What Impact Will The New Silk Road Have on Global Trade?

Russia is decoupling its trade from the dollar, decoupling its hydrocarbon trade from the petro-dollar, and working with China to re-open the old Silk Road between China, Germany, and Russia. Powered by the Eurasian Land Bridge that is a rail transport route for moving freight and passengers overland from Pacific seaports in the Russian Far East and China to seaports in Europe using a transcontinental railroad and rail land bridge (by way of the Trans-Siberian Railway and the New Eurasian Land Bridge through China and Kazakhstan), the New Silk Road will increase Eurasian trade, most likely at the expense of North America.

The immediate consequences of Russia’s actions will amount to the BICS, and BICS partner countries, following Russia’s lead and decoupling their trade from the dollar, especially in hydrocarbons (which is a Trillion dollars a year in Russia alone), to local currencies and trading partner currencies. Furthermore, China has been in the process of decoupling from the dollar for months and is focussed on the yuan’s ascendancy.

The follow-on to this, as described in this recent article over on sott.net on Russia and China announce decoupling trade from Dollar – the End for the USA is nigh, is that the BRICS are preparing to launch a new currency — backed by a basket of their local currencies — to be used for international trading, as well as a new reserve currency. As a follow on, a new international payment settlement system, replacing SWIFT and IBAN, is expected, which will bust up the effective monopoly held by the Bank for International Settlement (BIS) in Basle, Switzerland. Currently, China has two small operations in London and Frankfurt to process trading cash flows directly between Euros and Yuan, but that is expected to grow.

But the new economic Silk Road, which is going to use Duisburg, the world’s largest inland harbour (and a historic transportation hub in Europe), and link Russia and China through the world’s fourth largest economy, as well as with Kazakhstan, Belarus, and Poland, has the potential to overshadow all of this from a trade perspective. The effect of decoupling from the dollar just means that some currencies rise at the expense of others that fall. It doesn’t alter trading volumes substantially. Some countries, not having to buy an overpriced dollar, might be able to buy a little more, or some, for which the dollar was relatively weak to their currency, might have to settle for a little less, but overall, the change will likely be limited and controlled.

But a new trading route, which can get things from China to Duisburg in 18 days or less, could significantly shift the global balance of trade, see less trading between the West and the East, and even increase trading on the Eurasian continents. It’s hard to say what will happen, but chances are some ocean carriers will lose considerably, as more goods will be moving over land, and carriers servicing the ports along the New Silk Road will gain, as trade shifts to minimize the amount of time cargo needs to spend on the ocean (as time is money). It’s a situation to be aware of at least.

Will Increased Cargo Theft be the Next Impact of MAP-21?

MAP-21, the short-hand for Moving Ahead for Progress in the 21st Century Act, took effect October 1 of last year (and shortly thereafter we asked if your supply chain was compliant in Part I and Part II). This 584 page monstrosity had ramifications across your transportation-based supply chain and included, among other things, in the Commercial Motor Vehicle Safety Enhancement Act: Subtitle 1, section 32918, a requirement that each broker subject to the requirements of this section shall provide financial security of $75,000 for purposes of this subsection, regardless of the number of branch offices or sales agents of the broker, a seven-fold increase for the average small carrier.

As a result of this requirement, we asked if the act should be more accurately renamed RIP-21 as the act led to the forced closure of over 9,800 freight transport brokerages that were unable to put up the significantly increased bond. Overnight, 46% of independent brokers disappeared! Some eventually came up with the bond and reopened, but the number of independent brokers is down 40% year over year.

So what does this have to do with increased cargo theft? One of the fastest growing forms of cargo-theft is deceptive / fictitious pick-ups. The scheme, as described in an AP article last year on how “thieves pose as truckers to steal huge cargo loads”, works as follows.

 


Thieves assume the identity of a trucking company, often by reactivating a dormant Department of Transportation carrier number from a government website for as little as $300. That lets them pretend to be a long-established firm with a seemingly good safety record. The fraud often includes paperwork such as insurance policies, fake driver’s licenses and other documents.


Then the con artists offer low bids to freight brokers who handle shipping for numerous companies. When the truckers show up at a company, everything seems legitimate. But once driven away, the goods are never seen again.

And now thieves have over 9,000 cargo companies, many of whom with good safety records, to work with. Now more than ever, you need to keep a close eye on your cargo on American soil, or you may not see it again! Makes you wonder just who MAP-21 is for, eh?

We First Rocked Around the Clock 60 Years Ago Today …

… but how long have you been rockin’ your supply chain?

As Christopher Sciacca insists, supply chains don’t have to be boring. You don’t have to sing the blues. You can twist and shout.


Put your glad rags on and join me, hun,
We’ll have some fun when the clock strikes one
We’re gonna save some money tonight.
We’re gonna save, save, save ’til broad daylight

Modern e-Sourcing Technology allows you to identify savings you never knew existed.
Spend Analysis and Decision Optimization identify year-over-year savings in excess of 10% when properly deployed.
New market intelligence solutions identify changing commodity prices in near real time.
Six Sigma and Lean solutions allow you to improve processes to reduce manpower costs.


When the clock strikes two, three and four,
if the float goes down we’ll save some more
We’re gonna rock around the clock tonight,
We’re gonna add value ’til broad daylight

Visibility solutions identify potential risk and allow for mitigation and prevention.
Sustainable options increase brand value and minimize long-term costs.
Recognized brands add value to your own.


