AuthorKokora Sugiura, RUSCA Blog Committee President Biden, entering his third year of presidency, gave his annual State of the Union Address on February 7, 2023. He highlighted his passage of the CHIPS and Science Act and the Inflation Reduction Act that has aided manufacturing in the country. One of the key takeaways in his speech was his plan to add standards to his Infrastructure Investment and Job Act, which was passed in 2021. Previously, the qualification for a product being “Made in America” was that 55% of the material value was made in the US, which increased to 60% last year and is expected to reach 75% by 2029. President Biden’s plan, which is still under development by the Office of Management and Budget, is to enforce public infrastructure to be built with American materials. The administration plans for government funded projects to domestically source materials such as lumber, fiber optic cables, glass and drywall. They are also planning to include standards for plastic and polymer based products. The President’s announcement that “We’re going to make sure the supply chain for America begins in America” signals the administration’s planned reconstruction of the US’s supply chain. Since the COVID-19 pandemic, supply chain issues–particularly with on-time delivery of goods–has been a major issue in people’s lives. Though there have been improvements after three years, the President’s plan pushes for more companies to source materials and labor within the country. In addition, this new plan will increase blue collar positions, which will help the nation’s economy. Factory and construction jobs have been under-supported throughout the years, but this initiative to create a “Made in USA” mindset can increase the demand for labor in the United States. This focus on domestic production and sourcing has not come out of nowhere. There already has been an increase of 750,000 jobs since President Biden took office, largely as a result of promoting domestic manufacturing. The Biden administration also increased tariffs on Canadian lumber last year, further helping to propel the shift to American sourcing and manufacturing. There have already been 20,000 successful projects, including the reconstruction of the Brent Spence Bridge near Cincinnati, since federal funding for American infrastructure was increased. The hope for the future is that developing more public infrastructure will support the American economy and decrease our reliance on outsourced materials. SOURCES: https://www.supplychaindive.com/news/President-Biden-state-of-the-union-2023-manufacturing-supply-chains-semiconductors-EVs/642260/ https://www.reuters.com/world/us/white-house-unveils-plan-boost-use-us-made-goods-infrastructure-2023-02-08/ https://www.eenews.net/articles/white-house-releases-details-about-buy-american-plan/ AuthorNick Leung, RUSCA Blog Committee There are times where people order products and it takes weeks or even months to deliver or even ship. This is due to ocean freight carriers seeing a huge consumer pullback in ocean shipping. The decline in demand cuts across many product categories such as machinery, housing, and apparel. Due to ocean rates being in a decline, ships are being canceled, despite carriers’ attempts to match the vessel space with order volume, which could potentially stop the decline in prices. By the latter half of 2022, ocean rates suddenly went down along with the heavy decrease in cargo demand, which revolves around how there is already too much inventory coupled with a lack of clarity on consumer demand. Stakeholders do not see any relief for shippers coming anytime soon, especially this year due the difficulty of their jobs. Not only is this a problem in the United States, but a global problem as well. Higher ocean freight rates make it difficult for shippers and carriers to operate to the best of their ability. A lack of visibility can make it even more challenging and can negatively impact the supply chain in all stages. Solutions to this problem are not evident, but supply chain practices can be adjusted, to an extent, in response. Being able to acclimate based on the visibility of the carriers is crucial. Another way to circumvent the problem is for supply chain stakeholders to monitor cargo containers in ocean transports. Up to date information can approximate where the most critical problems are for the carriers, allowing them to address the issues before conditions worsen. Approaching the issue as soon as possible is vital not only for these ocean freight complications, but for any type of problem in general. Ultimately, open communication with customers should be a priority as well. It is true that issues need to be dealt with by the workers, but having communication with those who need these products to be delivered as soon as possible is also essential; customers should be constantly updated on what the issues are so they are not left in the dark. This would minimize the impact of disruptions and give them clarity in a more professional manner. Furthermore, using new technology and the many other tools that are readily available can improve