From “New research spells out the benefits of diverse supply chains” (The Economist):https://www.economist.com/finance-and-economics/2022/04/23/new-research-spells-out-the-benefits-of-diverse-supply-chains
In most countries, the vast majority of components used to make goods tend to be sourced domestically. About 69% of parts in Europe and more than 80% in the western hemisphere are produced at home, for example. If a firm were to choose to import a critical component instead, it would face a more diverse choice: the market share of the average exporting country in the average industry is a little under a third. Re shoring would therefore tend to reduce the diversification of a supply chain rather than increase it, by making production even more dependent on a single country: the home economy. That could prove costly. The fund estimates that in the face of a big disruption (one that causes a 25% drop in labour supply in a single large producer of critical inputs), the average economy could be expected to suffer a fall in gdp of about 1%. Greater diversification stands to reduce the damage by about half.
Canada is projected to have the strongest growth in the Group of Seven this year, and a large majority of businesses already say they would struggle to cope with any unexpected increase in demand. One visible manifestation can be found in the huge industrial buildings that line the highways of the suburbs around Toronto and Vancouver.
For-lease signs are vanishing and “everybody’s warehouse is packed,” says trucking executive Murray Mullen, who runs Mullen Group, one of Canada’s largest logistics firms.
Across the nation, the availability rate for industrial real estate in major markets has shrunk to 2.2%, from almost 3% a year ago, according to Altus Group. In Toronto and Vancouver, it’s around 1%.
In some municipalities near the Port of Vancouver, there is not a single square foot of vacant industrial space, according to Colliers International.
Delays and disruptions in the global supply chain have prompted a reversal of the lean-inventory model that broke down in the early months of the pandemic.
Companies are “buying stock not three weeks, not three months, but six months ahead of time and storing it somewhere,” says Martin Imbleau, chief executive officer at the Montreal Port Authority, which has pitched itself as a less-busy alternative to clogged eastern ports.
The squeeze means that, in addition to paying more to ship goods, companies also have to pay ever-higher premiums to store them.https://www.bloomberg.com/news/newsletters/2022-04-25/supply-chain-latest-canada-s-warehouses-are-full-straining-logistics?cmpid=BBD042522_TRADE&utm_medium=email&utm_source=newsletter&utm_term=220425&utm_campaign=trade
The total cost of leasing industrial space in Vancouver has risen 40% in three years, according to Altus.
The Institute for Supply Management on Monday reports it’s taking an average 100 days to receive production materials, the longest in records dating back to 1987. For capital expenditures, the average commitment time rose to a whopping 173 days, matching the highest on record.
In addition to transportation and shipping delays, the inability to hire is complicating matters for producers. Some 34% of the ISM survey’s respondents who are hiring indicated difficulty filling vacancies, up from 28% a month earlier.
Turnover rates remain elevated as well, illustrating severe tightness in the job market. The share of purchasing managers who said employment actually declined in April was the highest in seven months.https://www.bloomberg.com/news/newsletters/2022-05-03/supply-chain-latest-labor-long-lead-times-a-one-two-punch-for-u-s-factories?cmpid=BBD050322_TRADE&utm_medium=email&utm_source=newsletter&utm_term=220503&utm_campaign=trade
Two years of supply shocks have made efforts to strengthen supply chain resilience top-of-mind for manufacturers and retailers. Economists at Goldman Sachs see three main solutions for those in the U.S.: reshoring foreign production, diversifying supplier networks and overstocking inventories.
Overstocking, or targeting a permanently higher level of inventories, is the strategy that’s most clearly underway, especially in durable goods, the economists said in a recent report. Companies analyzed by Goldman Sachs are aiming for inventory-to-sales ratios roughly 5% higher than before the pandemic on average, according to the report.
Reshoring, on the other hand, appears limited so far. That’s partly because construction of new domestic manufacturing facilities “has mostly gone sideways,” the economists wrote. At the same time, imports of foreign parts and final goods have grown faster than domestic manufacturing output, they said, suggesting that many supply chains still depend on foreign sources for production materials.
In “A new type of 3D printing may bring it into the mainstream“, The Economist highlights “Area Printing.”
