China, Trade, and the Ripples

By Steve Geary | 03/10/2019 | 1:24 PM

After establishing new trade surplus record with the U.S. in December, Chinese exports are collapsing. Statistics released on Friday—numbers released by China, not the United States—show that the expected realignment is underway.

China's politically sensitive trade surplus with the U.S. narrowed sharply, to $14.72 billion, in February, from $27.3 billion in January.  Now, these are numbers reported by the Chinese government, so some skepticism is in order.

“Dollar-denominated exports [by China] plunged 20.7 percent for the month of February from a year ago, missing economists' expectations of a 4.8 percent decline, according to a Reuters poll,” reports CNBC.

CNBC continues, “Dollar-denominated imports [by China] fell 5.2 percent in February from a year ago, missing economists' forecast of a 1.4 percent fall.”

The unemployment rate held steady at 3.8%. The latest employment statistics in the United States for February show non-farm job growth at a near standstill, according to the Labor Department; this may be an aberration, but it bears watching.      

U.S. Census Bureau statistics are still lagging due to the month-long government shutdown, so the best government sanctioned balance of trade numbers available are months old.

Bottom line: the supply chain in the United States remains healthy, logisticians appear to have realigned in anticipation of a collapse in Sino-U.S. trade, manufacturers seem to have found new sources of supply, and employment remains strong.

And China is getting nervous.

Think Globally.  Act Locally.

By Steve Geary | 02/03/2019 | 10:31 AM

Davos, officially known as the World Economic Forum, just wrapped up.

The annual meeting is an event where a couple of thousand people getting together and try to solve the world’s problems.  Quoting directly from the legal charter, The World Economic Forum “is an independent organization committed to improving the state of the world.”  These people are not timid in their ambitions.

This year, their report is over a hundred pages long.  According to the report, the five most likely risks are: 

  • extreme weather conditions
  • failure of climate-change mitigation and adaptation
  • natural disasters
  • data fraud or theft
  • cyber-attacks.

The top five in terms of impact are:

  • weapons of mass destruction
  • failure of climate-change mitigation and adaptation
  • extreme weather events
  • water crises
  • natural disasters.

Together these items are a good list.  There is a very important point worth noting: only two of the ten are cyber threats.  Go poke around on the web, search for Supply Chain Risk, and odds are the references will lead to articles on cyber threats.  There is a disconnect in our discourse.

Logisticians need to figure out how to mitigate Supply Chain Risk in operations, not just cyber.  Our challenge is at the micro economic operational level.  The one of the world point of view belongs to Davos.  We can consider how to mitigate the impact of extreme weather, the implications of climate change on logistics, disaster response protocols, water, and natural disasters.  Every one of these operational risks cascades down to the tactical level.

Supply Chain Risk Management is about managing and mitigating these risks across the spectrum.  Supply Chain Risk Management is bigger than cyber.  Supply Chain Risk Management belongs to the operators, not the technical staff.

Look what Santa left under the tree.

By Steve Geary | 01/01/2019 | 8:48 AM

On December 13, the Department of Defense (DoD) issued an update to the governing procedures for supply chain management

“DoD Supply Chain Materiel Management Procedures: Operational Requirements,” gives solid direction for Supply Chain Risk Management (SCRM). 

Too often risk management is overshadowed by cyber threats; the DoD didn’t do that. 

Instead, DoD defines Supply Chain Risk Management (SCRM) as “strategies to identify, assess, and mitigate potential supply chain risks.” 

In other words, risk isn’t just about cyber.  DoD illustrates the landscape of risks by citing vectors like terrorism, cyber threats, [physical] attacks, insufficient quality, unreliable suppliers, imbedded threats, access points, machine break-down, uncertain demand, obsolescence, vulnerability from interruptions and interdiction of supplies, including fuel and electric power, flooding, labor strikes, natural disasters, or large variability in demand.

Put your tax dollars to work.  Adapt and adopt the blueprint the government published and make it your own.  Then get to work.

And now for the logistics dislocation from the China tariffs.

By Steve Geary | 12/29/2018 | 5:26 PM

Last month we demonstrated channel stuffing on an international scale, quantifying the impact of the trade war with China on trade activity.

The partial government shutdown means that Census Bureau still hasn’t published statistics for November.  It isn’t clear when they will be published, either, so we looked at other sources. 

A quick scan of the Port of Los Angeles November volumes suggests that the predicted collapse in trans-pacific trade has begun.

Year over year imports at the port, measured in Twenty-Foot Equivalent Units (TEU’s), are down almost 9%.  Exports through the port are down over 14%.

If shipment activity through the Port of Los Angeles is a valid indicator of the health of trade with China, then the conclusion is inescapable:  a massive international logistics dislocation is underway.

2019 is going to be an interesting ride.

