Category Archives: rants

Why Is China Going to Beat the US in GDP Very, Very Soon?

If market trends continue, China is very likely to overtake the US in GDP by 2025. Why is this?

Is it because China has 1,351 Million people compared to the US population of 314 Million?

Is it because the world is still aggressively outsourcing to China?

Is it because China controls 90%+ of the global supply for some of the increasingly important rare earth metals?

Is it because China is effectively balancing socialism with capitalism?

Is it because they have manufacturing plants the size of small cities?

Is it because they run on five-year plans designed to improve the overall state of the country every five years?

Is it because they recognize not only the importance of public health-care but the importance of getting it right?

Is it because they realize that you can effectively defend your country on 6%- of your budget (and 2.2% of their GDP) compared to the US that needs to spend 11%+ of their budget (14% of revenue and 4.4% of their GDP)?

Is it because the populace is actively protesting GM (Genetically Modified) food?

Is it because they are pushing ahead on R&D and exploration (having landed the first spacecraft on the moon on December 13 for the first time since Russia landed Luna-24 in 1976)?

It’s all of these reasons, and more. While the US media is too focussed on the scandal of the day, the Chinese media, while censored, is more focussed on the issues. While the political parties in the US squabble over minutia and blame each other for the government shutdown that just occurred, and the one that is likely to happen in January, the one party system in China is discussing amongst itself how best to move forward (and keep the necessary control). While the US is on the verge of another energy crisis, China is building new power plants, including those that run on renewable energy sources, as fast as it can.

Now, SI will be the first to admit that China is not without its problems. It still has way too many coal-producing power plants, too much smog in its big cities, limited freedoms (especially where the press is concerned), urbanization issues (as it is still building cities it doesn’t yet need to keep people employed), logistics challenges, and so on. But compared to the US, where the republicans and democrats spend all their time blaming each other and fighting instead of working together to advance the country, where the government apparently spends too much time and money spying on its own citizens and pursuing controversial drone technology instead of fostering better inter-agency cooperation, public support for homeland defence initiatives, and scientific research endeavours, and where education spending often gets the shaft (with the Department of Education budget typically clocking in at under 2% of GDP), China is making more progress, and doing so faster, than the US.

If the US wants to retain its top spot on the economic powerhouse rankings, once the elections are over, the elected representatives have to work together to do what’s best for the country, otherwise, despite all of the limitations of socialism that one can identify from a free market perspective, China is going to win, and win big, and do so at the expense of the US.
While it may be an inevitability that China overtakes the US in GDP at some point in the future, it doesn’t have to be the near future, but unless the US makes a concerted effort to shape up from a global perspective, and forces its politicians to grow up, we may all need to start registering in Mandarin classes very soon.

Are American Companies Threatening Their Own Supply Chains?

A recent article over on CNN Money on how Starbucks is in Hot Water over China prices has me wondering. According to the article, Starbucks is charging more in China for a cup of coffee in China than it is in Chicago or London (with a medium size Latte costing $4.40 vs $3,20 and $4.00). Similarly, it is charging as much as $18 in China for its Starbucks Coffee mug, that sells for between $10 and $14 in the US.

This is despite the fact that it is doing quite well in China, with strong sales contributing to a year-on-year jump in revenues in the Asia Pacific region of 30%.

Is this how you want to be treating a country you rely on for low-cost product production?

In the case of Starbucks, it could be argued that the mugs are not a main source of income, and since the coffee beans are not sourced from China, Starbucks isn’t really relying on China for its supply chain. But consider Apple, which is using refurbished parts to repair products in China and limiting some warranties to one year, as compared to the two and three years it offers in North America.

We all know that Apple relies on Foxconn Technology Group for it’s iPhone and iPad production, and is thus heavily reliant on China in is Supply Chain.

The last thing Apple should want to do is get the attention of China’s government, that recently recorded fines against five international dairy firms after they were accused of fixing the prices of baby formula, and that is currently investigating production costs and price setting practices at 60 pharmaceutical companies as part of a wider anti-corruption crackdown.

But this post isn’t about Starbucks or Apple, but about every company sourcing from China that also does business in China. Considering their dependence on China, shouldn’t they be treating the Chinese market with the fairness that they demanded for years? How many years were we conveying the message that American negotiators shouldn’t stop until they paid China price, as Chinese sellers had a history of charging foreign buyers more than native buyers?

If we want to get China price, shouldn’t we be charging China price, or at least a price that’s fair with respect to what we charge else where? Otherwise, what right do we have to complain about unfair competition or about a government that might respond by slapping fines on us and/or adding new export tariffs to punish us for our relatively un-ethical pricing measures.

Banks Have A Place In The Supply Chain – But That Place is Simply Financial!

Supply chains require capital. Lots of capital. And the role of a bank is to provide that capital through financing, even though, these days, private lenders are sometimes doing more through Supply Chain Finance platforms (like those offered by Prime Revenue, Oxygen Finance, and Orbian) than the banks are.

However, and in the United States in particular, the role of a bank is not to invest in, and retain the majority control of, companies that control significant stores of commodities that drive the markets that banks run. It’s an indirect route to a price-fixing monopoly, which is a criminal federal offense under section 1 of the Sherman Antitrust Act. It seems that the banks realize this, and, according to this article on CFO.com that states “A Bank Is Hiding Inside Your Supply Chain”, they’ve found a new way to inflate commodity prices and make extra profit off of your supply chain at your expense.