ocean visibility and last but not least, improve the freight visibility of carriers. SOURCES: www.cnbc.com/2022/10/03/ocean-shipping-orders-are-signaling-a-big-drop-in-consumer-demand.html https://www.supplychain247.com/article/ocean_cargo_stormy_seas_ahead_for_carriers/news www.supplychaindive.com/news/shippers-to-see-no-relief-in-2022/619697/ AuthorAnthony Partazana, RUSCA Blog Committee News headlines have been enamored with reports of retail giant Amazon having a down year in 2022, with a reported $2.7 billion in losses. However, Amazon is looking towards its transportation and logistics networks as a way to make up losses. As for where these losses are coming from, that would mainly be through some of their investments such as Rivian, an EV startup that has struggled as of late with a variety of issues. Also, Amazon’s investments in brick and mortar with Amazon Go, Amazon Fresh, and Whole Foods have not worked out as planned. This has led Amazon to pause growth of these stores for the foreseeable future. Along with these factors, the number of Amazon fulfillment centers has doubled in the past few years with the rise of E-Fulfillment. Now, Amazon is left with tough decisions on whether to cut their losses, and are looking towards their supply chain for these solutions. It is hard to drive anywhere without driving past an Amazon fulfillment center nowadays, which is by design. With all of these fulfillment centers, Amazon can provide shipping times that meet the demands of customers who expect two day, one day, or even same day delivery. However, Amazon is finally slowing down their growth of fulfillment centers, and beginning to increase investments in transportation in order to decrease their reliance on third party carriers. The rise of transportation costs in 2022 is well documented, and Amazon is looking to cut costs through having control of this important aspect of their supply chain. Another way that Amazon cut costs is through the use of machine learning at their fulfillment centers. One source of waste in a supply chain is downtime, and Monitron, an end-to-end machine learning system to detect abnormal behavior in industrial machinery, has cut unplanned downtime by around 70% according to Amazon. Monitron can predict potential failures of machinery at fulfillment centers, saving the company hours of unplanned maintenance and helping to ensure that customers will receive their orders on time. This is a great example of how Amazon can cut costs and increase customer satisfaction through automation. While investing in transportation and machine learning is a main part of the strategy for Amazon to decrease losses, Amazon unfortunately also had to cut many different programs, some of which impact their supply chain. Along with cutting around 18,000 employees in November 2022 and implementing a hiring freeze, Amazon also cut various projects including delivery robots. While some of these ideas had the potential to increase profits for Amazon, they did not see them to be worthwhile at a time when costs are increasing and consumer spending is decreasing. Ultimately, Amazon is hoping that retooling their supply chain will pay dividends for the future and that they maintain their grip on the E-fulfillment market. This is especially vital now, with companies like Walmart making significant gains in recent years. SOURCES: https://venturebeat.com/ai/how-aws-used-ml-to-help-amazon-fulfillment-centers-reduce-downtime-by-70/ https://www.seattletimes.com/business/amazon/amazon-reports-net-loss-of-2-7-billion-for-2022/ https://www.supplychaindive.com/news/amazon-focused-on-streamlining-operations-after-reporting-unprofitable-year/641963/ https://press.aboutamazon.com/2023/2/amazon-com-announces-fourth-quarter-results AuthorKhush Parikh, RUSCA Blog Committee Intel, one of the largest leading global chip manufacturing companies, is facing challenges in the market with decreasing sales and increasing costs. To revive its position, the new CEO, Pat Gelsinger, has laid out a plan to transform the company into the chip industry leader. At the same time, the United States government is trying to reduce its reliance on Asian markets, which control about 80% of chip production, by encouraging companies like Intel to increase investment in US-based plants and factories. This presents an opportunity for Intel and the US government to partner and bring chip production back to the US, boosting Intel's sales and decreasing dependence on Asian chips. Intel sales have dropped dramatically over the past few years due to increasing competition along with increasing costs and demands for more powerful chips. They have reported a loss in earnings for the first time in 30 years, causing panic at Wall Street and leading to many investors selling shares, reflecting their lowered outlook on the company's future. CEO Pat Gelsinger believes that Intel will need to make massive changes and investments in order to turn the company around and regain its competitive edge at the forefront of computer chips. One key area in which Intel could potentially gain large amounts of market share is through the