Category Archives: Supply Chain

Supply Chain Finance: We’re NOT There Yet!

A recent article on the World Trade Magazine web site asked “are we there yet” in reference to Supply Chain Finance. To this, I must answer an emphatic NO!

Why?

First of all, thousands of business went out of business last year simply because customers, who obviously have no understanding of how financing should flow through the supply chain, wouldn’t pay on time and simply extended DPO as their method of “financing” themselves. (See They Killed Kenney.)

Secondly, as noted by Michael McKenzie of JPMC in the article, factoring is the “financing method” receiving the most attention. Factoring is not financing. It’s just a high-interest loan in reverse. “Here’s 80% of the value of your receivables.” How is that better than “here’s a 20% interest loan”? Think about it.

Thirdly, as noted by David Gustin of GBI, bank-assisted Trade Finance Products account for less than 15 percent of Trade Financing. Banks have all the money … and, generally speaking, they haven’t gotten it.

I could go on, but I don’t see the need because these three examples alone clearly demonstrate that supply chain finance, for the most part, is still far on the horizon.

Share This on Linked In

Nearshoring Adds Security to Your Supply Chain

I was very happy to see this recent article in Industry Week on “moving sourcing closer to home” because I’m not a big fan of global sourcing just because someone in the C-suite wants to say “me too” on the golf course. You source globally when it makes economic sense from a total cost of operations perspective. Even though labor might be cheaper, by the time you add transportation, import tariffs and fees, export tariffs and fees, value added taxes, extra inventory carrying costs, expediting fees, losses from stock-outs, the real savings are usually a lot less than you think they are. You need to remember yin-yang of the business universe and your international procurement skills, do your homework, and make the right decision.

Chosen properly, appropriate nearshore locations can bring increased cost competitiveness, more lead-time security, and a balanced geographic portfolio that reduces the risks associated with overly aggressive low-cost country sourcing strategies (which can include stock-outs when you don’t realize shipments never shipped until three weeks after the fact, costly currency fluctuations, unstable economic environments, and even nationalization). So be sure to consider near-source locations in your global sourcing strategy, even if they appear to cost a little more. The reduction in risk associated with producing just some of your product closer to home might be worth it in the long run.

Share This on Linked In

Are You Ready for the Mega-Risks?

A recent Supply Chain Digest piece recently covered a few of the supply chain mega-risks that you need to be prepared for, because chances are that you can statistically count on at least one of them happening in the near future.

The mega-risks highlighted by Supply Chain Digest include:

  • Terrorists Attack Your Port
    The article focussed on an attack at at US port, such as the Ports of Los Angeles or Long Beach, which could cripple supply chains for a number of multi-nationals, but an attack at a major port in China, for example, could be just as devastating.
  • A New War Breaks Out
    The article hypothesized that Israel could attack Iran over nuclear capabilities, but war could break out anywhere tensions are high. Northern Ireland, Africa, Venezuala … who knows.
  • Pandemic
    The article mentioned the Swine Flu. But it could be Bird Flu. Or SARS. Or something worse.
  • Rapid Inflation / Deflation
    The dollar could rise, or fall, rapidly.

But those are just a few of the mega-risks. As highlighted in nine cautionary tales (which I reviewed in your supply chain is not secure I and II), you also have:

  • Massive Power Failure
    A targeted attack or opportune failure in a critical region of the grid can take out a city, state, or even an entire region of the country.
  • Toxic Atmosphere
    A train wreck could unleash toxic chemicals into the air and make an entire subdivision, town, or city uninhabitable for an indefinite amount of time.
  • Severe Oil Shortage
    A single attack on a major refinery or drilling platform could take out a sizeable chunk of global production.
  • Agro-Armageddon
    Mad-cow could spread faster than a viral outbreak and decimate national farm populations.

And natural disasters and catastrophes, though unlikely, that are still too numerous to mention. Are you ready?

Share This on Linked In

Doug Smock on the Dreamliner Supply Chain

 

This guest post is from Doug Smock of Design News and BCC Research.

The Dreamliner aircraft development project was launched by Boeing six years ago as one of the most ambitious technology and supply chain projects in history. On the technology side, the Dreamliner was the first commercial airliner design with a plastic composite body. On the supply chain side, Boeing made the switch from a top-down, disciplined captive design and manufacturing approach to one that was largely outsourced to suppliers around the world.

The Dreeamliner is now two years late, and it’s not an exaggeration to say that Boeing’s future rests on its outcome. Three years ago, Boeing officials were eager to talk about the great work on the Dreamliner, on the technology and supply sides. Now they’re mum, but I took a couple of shots at raising the questions about the Dreamliner, and then making some educated guesses about the answers.

So what are the questions?

And what are the answers?

Read my pieces on “What’s causing huge delays for the Boeing 787 Dreamliner” and “why the Dreamliner is so late” to find out!

Thanks, Doug.

What Is The Baseline For Smarter Supply Chains

Share This on Linked In

A recent article in RFID Journal states that, according to Karen Butner of IBM, “the baseline for smarter supply chains really is about RFID, sensors, and actuators“. Really?

What smarter supply chains require is visibility … near real-time visibility to be precise. You don’t need RFID chips and sensors to get that. You need processes and procedures that make sure that the status of every package is recorded every time it changes location … from the supplier warehouse to the transport truck to the dock warehouse to the container to the cargo ship to the dock to the transport truck to your warehouse … and that this information is always accessible. The status can be manually updated by a receiving clerk that scans a barcode with a handheld device or, if you are challenged when it comes to new-fangled gadgets, enters a bar-code into a dumb-terminal … which can then indicate if the bar-code is recognized and the state change is expected.

That would seem to tell me that the basis of smarter supply chains with near real-time visibility is not overhyped RFID & sensor technology, but smart people following smart processes that use smart information technology. Am I wrong?