When the chimes ring five, six and seven,
we’ll be right in seventh heaven.
We’re gonna rock around the clock tonight,
We’re gonna innovate ’til broad daylight

Collaboration tools allow for joint product design.
VMI allows for joint inventory management.
e-Document Management allows for procurement and sales support.


When it’s eight, nine, ten, eleven too,
I’ll be goin’ strong and so will you.
We’re gonna rock around the clock tonight,
We’re gonna start again at broad daylight

Savings, Value Generation, Innovation is a continuous process — and supply chains support it!


We’re gonna rock, gonna rock, around the clock tonight!

The Board Gamers Guide to Supply Management Part XIX: The Gnomes of Zavandor

You’ve been working your way through the series and honing your strategic planning, negotiation, and even payment skills, but you still haven’t found the right game because you are in the raw material supply chain and work for a jewellery buyer and distributor. You’ve searched and searched but firmly believe you’re not important enough to get your own game.

Great news! You are. In The Gnomes of Zavandor, you are a gnome with two great passions: sparkling gems and wondrous machines (and are thus likely displaced from Warcraft where gnomes are a short, intelligent, and inquisitive race with aptitudes in both the arcane and mechanical crafts or from Dragonlance where they are the ancestral race of dwarves who are constantly thinking of new inventions and defined by their life quest). Your goal is to become the most successful gem trading mogul in your community and the first to achieve the wealth that gives you this status (which is measured in victory points).

In The Gnomes of Zavandor you gain victory points by acquiring mining rights, jewelry made of precious gems, and inventions. You acquire mining rights, jewelry, and inventions if you can afford the cost, which is paid in precious gems. You acquire gems by buying them on the market for gold or by mining them with mining rights that you have managed to acquire. You start the game with 23 gold, come into a small inheritance of more gold at the start of the second round, but then have to trade and mine your way to success to survive, and win, the game.

The game consists of a sequence of alternating action rounds and mining rounds and continues until one gnome achieves victory. In an action round, each gnome has 3 actions, taken sequentially, where he or she can:

  • buy up to 4 gems of a single gem type on the market
  • sell up to 4 gems of a single gem type on the market
  • draw 2 cards from the face down jewelry or artifact pile and keep one (which only that gnome can buy or build)
  • buy a mining rights tile
  • buy a face-up jewelry or artifact from the market
  • take (or exchange) a trader (that allows you to trade one gem for another one-to-one regardless of market price)
  • use a trader card
  • earn 4 gold

Sounds simple right? Not really. First of all:

  • market prices go up when you buy gems, buy mining rights with gems, or buy jewelry with gems (as demand for the gems has increased) and go down when you sell gems for gold or mine gems (as supply has increased)
  • you can only maintain exclusive buying rights for one item (which is a piece of jewelry or useful artifact) at a time (as the market won’t allow you to have more than one call at a time)
  • you can only buy mining rights in certain regions in a given round, and unless you pay for a a “soil sample” you have no idea what type of gem you are going to be able to mine
  • while every artifact gives you an advantage, some advantages are only temporary and they don’t always outweigh the opportunity costs of doing something else
  • you can only have one trader in your employ at any one time, which means you can only trade one of the six possible pairings of gems one-to-one at any one time
  • if prices are low, earning more gold to buy more gems looks like a good idea, but the prices can skyrocket before you get a chance to buy

And then, just to make things a little more complicated:

  • while market prices for gems only go up 1 gold when you buy, when you embed gems in jewelry (or artifacts) or buy mining rights, they go up by the number of gems used (as they are removed from the market) or paid (in expectation or surging demand)
  • while market prices for gems only go down 1 gold when you sell, they go down by the number of gems mined (as the market has just been flooded)
  • while you only mine 1 gem of a given type for a single mine that produces gems of that type, each additional mine for gems of that type produces 2 gems of the type (as you get efficiency gains)
  • if you acquire the rights to a mine in gem-rich Diamantina (which is one of six mining regions), and are lucky enough to secure the rights to one of the gem-rich mines, you produce one gem of your choice in addition to one diamond every time you mine
  • only 3 of the 6 artifact types are available at any one time, you might buy one only to miss out on something better
  • if you don’t scoop up a trader that you know you will need later when you have the chance, the trader might be scooped up into someone else’s employ

And, finally, you can only buy mining rights in the district currently occupied by the wandering gnome, who wanders around looking for new mines to sell the rights to, or Diamantina. (He’s like the travelling gnome, but prefers mines to tourist destinations and transfers deeds instead of sending postcards.)

It sounds simple and silly, but it’s actually quite involved and smart. If you try to take advantage of a down market and buy too many units of a cheap gem, but no one increases demand, you become cash poor and unable to do anything but sit on what is essentially a declining stock portfolio until the market swings again. If, on the other hand, your opponents trade their gems en-masse for artifacts, mining rights, or valuable jewelry and their value sky-rockets, you can sell en-masse while prices are high, buy multiples of other gems, trade them for mining rights and jewelry that generate victory points, and take a clear lead. It models the real world conundrum of supply vs. demand in mineral, rare-earth, and gem supply chains — mine too little, and you don’t have enough to sell to pay for your costs, but mine too much, and you can’t sell at a high enough price to recover your costs.

The Gnomes of Zavandor is a great game for sharpening your mineral, rare-earth, and gem market making — and breaking — skills — simple to learn, but hard to master, just like the base market skills. The rules are simple to learn, but the real world timing and execution is very hard to master.