This got Mr DeMuth and a group of colleagues thinking about how to speed things up without compromising quality. After some work, they started using a device called an optically addressed light valve, which had been developed at llnl. This permits a pulsed infrared laser, with its beam shaped to have a square cross-section, to be patterned with a high-resolution image. Working a bit like a photographic negative, the image can block or pass light, creating millions of tiny laser spots, much like the pixels that make up a digital image.
When projected onto a bed of powder, this patterned laser light can weld a complete area in one go. Mr DeMuth likens the process to producing documents with a printing press instead of writing them out individually with a pen.
In 2015 Mr DeMuth co-founded Seurat Technologies, to commercialise the technology. This Massachusetts-based firm is named after Georges Seurat, a post-impressionist French artist who pioneered a painting style called pointillism that builds pictures up from dots. Several companies, including GM and Volkswagen, a pair of carmakers, Siemens Energy, a division of a large German group, and Denso, a big Japanese components firm, have partnered with Seurat to explore the use of its first prototype area-printing machine.
This prototype produces a series of small, patternable squares on the powder bed. Their size depends on the material. Aluminium requires 15mm squares. Titanium requires 13mm. Steel requires 10mm. Individually, these squares might seem small. But 40 of them can be printed adjacent to each other every second, so a large area can be covered quickly. The prototype was designed to work at this scale to keep the size of the laser and the amount of energy it consumes to a practical level.https://www.economist.com/science-and-technology/2022/03/19/a-new-type-of-3d-printing-may-bring-it-into-the-mainstream
“From Coast to Coast, Supply Chains Get Off to a Rough Start to 2022″ (Bloomberg):
The latest weekly figures from Truckstop.com showed the average spot rates in the New England area hit a four-month high, capping its first January increase in data going back to 2014. Truck freight costs eased in other parts of the country but remained well above pre-Covid levels — evidence that capacity shortfalls are snarling supply chains even after the holiday rush and may linger for months.
“We have been bullish on the truckload cycle for quite some time and have not changed our tune,” says Lee Klaskow, a senior logistics analyst with Bloomberg Intelligence. “Rates will moderate into the summer but should remain above pre-pandemic level due to supply constraints.”
According to a Dallas Fed survey released Monday, almost 60% of manufacturers and half of retailers negatively affected by the Covid surge over the past month cited “new or worsened” supply disruptions. That sentiment echoed anonymous commentary in a recent Kansas City Fed survey, a sampling of which is here:
“Lead-times have doubled in some cases, so if it is supposed to take three weeks it is taking six weeks.”
“Purchasing, costs, supply chain are still massive issues … have basically started raising prices on select items to almost extreme levels to intentionally limit or eliminate demand.”https://www.bloomberg.com/news/newsletters/2022-02-01/supply-chain-latest-2022-is-off-to-a-rough-start-in-logistics?cmpid=BBD020122_TRADE&utm_medium=email&utm_source=newsletter&utm_term=220201&utm_campaign=trade
The Economist analyzed how employers are adjusting to a labor market with only seven workers for every ten available jobs. Tactics include sign-on bonuses, higher base pay, in-house training, more predictable schedules, and investments in automation.
The share of job postings that list “no experience required” more than doubled from January 2020 to September 2021, according to Burning Glass, an analytics firm. Easing rigid criteria may be sensible, even without a labour shortage.
Another way to deal with a shortage of qualified staff is for the companies to impart the qualifications themselves. In September, the most recent month for which Burning Glass has data, the share of job postings that offer training was more than 30% higher than in January 2020.
Besides revamping recruitment and training, companies are modifying how their workers work. Some positions are objectively bad, with low pay, unpredictable scheduling and little opportunity for growth. Zeynep Ton of the MIT Sloan School of Management contends that making low-wage jobs more appealing improves retention and productivity, which supports profits in the long term. As interesting as Walmart’s pay increases, she argues, are the retail behemoth’s management changes. Last year it said that two-thirds of the more than 565,000 hourly workers in its stores would work full time, up from about half in 2016. They would have predictable schedules week to week and more structured mentorship.
