Manufacturing Matters – Safety & Security

Manufacturing promotes safety and security and mitigates risk. Controlling your supply chain and mitigating geopolitical risk can become paramount overnight as geopolitical events occur, natural disasters emerge, and supply chain challenges arise (strikes, disruptions, shortages). These types of issues have been increasingly concerning with recent events.

For example, the war in the Middle East has caused disruptions in the Suez Canal. Container ships are being diverted and traveling around the southern tip of Africa, adding 10,000 miles and 7-10 days. This situation delays critical supplies and causes further inflation with increased costs. Additionally, the reason China has been threatening Taiwan is partially to gain control over 90% of the world’s advanced computer chips that go into everything from medical devices to critical infrastructure.

During the pandemic, the U.S. discovered it was dependent on China for critical supplies and everyday necessities. Not only can a worldwide pandemic cause disruptions of these supplies, but country specific policies can dictate whether your supply will be cut off. For example, China rolled out zero COVID policies, directly impacting production and shipping to the U.S. China could prioritize who received limited supplies.

China also wants to control the Red Sea and could decide to cut off supplies produced in other Asian countries in the region. Clearly China thinks manufacturing is essential to national security. For example, their shipbuilding capabilities are over 200 times greater than the U.S. According to the Maritime Executive, China produces more than half of all new tonnage in the world. These types of statistics are gravely concerning and the proactive will build capabilities.

Manufacturing Will Thrive in the Next Decade

As companies realize they must gain control over their supply chain to better support customers, reshoring and regional expansion of manufacturing capabilities will soar. Additionally, the cost has come into alignment for non-commodity products if you evaluate the total cost to produce, ship, store, protect, etc., China won’t have the advantage. Piles of inventory tying up cash unnecessarily are no longer acceptable, especially as customer needs change rapidly, increasing the risk of obsolescence. As interest rates soar, this situation is untenable.

Customers are not willing to accept prolonged periods of delays and stock outs. Thus, they are taking control of their supply chain and focusing on manufacturing capabilities. In addition, companies must prioritize customers and address proactively with strategic pricing and capacity decisions. Thus, smart companies are utilizing a SIOP (Sales Inventory Operations Planning) process to proactively navigate these changing circumstances to maintain high levels of customer service, profitability, and working capital results. SIOP will bring visibility to customer and product profitability, sourcing decisions, make vs buy alternatives, capacity bottlenecks and more.

The proactive will thrive and have more opportunities than ever expected. In fact, they will be in the catbird seat. The rest will continually struggle and weaken. With the significant skills gap (refer to our recent article on where the talent has gone), the proactive executives are hoarding the “best of the best” (employees, trusted advisors, suppliers, etc.). Are you prepared to thrive?

If you are interested in reading more on this topic:
SIOP/ S&OP: Proactive Approach to Maximizing Production Output and Capacity

The post Why Manufacturing Matters & Will Thrive in the Next Decade appeared first on LMA-Consulting Group, a supply chain consulting firm.

Given the succession of unforeseen events in recent years, from the blockage of the Suez Canal by the Ever Given ship to the supply crisis during the pandemic, Lisa Anderson, president of supply chain consultancy LMA Consulting Group, believes that companies must be more proactive and take the initiative instead of simply reacting when something happens and it’s too late. “That means establishing alliances and regional supply sources, better planning inventories and being at the forefront of technological advances.”

Lisa Anderson was quoted in EL PAÍS.

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This is how companies deal with the Red Sea crisis: planes, storage, and closest suppliers

The impact on inflation still seems limited, and major stock outages are not expected, but experts and those affected agree that the key will be the duration of the conflict.

The rain of drones loaded with explosives and Houthi missiles on merchant ships in the Red Sea has turned the once boring and reliable maritime industry into a focus of uncertainty and negative surprises , with unexpected delays due to route changes, cost overruns due to the increase in the cost of freight, and sky-high insurance against the possibility that the cargo never reaches its destination. It is exactly the opposite of what companies intend in this way, which place their orders months in advance so that they can be delivered on time by heavy container ships, slower but cheaper and with more cargo capacity than airplanes.