Channel stuffing on an international scale

By Steve Geary | 11/25/2018 | 9:20 AM

The impacts of U.S. trade tensions with China are starting to show up in the numbers.

According the Census Bureau, an unbiased provider of trade data, in September of 2018 the United States imported over $50 billion in goods from China. Compare that figure to 2017, when it was a little over $45 billion. That $50 billion is an all-time monthly record.

A look at the Census Bureau statistics for manufacturer’s inventories shows where many of those imports are going. Year over year, US manufactures inventories are up 6.7%. 

There will be no debate here on whether or not the tariffs imposed by the Trump administration are a good or bad. What is clear is that because of the tariff situation uncertainty is creeping into the supply chain. Uncertainty makes me nervous.

Anybody who relies on China as a source of supply is looking at the risk profile. Long term, there is a need to realign global supply chains with a more deliberate view toward supply chain risk. Tariff uncertainty is a part of that equation.

We are already seeing the pragmatists react to the uncertainty. They are stuffing their DC’s, as shown in the Census Bureau numbers.  There is no choice but to hedge against supply chain risk by stuffing the pipeline with inbound supplies. 

Build a buffer, stuff the warehouses, and buy a hedge. 

Then say a prayer that the politicians in Washington and Beijing find a way out.

The United States Army has a vision.  Do you?

By Steve Geary | 11/20/2018 | 3:29 PM

The headline for an Army News Service article reads, “Army must update logistics operations as part of modernization efforts.” The article details remarks made to an Association of the United States Army Institute Land Warfare breakfast in early November by Lieutenant General Aundre Piggee.

Piggee’s opinion matters: he is the Army's deputy chief of staff for logistics.

He drove home four points:

  1. Self-Sustaining Brigade Combat Teams. Translating this into commercial terms, we need to delegate responsibility and authority to operating teams, and let the team run with it.
  1. Additive Manufacturing, or 3D Printing, is a “game changer.” The benefit to an operating force operating thousands of miles down the supply line is real. The same opportunity exists in the private sector. A seismic shift may is coming. This technology might actually be more fundamental than Block Chain.
  1. Global Supply Visibility: the Army has been working on this for years, and their system is now fully fielded. That was the easy part. Now that they have global near real time data, what are they going to do with it? Once again, the general is on target, saying “we have to make sure we are using all this data that we're pumping out to make good decisions."
  1. Autonomic vehicles enabled by Artificial Intelligence are within reach, and some would argue that they are already here. How does this capability reshape logistics and material handling? Piggee offered an idea: autonomous vehicles could be a key element in resupply. Are we going to be able to do the same thing in the private sector? If we can't do it over the road, can we do it in the warehouse?

We have to give the General credit, and his thoughts should serve as a catalyst for any logistician.

Gartner Academic Rankings for Supply Chain Academic Programs

By Steve Geary | 11/04/2018 | 10:38 AM

If you are getting ready to search college campuses for Supply Chain talent, Gartner has a list.  

The top 25, according to Gartner, are:  Pennsylvania State University, the University of Michigan, the University of Tennessee, Michigan State University, Rutgers University, the University of Minnesota, he Massachusetts Institute of Technology, Arizona State University, The University of Texas at Dallas, the University of Wisconsin-Madison, the Georgia Institute of Technology, Indiana University, Northeastern University, the Ohio State University, North Carolina State University, Texas Christian University, Wayne State University, the University of Southern California, Howard University, The University of Texas at Austin, University of South Carolina, Syracuse University, University of Houston, the University of Washington, and the University of San Diego.

All are solid, so if you want to go looking for freshly minted talent, these schools are a great place to start.  An article in the October issue of DCV highlights the top school on the list, but if you are searching for talent in today’s tight market don’t ignore the other schools on the list.  They’re all over the country.

 (disclosure:  the author is on faculty at the University of Tennessee, which clocked in at number 3 on the Gartner list.)

Supply Chain Risk Management: the Feds are moving in the right direction.

By Steve Geary | 08/31/2018 | 2:45 PM

A competent logistician takes a holistic, not a transactional, view of Supply Chain Risk Management (SCRM).  Congress is moving the Department of Defense in that direction.  And that means if you do business with the federal government, get ready to answer the mail.

Supply Chain Risk Management rides on four vectors.  There are strategic risks we logisticians worry about, like foreign market fluctuations or economic dislocations.  There are operational risks, like diminishing manufacturing sources and material shortages (DMSMS).  There are physical risks, like the driver shortage, port closures, or weather disruptions.  There are financial risks, like currency fluctuations or price volatility.

President Trump signed the annual defense budget – the “John S. McCain National Defense Authorization Act for Fiscal Year 2019” – on August 13.  It is over a thousand pages long.  Buried in the bill (Section 881) is a definition of Supply Chain Risk for the Department of Defense.

