Everything looks a bit crazy right now, doesn't it? Oil and energy prices are fluctuating. The ongoing worldwide debt crisis is having a chilling effect on government spending. There are shocks in the global stock markets. Japan is recovering from its disaster. Youth riots and public unrest are spreading from North Africa to the Middle East to Europe. And there are concerns about how road, railway, port, and other transportation upgrades will be funded if regional budgets thin out even more.
If you think the electronics segment will be isolated from these evolving events, think again. In more ways than one, they will collide head-on with near-term supply chain and logistics management plans.
On one extreme side, companies will want to make sure their distribution warehouses are secure and out of harm's way. That warning is a few days late for Sony Corp. (NYSE: SNE), which was already beaten down by last spring's earthquake and tsunami in Japan and ended up with another black eye this week. One of its distribution centers in London was burned down during the riots there.
Supply chain managers will also want to check out the increased merger and acquisition activity in the transportation and logistics industry, particularly within the shipping and passenger air verticals. First-quarter deal activity in this industry jumped nearly 15 percent from the same quarter last year, according to "Intersections," a quarterly analysis of global M&A activity in the transportation and logistics industry by PricewaterhouseCoopers International .
This kind of uptick probably warrants at least a few phone calls to shipping companies to get a status check on their businesses and to review partnership criteria for all shipping partners.
M&A activity is worth following for another reason: It could be a tipoff for infrastructure improvement trends. If governments continue to slam the brakes on spending and put major capex projects on hold, businesses may well step in and step up deal negotiations, PwC said. "Continued interest and activity in transportation infrastructure remains a key driver for M&A in the sector." And the momentum is expected to continue as regional and national authorities grapple with the need to make transportation infrastructure improvements while pursuing fiscal austerity.
From all indications, austerity is an item that remains on a worldwide wish list. Talk of a double-dip recession, very jittery stock markets, and softening international demand and manufacturing outputs will once again give pause to electronics companies. Sales forecasts, currency translations, and product planning could soon be swept into another very uncertain business tornado.
Given the big-picture chaos unfolding in the world, now is as good a time as any to take another look at the supply chain dashboard and figure out how to steer around the roadblocks and speed bumps popping up.
Securing the physical assets might require building new components into existing data centers or moving the assets to more secure areas and other planning.
I think the cause for that is, with the boom of virtualization, cloud computing, and near instantaneous recovery and migration abilities using these tehnologies, it becomes more cost-effective to protect the 'logical' assets compared to the physical.
Barbara makes an excellent point in that comparatively little is spend on disaster prevention for physical assets compared to, say, data storage or IT infrastructure. In IT we need to ensure that we have minimal impact from equipment failure locally right up to the building burning down. However when it comes to inventory and manufacturing we have all our eggs in one very vulnerable basket.
I wrote a longish reply this morning, but apparently didn't hit the post button. Let's see if I can remember the key points.
Jacob - I'm no expert in analyzing the immediate effect gold and oil pricing will have on supply chain activities, but it's obvious that someone is going to have to pay for any fuel surcharges. Probably, like always, it will be divided along the supply chain, and passed along to the consumer.
Eldredge - Governments may have resisted significant spending cuts to date, but if we fall into a double-dip recession, I don't suspect that strategy to be sustainable. Municipal and state government budgets in the US at least largely depend on the income and property taxes they levy from their communities, and their ability to issue bonds for major capex projects. If unemployment remains high, wages stay frozen, and home mortgage default and foreclosures remain a norm, city, regional, and national governments will have to look at their dwindling tax revenue and re-assess what services can be supported. It doesn't help either that the S&P cut municipal bond ratings this week. The full story on that is here: http://finance.fortune.cnn.com/2011/08/11/how-safe-are-your-munis/
And, Barbara - you're absolutely right. Physical disruptions play a huge part in supply chain replanning, but they are so unpredictable it's hard to factor in. For instance, who would have seen London's riots escalate so quickly in just a couple of days?
Interesting post. The supply chain continues to be dependent on physical facilities such as warehouses and shipping avenues, which will always be affected by weather, political upheaval and disaster. I've always found it fascinating that so much time and money are spent on the theoretical aspects of the supply chian when a physical disruption can render the best practices nearly useless. It's always worth thinking about...redundnacy is one answer but not the most financially viable.
It seems like government spending restirctions are being resisted far more. I think, you have a point. Investors are unwilling to response to the capital market and the whole financial climate looks harsh and becoming unbearable.
Jennifer, as you know there is an economic instability in the market due to the recent happenings in US economy. More over the oil and gold pricings are adding fuels to such crisis. In such situation, are you foreseeing any direct and indirect effect for the electronic and supply industry in pricing and stoking? Just now only the industry regains from recent tsunami in Japan and global recession before that.
"Given the big-picture chaos unfolding in the world, now is as good a time as any to take another look at the supply chain dashboard"
I believe that the best way to overpass the economic crisis is to remain calm. And that includes people that have a small amount of shares in the stock market, people that work in big finance companies and our politicians.The extendednervousness in the market make us to take the wrong decisions.
A new report shows that most of the worrisome issues that the supply chain industry has been dealing with for years are not new, but there are some new concerns that need answers. Here’s a look at what keeps supply chain professionals up at night.
When it comes to shipping supplies from China to Europe, trains might be the most cost-effective way companies have available to them. DHL is looking to jump on that bandwagon.
For many dealing with the enormous task of tracking,
reporting, and resolving issues associated with
potential counterfeit parts, there is a collective
hope that 2013 will bring clearer guidance on what
needs to be done by whom and when.
A necessary foundation for moving efficiently at real-time speed, supply chain analytics is still very much at the beginning stages of development at many companies.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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