As the crisis becomes more chronic, the list of those affected continues to grow. The sources consulted point out that despite the magnitude of the detour of the ships, forced to avoid the Suez Canal and make a detour around the Cape of Good Hope that implies at least nine more days of travel, the impact is not yet dramatic or for global economic growth or inflation. “The first estimates suggest for now that the impact of the Red Sea crisis on inflation will be moderate, with an additional rise of a few tenths this year and an impact mainly focused on imported goods,” explains Ángel Talavera, chief economist for Europe at Oxford Economics. The Bank of Spain also lowers the volume of the shock: it believes that fragile global demand and the absence of congestion in the logistics industry will prevent the traffic jams of yesteryear.

The key word, however, is that still : if the US and EU military missions do not achieve their objective of returning security to the area, the consequences could be very costly. At the moment, they already involve uncomfortable surcharges and hasty adaptations. This is the case of automobile companies, with a supply chain based on the just-in-time model , and less accustomed to storage. “Some automotive suppliers installed in Spain are being affected by delays in the components or raw materials necessary to manufacture them, as well as an increase in costs by having to resort to air transport instead,” the employers say Sernauto.

The crisis cabinets have not stopped meeting to minimize the blow. “Being a tremendously flexible and resilient industry, they are already adopting measures such as increasing stocks , readjusting transit times, advancing orders to suppliers and contingency plans,” adds Sernauto. Companies such as Tesla, Volvo and Michelin have already announced temporary stoppages in some of their production plants in Europe due to not having the materials they need on time. This will translate into thousands of fewer cars manufactured, between 5,000 and 7,000 in the case of Tesla and the pause of one of its factories in Germany.

“Non-urgent orders are being postponed, the key variable is the duration,” say sources from the business association CEOE. Talavera agrees. “The precedent of 2021-22 tells us that there are risks of an exponentially higher impact if the crisis is sustained over time and the blockade begins to create disruptions in supply chains. “Europe imports liquefied gas from Qatar, which crosses through the Suez Canal, and a significant part of oil traffic could also be affected.”

More expensive freight and insurance

The large consumer association Aecoc warns that the impact is already significant in sectors such as food, textiles and fashion, hardware and DIY or technological consumer goods, with freight rates that in some cases have become “300%” more expensive. which adds to the higher premiums requested by insurers, who sometimes even refuse to cover the risk of shipments.

Even so, the employers assure that for now there will be no shortage of stocks , that is, that shortages will be avoided. “In recent weeks, companies have focused their efforts on anticipating purchases of raw materials, looking for new suppliers in closer geographic areas and managing their supply through new routes and other means of transportation as an alternative to maritime transportation,” they point out.

From the Spanish Federation of Food and Beverage Industries (FIAB), they detect that warnings are growing for companies that import to increase their safety stock due to expected delays, and they perceive that the merchandise in warehouse is expanding due to the greater transit times. As more time is spent at sea and less available, the difficulties in obtaining space also increase, despite the fact that the number of new boats sailing has grown in recent months. “The direct impact is on the routes with Asia and the Middle East, but there is also an indirect impact on the route between Europe and America due to the shortage of containers and ships,” FIAB sources say.

The perfect storm is completed by the celebration of the Chinese New Year in February, a period that historically involves a slowdown in production, limited transportation operations and supply chain disruptions. And with the problems in another key artery, the Panama Canal, which has limited the passage of ships due to a severe drought. “Container ships are also diverting to the ports of Los Angeles and Long Beach, and transporting those shipments across the US to the East Coast. Air freight is increasing for urgent shipments and manufacturers are experiencing delays,” explains Lisa Anderson, president of supply chain consultancy LMA Consulting Group.

Given the succession of unforeseen events in recent years, from the blockage of the Suez Canal by the Ever Given ship to the supply crisis during the pandemic, Anderson believes that companies must be more proactive and take the initiative instead of simply reacting when something happens and it’s too late. “That means establishing alliances and regional supply sources, better planning inventories and being at the forefront of technological advances.”