According to Tim Weiner, Global Risk Manager of Commodities and Metals at MillerCoors LLC, who recently testified at a senate hearing, bank holding companies are slowing the load-out of physical aluminum from warehouses controlled and owned by these U.S. bank holding companies to ensure that they receive increased rent for an extended period of time. According to MillerCoors, they have to wait as long as 18 months for the metal (that is just sitting in a warehouse ready to be used) or pay a high premium in a market where there has been massive oversupply and record production.

And according to the article, and the hearing of the Financial Institutions and Consumer Protection Subcommittee of the Senate Committee on Banking, Housing & Urban Affairs that took place this summer on July 23, 2013, this isn’t the only instance where large U.S. banks have diversified into commodities-markets operations, stretching the limits of rules designed to separate banking and commerce to the point where part of the high prices and price volatility some commodities have experienced is likely due to the banks’ increased involvement in the storage, transportation, and trading of these physical commodities (when they are supposed to stick to the non-physical futures and options markets).

In SI’s view, banks shouldn’t own any business that has any control over a commodity. As the CFO article clearly states, through bank ownership of a commodities business, a financial institution can place its hand on the scale of supply and demand for a commodity and distort the free market. Furthermore, a bank can not only affect the price of the commodity, it can also make profitable bets on its direction in the futures markets. Plus, and this is really scary, a bank that owns a commodities business could choose to deny lending or underwriting to a competitor of that commercial business or even lend at preferential rates to its own commercial commodities business. Thus, SI is in full agreement that regulators need to force banks to be more transparent about their commodities’ operations and divest them where appropriate.

So what does this mean for your supply chain? It means you have to be ever vigilant and know where banks are in, or may be able to take, control in your supply chain and plan appropriately for the disruptive actions to cost or supply that they could take. It means that visibility is key, that transparency from your supply chain partners is more important than ever, and that good record keeping is a must. If banks start to unduly pressure your business, as they are doing to MillerCoors LLC and others, you need to have the data to stand up to them. Price-fixing and manipulation is illegal, and if enough companies stand up to it, it’s a safe bet that something will be done about it (unless the TPP passes. Then all bets are off).

Corporations Will Soon Rule the World


To the tune of Everybody Wants to Rule the World by Tears for Fears.

Welcome to our life
There’s no turning back
Even while we sleep
They’ll continue
Acting on their worst behaviour
Turn their backs on mother nature
Corporations will soon rule the world

It’s China’s design
It’s Harper’s recourse
A social divide
That will take the most (of)
our freedom and our pleasure
Nothing ever lasts forever
Corporations will soon rule the world

There’s a room where the light won’t find them
Counting money while the poor go bankrupt
When they do they’ll buy the shelters too

So sad they’ve almost made it
So bad Obama’s played it
Corporations will soon rule the world

I can’t stand this lack of vision
That will soon put us all in prison*
Corporations will soon rule the world

Say that we’ll never never never never need it
One headline why believe it ?
Corporations will soon rule the world

Our freedom and our pleasure
Nothing ever lasts forever
Corporations will soon rule the world

By now, at least 3/4ths of North Americans should know that the Trans-Pacific Partnership, which allows you to be thrown in jail simply for clicking on a hyperlink embedded in a web-page, is bad. Very bad.

But what is not so obvious, as astutely pointed out in this article over on “A Corporate Coup in Disguise” on AlterNet.org, is that the Trans-Pacific Partnership will create a virtually permanent corporate rule over the people. No wonder the US and Canada, led by the worst prime minister ever, are getting on-board. Under this wonderful trade agreement, any food safety regulations and food labelling laws stricter than “international standards” become “illegal trade barriers” and get stricken down. Exports of natural gas cannot be regulated, and un-regulated instances of destructive fracking will sky-rocket. Big Pharma will get an additional 10 years of monopoly pricing on patented drugs and the ability to block generics until the monopoly runs out. Not only would the NSA would be given legal authority to police the entire internet, but all ISPs would have to act as the NSAs private on-line police force while banking regulations designed to prevent economic collapse get thrown out the window. And Corporations get to relocate all of their factories to the lowest cost TPP member country risk free thanks to enhanced foreign-investor protections.

In other words, corporations get to go where they want, do what they want, and not give a damn about sustainability, liability, or us. For you Christians out there, I think even the devil himself would be hard-pressed to come up with such a dastardly deal. Say NO to the TPP!

*Soon all prisons will be run by corporations too!

Market Disruption Forces Supply Chain Change

 

Market Disruption Forces Supply Chain Change

Despite what the title of this recent article on “disruptive market drives supply chain change” over on Just Style might suggest, market disruption does not drive supply chain change, it forces it. However, the article is right when it notes that having an efficient and fast-reacting supply chain should be a must for any brand or retailer.

The difference is slight, but important. Driving implies there is some guidance to the movement. But the nature of disruption, especially in today’s supply chain, does little to guide an organization that needs to respond, and do so quickly. The organization is forced to change, because failure to do often results in a change in liquidity status from profitable to bankruptcy.

And it’s not just demographic shifts that a retailer or brand needs to react to, but disruptions further down the supply chain. Even if a brand can react quickly to a change in consumer preferences and adapt its main product line to have the look, feature, or ruggedness demanded by its target customer base, if a fire takes out its main manufacturing plant, or a labour dispute cuts off production of a needed rare earth metal, or an act of piracy results in its shipment being stolen, what is the brand going to do?

Organizations need supply chains that can react fast, but they also need supply chains that are informed even faster. In order to react, supply chains need multi-tier visibility into critical product lines, such as the visibility that Resilinc can provide. Otherwise, all the market intelligence in the world on changing consumer consumption patterns won’t do them any good if they don’t see that a critical even in their supply chain prevents them from being able to react accordingly.