:29

Now, this week, I just get the feeling that the storm clouds are gathering in the global economy. Now, if we thought it was a mediocre autumn at the moment, I think it's about to take a downturn for the worse, and the signals are all around us. Think it's about to take a downturn for the worse, and the signals are all around us the signals coming out of the united states in terms of the labor strikes at boeing. And, of course, all's not well in the air industry. Airlines are starting to complain about the reduction in aircraft that they're receiving from manufacturers, as orders are delayed. It's mainly down to Boeing, with the 737s and their particular planes, but also Airbus is also behind schedule on delivering aircraft. And, of course, what started in the pandemic has become more of a crisis, and it's not just in the pandemic itself where we see the roots of these problems. It's probably earlier, but the pandemic certainly took a lot of expenditure from governments to keep the economies ticking along while they were waiting for it to end and uptick, and actually what's happening presently is that well, it isn't upticking that well.

Tony Hines: 1:48

I was looking at some figures in the United Kingdom, and although the inflation rate has dropped to 1.7 year on year in September and that's good because it's below the Bank of England target of 2% there is apparently a £22 billion black hole. But it gets worse because investment for growth will need to take account of that £22 billion black hole and an uptick of another £18 billion, so it's not insignificant amounts. That means £40 billion and that has to come from taxes or borrowing. Those are the only two sources that government have to generate revenue, and if we think ahead in the world economy, then similar problems are existing in the market for EVs, aircraft and other goods, and consumers obviously are getting quite nervous, so they're delaying expenditures too, and that doesn't help either. The other thing I saw in the news this week was that world debt is around 100 trillion US dollars, or at least it's estimated to be that by the end of this year, and that's not insignificant either, and it's the highest it's estimated to be that by the end of this year and that's not insignificant either and it's the highest it's been on record, if that hits that target. So we've got a debt mountain. We've got a reduction in cash as sales outputs are lower generally as ev markets are hit. Car markets have been hit generally because of the switch over and the transition to electric vehicles, and I was reading also that the price of a new car in the United Kingdom is around about £38,000. Pre-pandemic that figure was around about £30,000. So car prices have gone up by £8,000 to £10,000 on average since the pandemic and if we also take a look at car prices, we can think that EVs carry a much higher premium in their price setting. So again, problems in the car industry.

Tony Hines: 4:05

If we look at heavy industry output and we look at steel output, steel output in the UK has fallen significantly over the past few years. Steel output worldwide is about 1.9 billion metric tons. China accounts for about half of all steel produced, while the EU27 makes up less than 10% of the market In Britain. It's a sorry story for steel production. It was about 9.2 million tons of steel produced in 2014, and that was down to about 5.96 million in 2022. And many have questioned do we need a steel industry anymore? Well, it's a critical question and it looks as if we're heading not to having one the way things are shaping up. We also have a problem with energy and if energy prices become volatile that will damage the UK economy even more. And if consumers think it's bad right now paying for energy and businesses, it will be even worse if the government can't make that transition to a net zero economy by 2050 and on the way there it can't actually adjust the move to renewable energies faster, much faster than it has in the past. Now I know the government says it has an aim of doing that, but a name is one thing and a realization is something else.

Tony Hines: 5:44

If we just look at some of the headlines this week, lvmh shares, their luxury retailer, hit by week quarter three sales and it's dragging down the luxury sector. Stellantis expects Q3 shipments to fall by a fifth in efforts to cut inventories. Debt boom hits pause down under as US elections loom. Asml in technology has lowered its outlook, suggesting factory overcapacity, not ship doom. Shareholders approve buyout of AirAsia by long-haul associate Airbus to cut 2,500 jobs in defence and space. Boeing's going to cut 17,000 jobs, a tenth of its workforce, because of the strikes and other problems it has. Stellantis recalls over 20,000 hybrid SUVs in the US over brake pedal concerns. Ryanair said it's going to cut traffic estimates for next year because of plane delivery delays. So everywhere you look, the signals are there. Airbus 2 is cutting 2,500 jobs in defense and space. It announced on Wednesday it will cut 2,500 jobs in the Defence and Space Division, especially in loss-making satellites. Boeing is lining up $35 billion in funds as the strike is biting into finances.

Tony Hines: 7:18

There could be a very different energy field at the end of the decade. According to the IEA Executive Director, fatih Birol, the world is on the brink of a new age of electric, with fossil fuel demand set to peak by the end of this decade, and that means the surplus oil and gas supplies could drive investment into green energy. According to the International Energy Agency, shares in ASML in Europe fell by nearly 5% to €635.6 this week. In July it was valued at €1,000. That's $1,088 a share In retailing. Walgreen is shutting 1,200 stores in the United States as the business tries to turn itself around, looking for a stronger balance sheet. Amazon this week announced its first ever colour Kindle e-reader.