Minor impact to the pandemic

The investment manager Federated Hermes expects that the economic impact of the interruptions will be accentuated in the first two months of the year because cheaper trips contracted before the attacks in Israel are replaced by current ones at higher rates. In context, the cost overruns are even lower than those of the supply crisis closest in time. “The recent increases in container shipping rates are significant, but do not come close to the sharp increases in 2020 and 2021 during the covid-19 pandemic.”

Then, as now, shipping companies were the big beneficiaries , multiplying their income and reaping increases in profits accompanied by strong increases in the stock market. On the losing side of the Red Sea crisis, the insurer Crédito y Caución places European manufacturers in first place. “They import a wide range of intermediate goods from Asia-Pacific, such as electrical equipment, high-tech goods, rubber and plastics, chemicals and machinery. If the crisis continues, waiting times, prices and congestion at ports are likely to increase. This may accelerate the return to a greater willingness to maintain higher inventory levels out of an abundance of caution,” they note.

See the original article here.

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CLAREMONT, CALIFORNIA – January 25, 2024 –  Amidst escalating global supply chain challenges, LMA Consulting Group remains at the forefront of offering strategic solutions. Lisa Anderson, MBA, CSCP, CLTD, President of LMA Consulting Group Inc., highlights the critical situation: “The recent turmoil in the Red Sea, triggered by Houthi drone and missile attacks, has significantly amplified risks in global shipping, particularly affecting the Suez Canal and Red Sea routes. These complexities, combined with ongoing disruptions at the Panama Canal, underscore the urgent need for agile and robust supply chain management.”  

The Red Sea, a vital maritime artery, is now a high-risk zone due to geopolitical tensions. Houthi attacks have forced a significant rerouting of shipping lines, with many opting for the longer journey around the southern tip of Africa.  This detour, while safer, adds around ten days and 1900 nautical miles to typical Asia-North Europe services, escalating costs and prolonging delivery times.  

Additionally, the Panama Canal faces challenges from drought-induced vessel limitations, further exacerbating global supply chain disruptions. Its reduced capacity is compelling more ships to navigate through the already stressed Suez Canal.

Ms. Anderson advises, “In this volatile global context, businesses must swiftly adapt and strategically plan ahead. Exploring alternate routes, diversifying supply sources and considering nearshoring or reshoring are imperative to mitigate these emerging risks.“

LMA Consulting Group is at the forefront, aiding clients in traversing these intricate challenges. By implementing a comprehensive Sales Inventory Operations Planning (SIOP) process, businesses can boost agility, secure capacity and maintain a dependable supply chain despite these disruptions. Companies that had preemptively diversified their manufacturing and supply chain networks are now experiencing the benefits of reduced risks and enhanced customer service.

LMA Consulting specializes in guiding businesses through turbulent times with strategic planning, comprehensive supply chain transformation and resilience-building solutions. For more insights, download Ms. Anderson’s eBook SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., specializing in manufacturing strategy and end-to-end supply chain transformation.  A recognized supply chain thought leader, Ms. Anderson has been named a Top 40 B2B Tech Influencer by arketi group, a Top 16 ERP Expert to Follow by Washington-Frank, among the Top 10 Women in Supply Chain by Warner PR, in the top 55 Supply Chain & Logistics Experts by flexport, and a woman leader in Supply Chain by RateLinx.  Her primer, “I’ve Been Thinking.” offers strategies for creating bold customer promises and profits. An expert on the SIOP process, advancing innovation and enhancing supply chain resilience, Ms. Anderson is regularly interviewed and quoted by leading publications. For information, sign up for her Profit Through People® Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.                 

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Media Contact Kathleen McEntee | Kathleen McEntee & Associates, Ltd. | p. (760) 262 – 4080 | KMcEntee@KMcEnteeAssoc.com

The post Lisa Anderson, Manufacturing & Supply Chain Expert Addresses Increased Supply Chain Volatility Amidst Red Sea Tensions and Global Disruptions appeared first on LMA-Consulting Group, a supply chain consulting firm.

Lisa Anderson, a supply chain expert and president of California-based LMA Consulting Group, says that in the past, shippers, vessel operators and manufacturers may have waited too long to properly evaluate an emerging threat such as COVID-19 or the Houthis, when taking action sooner would have been prudent.