That section says, “The term ‘supply chain risk’ means the risk that an adversary may sabotage, maliciously introduce unwanted function, or otherwise subvert the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of a covered system so as to surveil, deny, disrupt, or otherwise degrade the function, use, or operation of such system.”

Congress deserves credit for recognizing supply chain risk as an issue.  That said, what about supply chain risk unrelated to an adversary?  Not all national security threats involve an adversary.  The military definition of national security includes “defense posture capable of successfully resisting hostile or destructive action from within or without, overt or covert.”  What about supply chain risk outside of Defense?  There are some pretty complex supply chains run by the government unrelated to the military; just take a look at the State Department, for example.

Supply Chain Risk Management in a government context isn’t just about adversaries, and it isn’t just about war.  The four vectors of risk – strategic, operational, physical, and financial - are all around us.  While it’s good that Congress is taking notice of supply chain risk, it’s clear they are lawyers focused on transactions, not logisticians managing systems.

Congress deserves credit for what they have done, but they haven’t gone far enough in considering the breadth of supply chain risk.  While it is important that DoD embraces SCRM, like the private sector, SCRM should be a “Whole of Government” evolution, not just DoD. 

Things are moving in the right direction, but there is more work to be done.

With uncertainty growing and labor markets tight, think about a different kind of hire.

By Steve Geary | 08/17/2018 | 8:05 AM

The “trade war” talk makes logisticians nervous.  Supply chains can be brittle, and battles – even metaphorical battles – introduce uncertainty.  And with the rhetoric currently flying across the Pacific, uncertainty is certainly getting our attention

You can find candidates trained for this kind of uncertainty.  They come from top schools that graduate global logisticians – often with Masters Degrees – and you might want to think about looking for them as they consider leaving government service: 

Graduates of these schools bring the skills needed to deal with physical conflict and the ensuing uncertainty in the supply chain, not just the metaphorical.  The other thing they bring is leadership skills and operational savviness honed in challenging and diverse conditions, often in complex, chaotic, and austere situations.

There are also solid ROTC programs that develop entry level leaders on campuses across the country.  And let’s not forget the non-commissioned officer pools, who often earn degrees while wearing the uniform.  The point is that if you are looking for leaders in logistics; don’t just think of the traditional college campus. 

Leaders in the military – both uniformed and civilian - know how to make things happen.  Often, they learned how to make things happen when the bullets are flying.  Literally.

They can handle a trade war.


By Steve Geary | 07/23/2018 | 1:47 PM

It’s one thing to read about the macro-economic impact of tariffs.  It’s another when the micro-economic impacts ripple through the pond in the backyard.  Those tariff ripples are now rolling though our logistics networks.

It’s time to pay attention.

Jared is a short order cook at the neighborhood breakfast place four days a week.  On the days when he is not working at the restaurant, Jared works for a lobster wholesaler in Boston.  Jared is riding just one of the ripples flowing through the economy caused by the new tariffs.

In retaliation for the tariffs the US imposed, China has responded with tariffs on an array of American exports.  In particular, China hit American lobster imports with a 25% tariff.  Lobster prices are collapsing.  Those with a strong domestic customer base should surive, but some sort of realignment will take place.

This morning Jared shared that two of his wholesaler’s competitors have closed their doors since the tariffs went into effect.  Jared estimates that the volume at his wholesaler is off about two-thirds since the tariffs hit.  All of these companies were vulnerable, because China exports were a large chunk of their business.

Not every industry is losing.  For domestic steel manufacturers in the Midwest, unlike Jared, it’s a good thing.  Competitive imports are now more expensive, and presumably prices and profits for US steel producers will rise.

The point is that a new factor - higher tariffs - has been injected into the trade equation.  Discernable shifts, large and small, are rippling across the supply chain triggered by these new tariffs.  Some have been imposed by Washington, and some are retaliatory movesby our trading partners.  Across a slew of commodities, market equilibriums are shifting.

Right now, for most of us, it’s a new ripple emerging from the fog.  

What matters to us is that supply chain realignments and adjustments are underway. 

Are you seeing any ripples? Are they big enough to get your attention?  Scan the horizon within your network.  Is there something coming over the horizon worth your attention? Are you prepared to act if that wave becomes a tsunami across your supply chain? 

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Steve Geary

Steve Geary

Steve Geary is an adjunct faculty member at the University of Tennessee's College of Business Administration, and is on the faculty at The Gordon Institute at Tufts University, where he teaches supply chain management. He is the President of the Supply Chain Visions family of companies, and Chief Operating Officer at ROSE Solutions, consultancies that work across the government sector. Steve is a contributing editor at DC Velocity, and editor-at-large for CSCMP's Supply Chain Quarterly. He is listed in Who's Who in America, Who's Who in the World, Who's Who in Science and Engineering, and Who's Who in Executives and Professionals. In November of 2007, Steve was recognized for "Selfless Service to Our Nation and the People of Iraq" by the Deputy Secretary of Defense.


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