As a last resort, companies that cannot find enough workers are trying to do with fewer of them. […] Increasingly, it also involves investments in automation. Orders of robots in the third quarter surpassed their prepandemic high, by both volume and value, according to the Association for Advancing Automation.https://www.economist.com/business/2022/01/30/how-americas-talent-wars-are-reshaping-business
Average selling prices for PE slid 5 cents per pound in December, while PP prices tumbled 15 cents, according to buyers and sellers contacted by Plastics News. It’s the third consecutive 5-cent drop seen in the PE market. The October drop was the first seen in 17 months, as prices had jumped starting in early 2020 when pandemic-related demand couldn’t be met because of weather-related production outages.
Mike Burns, a PE market analyst with Resin Technology Inc. in Fort Worth, Texas, said that “warehouses are full [of PE], and exports can’t get out because of a lack of containers or other supply chain problems.”
Although PE prices dropped 15 cents in late 2021, the market finished the year up a net of 28 cents, according to the PN resin pricing chart.
Even with the late-year declines, PP prices are up a net of 39.5 cents since December 2020. North American PP supplies will be boosted in 2022 when Inter Pipeline Ltd.’s Heartland Petrochemical Complex brings more than 1 billion pounds of new capacity online in Strathcona County, Alberta.
Bloomberg writes this week about the hidden cause of the cream cheese shortage: their supply chain was disrupted by a ransomware attack.
Schreiber Foods in Wisconsin, a top maker of cream cheese, closed for days in October after hackers compromised plants and distribution centers. The company is big enough that the lost production shook U.S. markets.https://www.bloomberg.com/news/newsletters/2021-12-10/supply-chain-latest-cream-cheese-is-the-latest-casualty-of-cyberattacks?cmpid=BBD121021_TRADE&utm_medium=email&utm_source=newsletter&utm_term=211210&utm_campaign=trade
How are companies addressing the growing threat of cyber attacks? The Economist writes in their issue about The World Ahead 2022:
More than a third of senior executives surveyed in March 2021 by Munich Re, a reinsurer, are considering taking out a cyber-insurance policy, which pays out for ransomware-related losses.
Curbing cyber-crime ultimately requires getting the basics right: educating employees to be wary of suspicious emails; keeping software up to date; and backing up data.https://www.economist.com/the-world-ahead/2021/11/08/the-digital-pandemic-of-ransomware-attacks-will-continue
Many insurance brokers that sell cyber attack insurance policies also include free online training to reduce the risk of becoming a victim.
The Economist writes that there is reason to believe higher rates of turnover are here to stay. Their columnist writes generally about the three things managers should be doing: gauge the retention risk, pull different levels to retain different types of people, and plan for how to find new workers.
First, they should systematically gauge the retention risk that their firm faces. Working out what has driven people to quit is too late; rather than exit interviews, forward-thinking firms conduct “stay interviews” to find out what keeps employees. Focusing on teams cut back during the pandemic is another tactic: burnout rates are likely to be higher in departments that took lay-offs. Understanding a firm’s vulnerability to other employers is also key. When behemoths like Amazon or Walmart raise wages or add perks, the effects ripple beyond retailing.
Second, managers need to pull different levers to retain different types of people. Salaries matter to everyone but for lower-wage workers in particular, benefits like health care have also become central. A recent survey of young Americans by Jefferies, an investment bank, found that health concerns were the prime reason why people with only a high-school education had quit their jobs.
Firms also need to think harder about the career paths that entry-level employees can take. In a recent survey of large firms conducted by the Institute for Corporate Productivity, a research outfit, a majority admitted they did not have adequate data about the skills of their workers, making it harder to spot talent. A quarter reckoned that LinkedIn knew more about their workforce’s capabilities than their own firms did.
Third, managers should plan for how to find new workers. Remote working makes it easier to lose people but also to bring freelancers on board quickly. Qualification demands can be relaxed. In recent years IBM has removed the requirement for undergraduate degrees from over half of its American job openings. And there is no better time for firms to take aim at dim-witted regulation. In response to a shortage of lorry drivers, Britain’s government has decided to combine separate tests for driving rigid and articulated lorries into one.How to manage the Great Resignation, https://econ.st/3xP1ym9