Tony Hines: 8:20

I didn't realise that people still used Kindle. I've got one somewhere which I hardly ever use. I used to use it a lot in the early days. It was a fairly grey looking reader, but actually I much prefer reading the actual book to the screen reader. Call me old fashioned, I just like the aesthetic of a book. But following years of effort to bring the more techie device to replace the book that people use take them on beach holidays, see them on planes, and it's a useful way to take lots of books with you while you're on the move and you can even download new books wherever you are in the world. So the Kindle ColorSoft comes in at a price tag around 280 us dollars and that compares with similar devices from other manufacturers between 149 and 330 dollars. It relies on leds and other technologies to achieve the color display. Amazon had tried in earlier years to develop a colour e-reader using e-ink, the technology available in standard Kindles that I just talked about that grey look. It requires minimal battery power. The Coloursoft will have an 8-week battery life, roughly compared to 3 months for its latest generation of paperwhite e-readers. The paperwhite with a 7-inch screen is about an inch or two-tenths of an inch larger than the recent colour screens. Amazon is still the leader in this e-reader market. Well, do you think you'll be buying a Kindle, or are you going to the bookstore?

Tony Hines: 10:12

Venture capital firm Axel said that spending on AI is likely to hit about 79 billion US dollars this year, and that's up 27% on the previous year, so an awful lot of money being poured into artificial intelligence. At present, there's an 80-20 split in percentage terms between the United States and Europe and Israel, so 80% goes to the United States and 20% goes to Europe and Israel. It's quite significant, isn't it? All the investments in the US. In the main, the Agri-Food Regulator is conducting a survey to gather views from farmers, fishers and growers in the United States on trading practices in the agri-food supply chain. The survey aims to promote fairness and transparency in business-to-business relationships, and the results will be published anonymously to protect the confidentiality of respondents. This survey closes on October 18th. It might have already closed by the time you listen to this episode, but you'll all be able to go and get the results, so you can still learn from this survey.

Tony Hines: 11:27

A recent Gartner report highlighted the need for increased productivity in supply chains. Despite the advancements of technology and processes, overall productivity has seen limited progress. The report suggests that companies should invest in digital assets, artificial intelligence and machine learning to achieve greater economic value and sustained business momentum. Well, I should remind you here that there are a number of podcasts either already that we've done on chain reaction or coming your way shortly all about artificial intelligence and investment in digital assets and how it can actually lift your supply chain endeavors. So get along and binge on those episodes. Have a listen.

Tony Hines: 12:14

Following the collapse of isg cad, caddick Construction has offered support to its supply chain by releasing retentions early and hiring former ISG workers. This move aims to help affected subcontractors and maintain growth. The managing director of Caddick Construction, paul Doddsworth, emphasised the importance of supporting the supply chain during the challenging times. The International Longshoremen's Association strike, which began on October 1, 2024, and ended on October 3, 2024, after a tentative agreement was reached about the increase in wages, although resolved, it will take time to clear the cargo backlogs and restore normal operations at ports. Shippers have been advised to prioritise clearing backlogs to minimise disruptions. H&m announced it will stop sourcing new down fibres by the end of 2025. The company aims to use only down and feathers from post-consumer recycled sources, part of the circular economy. The decision is part of H&M's broader commitment to responsible sourcing and environmental stewardship, and the move follows pressure from animal rights activists and it fits with the company's sustainability goals.

Tony Hines: 13:37

And while we're on the subject of sustainability, great episode coming your way in the next couple of weeks on the Chain Reaction Podcast all about sustainability in supply chains. I'm sure you'll want to listen. It's a great episode. The Supply Chain Management Association of South Africa, sapex, has announced the theme Innovation in Motion for its 2025 conference. The conference is going to focus on how innovation can drive supply chain efficiency and resilience, featuring expert speakers Well, I'd love to be there, I just want to let you know and interactive sessions to explore the latest trends and technologies in the field. Sessions to explore the latest trends and technologies in the field. Well, I've spent a lot of time in South Africa. It's a great country and I hope the conference goes really well and I could be available Now.

Tony Hines: 14:25

I read a story this week about Travis Culper, who's an alumnus of the University of Arkansas and he received the 2024 Doctoral Dissertation Award from the Council of Supply Chain Management Professionals and his dissertation subject close to my heart how Supply Chains Respond to Disruptions Three essays on responses to operational, geopolitical and natural disaster disruptions. It's been recognised for its outstanding contribution to the field of supply chain management. Well, well done, travis, and, of course, to his supervisors. As we say, having spent a lot of time with doctoral students over the years, it's a very rewarding activity, and when a student does well with the research, it's a fantastic achievement for the student and for those that guide that student in the process of putting that work together.