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As Houthi attacks on ships escalate, experts look to COVID supply chain lessons

An upsurge in attacks on commercial ships by Iranian-backed Houthi rebels in the Red Sea threatens to disrupt the global supply chain as vessels are forced to reroute around Africa to avoid the conflict zone. Normally, about 15% of the world’s trade passes through the Red Sea, and delays and escalating insurance costs are hitting industries such as petroleum, food and electronics.

Manufacturers have already experienced some problems in getting parts to assembly floors, and both Tesla and Volvo last week blamed the Red Sea troubles for delays at plants in Europe.

But shipping industry experts hope lessons learned during the COVID-19 pandemic, the Suez Canal disruption in 2021 and Somali pirate attacks more than a decade ago will help mitigate widespread problems this time, should the conflict widen in the Red Sea.

Since October, the Houthis have targeted several ships on the Red Sea with ballistic missiles and drones and have hijacked others near the entrance to the vital corridor at the Bab-el-Mandeb strait. The Houthis have said their attacks are in response to Israel’s air and ground assault on Gaza, which has killed nearly 25,000 Palestinians, according to Gaza’s Health Ministry. The military campaign in Gaza followed the Oct. 7 attack by Hamas that Israel says killed 1,200 people.

The U.S., leading a maritime coalition involving more than 20 countries, according to the Defense Department, has launched airstrikes against the Houthis to secure the waterway.

Supply chain disruptions are nothing new for the shipping industry. The COVID-19 pandemic presented an unprecedented challenge for the industry — with vessels stuck at ports waiting to load goods even as freight rates skyrocketed from a lack of capacity and quarantined consumers ordered everything online. Also in the Red Sea, the giant Ever Given container vessel became lodged in the Suez Canal in 2021, halting all traffic through that vital area for nearly a week. And more than a decade ago, Somali piracy was a major concern for shippers as well.

Read more at NPR here.

The post Houthi attacks on ships escalate: Experts look to COVID supply chain lessons appeared first on LMA-Consulting Group, a supply chain consulting firm.

The best consulting clients are razor focused on supply chain volatility, risk and capacity. The recent events in the Red Sea highlight these critical priorities. As Houthi drone and missile attacks create chaos in the Red Sea, shipping container lines play it day by day as to whether to brave an attack or sail around the southern tip of Africa. If they reroute, it adds approximately 10 days and 1900 nautical miles onto a typical Asia-North Europe service. Additionally, some ships go through the Suez Canal for the East Coast of the U.S. This route has increased with the recent reduced capacity of the Panama Canal. Read our recent article, Supply Chain Optimization Remains a Priority as the Panama Canal Worsens on those issues.

High Risk in the Red Sea

What started with an Iran-backed Houthi attack on container shipping lines sympathetic to Israel has blossomed into a volatile, risk-laden decision to sail through the Suez Canal. For example, there was an attack on an MSC ship sailing from Saudi Arabia to Pakistan. According to Freightos CEO, approximately 50% of ships have been diverted from the Suez Canal, reducing capacity (due to extended lead sailing time) and increasing rates by around 30%. Safety is top priority, and CEOs are evaluating risk on a daily basis.

Alternate Routes & Sources of Supply

Clients are starting to ship to the L.A. and Long Beach ports to transport across the country to the East Coast; however, this change cannot happen rapidly, and adds time and cost to shipments. For quicker needs, companies are sending product by air freight to quickly respond to changing customer needs. Certainly, air freight is more expensive, thus inflating prices further. More and more companies are realizing they must reshore, nearshore, and take control of their ability to serve customers. Some are finding backup sources of supply while others are expanding their manufacturing footprint. The bottom line is supply chains are on the move.

Mexico Border Closures Impact Intermodal Trains

According to the Journal of Commerce, a major intermodal rail connection between Mexico and the United States was halted after US authorities shut down border crossings at Eagle Pass and El Paso in Texas so customs officers could help US Border Patrol process a flood of migrants. The two major class 1 railroads, Union Pacific Railroad (UP) and BNSF Railway, were impacted. Unfortunately, this is the second time in three months the Eagle Pass Crossing was shut down due to a surge in migrant arrivals. Intermodal has opened up again; however, UP and BNSF have a logjam of laden containers built up that need to be transported to the US.