expansion of new factories in order to increase their output, which is vital as demand continues to rapidly increase. At the same time, Gelsinger also believes that they need to dramatically cut costs by about $10 billion. As the United States works to decrease their reliance on Asia for the majority of their computer chips, the government is incentivizing companies like Intel to invest in American factories in order to bring production back to the US. This presents Intel with the perfect opportunity to increase their output by building multiple factories in the US with substantial government subsidies, which would help increase their profit margins. Many believe that COVID-19 showed the weakness in the supply chains of these large companies and that it was a wake up call that will take a long time to fix. The reliance on Asia as the largest provider of chips became extremely dangerous as China resorted to extreme measures to end COVID, which led to massive shut downs of American factories, then leading to chip shortages for many other industries such as electronics, autos, and basic technology. The increase in incentives has not only aided Intel in their quest to build more American factories, but other companies such as TSMC and Micron Technology are also investing heavily into US based chip manufacturing and moving away from Asia. Companies like Apple are struggling with chip shortages as well, but the government’s aim to bring their manufacturing back into the country could provide a way for these businesses to have easier access to chips in the future. The Biden administration seems to be pushing for a more secure supply chain and the only way for them to properly have that is to decrease their reliance on foreign countries for essential technology, which will help America compete and take market share from Asia in the chip manufacturing market. SOURCES: https://www.wsj.com/articles/intel-shares-open-10-lower-after-disappointing-earnings-11674838723 https://www.wsj.com/livecoverage/davos2023/card/rebalancing-chip-supply-chains-will-take-decades-intel-ceo-says-tAD8xp7CwcdeOEBMZdXO?mod=Searchresults_pos3&page=1 https://www.nytimes.com/2023/01/01/technology/us-chip-making-china-invest.html?searchResultPosition=3 AuthorRyan Salamante, RUSCA Blog Committee By now, it is not news that supply chain disruptions have been impacting businesses across the globe for the past several years. Seemingly starting with the rise of the COVID-19 pandemic in 2020, and further enhanced by the Russia-Ukraine war in early 2022, many organizations, large and small, have been struggling to deal with the dilemma. While the world continues to move forward and revert back to what seems like “normal times”, businesses unfortunately will likely continue to have trouble matching the increasing customer demand until around the first quarter of 2024. One of the significant issues that companies are facing in their operations is the effects that inflation has had on almost every aspect of their supply chain. Globally, there is a lack of raw materials available, which has significantly increased the cost of these essential resources for production. Energy costs, which are essential for a company’s logistics and transportation, have also seen a massive increase in price as a result of Russia’s war on Ukraine. Even warehouse prices have soared to an enormous 400% increase as bloated inventories are substantially decreasing space available (LaRocco). As a result, companies are needing to sell their items at discounted prices in an attempt to move inventory out of these warehouses. Another major factor that has prolonged supply chain disruptions is the labor shortage that has brought about a lack of skilled workers on the market. As a result, transport and warehousing labor wages have been increasing four times faster than pre-pandemic wages. But despite this, logistic departments are still having trouble hiring and retaining skilled workers. Ultimately, this shortage of workers has simultaneously resulted in both more issues in delivery delays and increased transportation rates of up to 30% (Bhattacharjee). In order to solve these issues as soon as possible, there would need to be either an increase in capacity or a fall in demand. Fortunately, as the world begins to impose fewer restrictions, trucking companies would have more capacity to perform their operations “normally” (J.P. Morgan). Commercial airlines and shipping fleets have also been seeing an expansion in capacity which would signal an increase in available transportation and drive down inflated costs for logistic operations. While the thought of supply chain bottlenecks continuing until 2024 seems alarming, it is possible to find comfort in the fact that we are slowly heading in the right direction. SOURCES: https://www.cnbc.com/2022/12/23/supply-chain-managers-expect-problems-continue-2024.html https://www.mckinsey.com/capabilities/operations/our-insights/navigating-the-labor-mismatch-in-us-logistics-and-supply-chains https://www.jpmorgan.com/insights/research/global-supply-chain-issues |
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