The fragmentation of supply chain amid COVID-19
Time Express discusses the fragmentation of supply chains amidst COVID-19.
We have seen over time what you might call a fragmentation of supply chains, as more and more goods are made up of components which are manufactured in several stages in different places around the world such as China, Taiwan, and Korea. “Global Value Chains” - imports and exports in any given country are increasingly composite, having different parts of value added at different stages and across different geographical locations. For example, Apples iPhone is assembled in Shenzhen China, with factories across the world including Thailand, Malaysia, the Czech Republic, South Korea, Singapore, and the Philippines. Many businesses are looking to transport intermediate goods, including a lot of the 5.9 million SMEs in the UK who actually specialize in the production of specific components or services, which then go on to form part of a finished product. These intermediate goods now represent 56% of all trade in goods and 73% of all trade in services.
In these kinds of supply chains, delays, heavy administration and unnecessary costs, no matter how low, reverberate along the value chain. Amid crisis situations like COVID-19 we predict thousands of companies to throttle down or temporarily shut assembly and manufacturing plants in the US, UK, and Europe. The most vulnerable of those which rely heavily or solely on factories in China for parts and material. The missed shipment components, or extra time spent on paperwork for customs clearance has a negative “domino effect” and can be amplified along the supply chain. The impact can be tremendous as mature consuming countries receive the impact of the delays. In these supply chains, velocity is of the essence. The vast majority of manufacturing businesses are focused on cost cutting measures and have no idea of what their risks exposure to what is going on in Asia as one failed link in the supply chain will have a multiplier effect. If the supply of components is disrupted longer, manufacturing will have to stop. Supply chain lead times will also have an impact. Shipping by sea to either US, or Europe takes 30 days. This implies Chinese plants that have stopped manufacturing due to Corona Virus will have their first shipment after recovery to arrive one month later. For these reasons, moving ahead it will be of critical importance that the public and private sectors in the producing and consuming regions work together to ensure a balanced and leveled production, customs, and international trade framework which can keep up with these changes and maintaining supply in times of crisis.
Cloud & data driven supply chains
Downtime for manufacturing industry is the single most critical element to ensure business continuity. The manufacturing industry works closely with courier providers to ensure spare parts are received in critical time leads such as in Pharmaceuticals, Oil & Gas, Automotive, as well as Industrial industries. As Time Express packages move through our network, data leads and follows them. The data “leads” because we have to submit customs forms and information to authorities in advance of the package arriving, and it “follows” because customers want to “track and trace” the packages. TIME EXPRESS receives approximately 20,000 track and trace requests each day. Like all global companies, we have information that has to be able to flow. This is why cross-border data flows are of critical importance. The flow of data, often personal data, has important implications in terms of international security and the global fight against counterfeit goods trade. The challenge for our courier sector in the coming years will be to strike the right balance between security, safety, and authenticity, without compromising the speedy movement of goods for B2B manufacturing.
New forms of protectionism
I’m not sure that the protectionism we see is necessarily “new” in its form, however that does not make it any less of a priority for future growth particularly into emerging markets such as Middle East, India, Africa, and Latin America where many UK and European companies have a large opportunity to grow their revenues. These countries have over 2bn population and represent a sizable market as purchasing power increase locally. TIME EXPRESS has encouraged governments in the United Arab Emirates and across the globe to recognize the role of competitive delivery services, which are services that collect, transport, and delivery documents, printed matter, parcels, goods and other items, in competition with one or more other suppliers. Independent regulatory authorities, the prohibition of cross-subsidization, the enforcement of transparent accounting by public service operators, and the equal application of customs and security procedures to all delivery-related activity are of utmost importance. Adherence to these principles will create the environment needed for continued growth well into the 21st century.
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