Again, customers waiting on this freight experienced delays and reduced capacity. It is clear that risk and volatility remains high throughout the world with goods movement.

Forward-Thinking Companies Thrive

Smart executives are thinking ahead, planning capacity and backup capacity with a SIOP (Sales Inventory Operations Planning) process and successfully navigating these ongoing disruptions. Forward-thinking companies are gaining an advantage as they have planned ahead to be agile, pivot quickly, and most importantly, are ahead of the curve in securing capacity. For example, a proactive client moved production from China to Vietnam ahead of the pandemic when China shut down production with Zero-COVID policies. Again, they are ahead of the curve by expanding capacity in Mexico and the U.S. to ensure sufficient capacity to supply key customers. While the competition struggles, they can provide rapid deliveries with increased prices and gain long-term customers.

The key is to proactively address these issues to mitigate the impacts to the customer and cost, and longer term, to revise your manufacturing and supply chain footprint and network to best support profitable growth and mitigate risk.

If you are interested in reading more on this topic:
Supply Chain Risk Has Risen to the Top with the White House Council

The post Supply Chain Volatility, Risk & Capacity Remain Critical Priorities as Highlighted by Mexico Train & Red Sea Delays appeared first on LMA-Consulting Group, a supply chain consulting firm.

Supply chain disruptions have been creating news since the pandemic started, and it is definitely not slowing down. Watch my interview by KSHB-TV in Kansas City on “‘Spiraled out of control’: Why the pandemic is still impacting supply chains‘ and send us your stories. Our clients are experiencing shortages and price increases in building and construction products, computer chips, e-commerce and logistics services, products delayed at Southern CA ports and/or the Suez canal and much more. Do you have a handle on your supply chain disruptions?

One Tip to Implement This Week:

The post Discussing Supply Chain Disruptions with NBC-affiliated KSHB-TV appeared first on LMA-Consulting Group, a supply chain consulting firm.

Manufacturing and Supply Chain Expert Lisa Anderson, president of LMA Consulting Group Inc. discusses the economical impact the stuck cargo ship had on the global economy.

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Fully Story

The post NBC 2 WGRZ: Ever Given’ ship stuck in the Suez Canal cost the economy $400M an hour appeared first on LMA-Consulting Group, a supply chain consulting firm.

I am thrilled to be quoted in the Washington Post in an article “Why a ship stuck in Egypt threatens the economy in the United States“. The hot news of the week is that a container ship got stuck in the Suez Canal and has created a pileup of ships waiting to pass through the canal (delaying $400 million an hour in goods). It has certainly brought up the issues of globalization and the impact of supply chain disruptions! Given the global nature of the supply chain, it will have a ripple effect throughout the globe on a supply chain that is already out of alignment (as there is a backlog of ships in the Southern CA ports, the Texas weather has created shortages in plastic and there are other pandemic impacts).

One Tip to Implement This Week:

No doubt about it. The supply chain is strategic and you should be thinking 4 moves ahead just to survive. If you want to thrive, you better be even more proactive. A few items of note to consider:

• Changing customer behaviors: 25% of business will change MINIMALLY. Do you know what is changing with your customers so you can be valuable to them?
• Changing customer conditions: Find out what is going on in your customers’ worlds. Different supply chain conditions are impacting different companies differently. What can you do to help?
• Changing supply chain conditions: What is happening in your end-to-end supply chain? If any “link” in your supply chain changes, it can have an effect throughout your supply chain.
• Changing supply chains: How should you configure your supply chain and manufacturing operations to best support future customer needs?
• SIOP: If you aren’t focused on implementing and /or continually refining your SIOP process (sales, inventory and operations planning), you will be left in the dust. It is vital to understanding how to successfully scale and be resilient to changing conditions.

Please keep us in the loop of your situation and how we can help your organization emerge above and beyond. Several of these types of ideas are included in our new eBook Emerging Above and Beyond: 21 Insights for 2021 from Manufacturing, Supply Chain & Technology Executives. Download your complimentary copy.

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