Tony Hines: 15:25

Dhl Supply Chain has announced a reduction in headcounts at its facility in Wisconsin. The decision is part of a broader restructuring aimed at improving operational efficiency, and that's because of changing market conditions. Pitney Bowes has launched a new e-commerce shipping platform designed to help businesses streamline their shipping processes and improve customer satisfaction. The platform offers a range of features, including real-time tracking, automated shipping labels and integration with popular e-commerce platforms.

Tony Hines: 15:58

Nearly half of all westbound sailings from Asia to Europe are delayed due to escalating port congestion. Major Asian ports, including Singapore Port Kliang and Tanjung Pelopas, are experiencing severe delays. Shanghai and Guangzhou are facing the longest waiting times, with some ships delayed by up to five days five days. The disruption impacts supply chain efficiency, increases costs and creates uncertainty about reliability for businesses and consumers. There is increasing concern over fire safety standards aboard ships. Experts warn that fire accounts for a significant proportion of maritime incidents and there's a need for stricter regulation and better fire prevention measures to ensure the safety of crews and cargo.

Tony Hines: 16:46

Ocean Network Express has reported a significant increase in revenue from its trans-pacific trade routes in the third quarter of 2024, and this growth has been attributed to increasing demand and improved operational efficiency. And improved operational efficiency, costco's shipping profits up 67% in the first nine months of 2024. Costco has reported an increase of profits for the first nine months of 2024 of 67%, and the company puts this down to higher freight rates and increased demand for container shipping services. Maersk, the shipping giant, has opened a new facility in Ohio for Levi Strauss yeah, those Levi Strauss, the ones that make the blue jeans. Maersk has opened its new logistics facility to support the company, and it's part of Maersk's strategy to enhance its supply chain capabilities and provide better service to customers.

Tony Hines: 17:44

Now there's some interesting evidence about the cost of Brexit. To the City of London, the departure of the four countries of the United Kingdom from the European Union has cost about 40,000 jobs. Michael Manali said rival financial centres such as Dublin had gained most by attracting 10,000 positions, and cities such as Milan, paris, amsterdam had all benefited from the migration of jobs from London after the vote to quit the trading bloc in 2016. He said there were about 525,000 workers in 2016 and he thinks they've lost about 40,000. And that number is far higher than EY calculated. They said it'd be about 7,000 by 2022. So not a very good forecast. That was it. If these figures are accurate and, of course, forecasts when they're badly wrong like that, really affect the decision-making, they can impact it.

Tony Hines: 18:45

However, I think it was more of an emotional than a rational vote to leave the European Union by many who saw it as their opportunity to simply stop bureaucracy, because that's what they were told. But quite the reverse is true, because we've got a lot more bureaucracy now than we ever had in the European Union. The city voted 70-30 to remain, and it wasn't something that they wanted. The UK financial services output has fallen by 1% since 2019., and that's in stark contrast to France and Germany, where it's increased 8%, and Ireland's 18% growth, according to official data. One of the plus sides of a resilient London, of course, is that there are now an increasing number of jobs in the insurance field and in data analysis, but we probably would have had those in any case. So, yeah, brexit Nothing very rational about it at all. Well, that's it for this week. I hope you've enjoyed the news edition and learned something that perhaps you didn't know before you listened.

Tony Hines: 20:01

Don't forget to subscribe to the podcast if you like Chain Reaction, and make sure you'll be first to know when a new episode drops. We've got some great episodes coming along your way in the next few weeks. We've got a session with Madhu Hosadurga, who's the VP for AI at Schneider Electric. We've got an episode on revolutionizing supply chains, exploring the core characteristics of Industry 4. We've got an episode on future-proofing supply chains, looking at resilience, agility and sustainability. We've got a special on mastering promotions building resilient supply chains, which is a great episode, and we've got a journey to a sustainable future. Those are all coming your way in october and november.

Tony Hines: 20:48

And then we've got some great episodes that we've put out recently, from strikes to storms, the impact of global trade, exploring the future of global trade, mastering supply chain strategy, insights to transforming your business and mastering supply chain forecasting techniques, technologies and pitfalls. So lots of episodes, and you can go and have a look at the chain reaction website and see which episodes you're interested in, and you could have a binge weekend. How about that? Well, I'm gonna leave it there. I'm tony hines, I'm signing off and I'll see you next time in the Chain Reaction Podcast. Bye for now, thank you.