Ronny Chieng & The Triple Threat To the Manufacturing Industry!
- Prabal Laad
Pandemic, Geopolitics, Globalised Supply Chains—He left nothing out of his gig in early 2020, and we all know what happened after.
All right, this is bizarre, but when I rewatched Ronny Chieng’s satirical Standup Comedy Special on Netflix that came out in January 2020, I was not prepared for how quickly it would go from being hysterical to ominous, considering the series of events that set-in motion just a couple of months after this telecast.
Let me help you draw an analogy.
More…? “Amazon Prime every day. Send that s**t to my house every day. Never leave your house. In America, never leave your house,” and a global lockdown ensued.
He also just happened to mention the racial slurs against Chinese people, that were about to become prolific when people ‘blamed’ China for the pandemic, kickstarting geopolitical tensions.
In fact, he took it up a notch with, “Let us get Prime Before. Use artificial intelligence to substitute my own intelligence so I can live my life. Send it to me before I want it! The airspace above America is just Amazon Prime,” and in a matter of months the supply chain and manufacturing industries across the world almost collapsed and would not have recovered without accelerated digital transformation—Automation, AI, ML, Cloud Computing, and more.
I’ll admit, I had a slight panic attack.
Cut to present day, we are trying to survive through a global lockdown because of one of the deadliest pandemics, geopolitical tensions due to an actual war, and a global manufacturing crisis caused by all the above.
Shadows Over Shanghai
Threat 1: The Pandemic
Shadows Over Shanghai, also the title of a 1938 Hollywood film, was set during the Second Sino-Japanese War, and unbelievably, with a plot centred around Japanese and Russian espionage; however, in this context we are referring to the current operational challenges caused by a stringent lockdown in response to the recent Omicron wave at Shanghai—a global manufacturing hub and the world’s largest container port—the ripples of which have been felt across the world.
With congested terminals, limited trucking, and temporary production termination, supply chains in the region are in a dire state. Warehouses remain closed as many ships wait to unload and load cargo, putting almost 90% of trucks supporting import and export deliveries on the blink.
Shanghai accounts for 3.8% of China’s GDP and has a much higher share—10.4% of China’s trade with the rest of the world. Researchers from Zhejiang, Tsinghua universities, Princeton, and the Chinese University of Hong Kong have stated that China’s implementation of a strict lockdown may cost nearly US $46 billion per month, which is 3.1% of GDP.
The city is also home to Volkswagen and General Motors manufacturing factories, Tesla’s first gigafactory in Asia, and Ford’s sixth global design centre. Pegatron and Eson Precision, both key suppliers to Apple—all of whom have suspended operations in Shanghai, while Taiwan’s Unimicron Technology that supplies printed circuit boards to Apple has also stopped production. Consequently, the impact of the disruption in automotive and electronics manufacturing industries is visible on a global scale.
The case above demonstrates what can happen with overreliance on a particular city, supplier, or resource critical for your supply chain. Of course, difficult to strike the right balance between cost effectiveness and building in the right level of resiliency, it is now necessary to start identifying the key failure points and act exigently, so that the incremental journey to face the next disruption is enhanced.
Ukraine Down Under
Threat 2: Geopolitics
Russia’s invasion of Ukraine has been one tragedy after another for the global economy that was barely recovering from the throes of the pandemic. Russia’s aggression has met with the imposition of severe global sanctions such as those on Russian state-owned enterprises, financial institutions like Alfa Bank and Sberbank, Russian government officials and their families—going to the extent of expelling Russian diplomats.
Some Western countries have banned imports of Russian oil and coal or levied heavy taxes on Russian goods and others have halted exports of items like military goods and mercenaries, luxury goods like vehicles, fashion, and art. Most Western countries have banned Russian flights, frozen the assets of Russia’s central bank causing the Ruble to drop a whopping 22%, subsequently leading to a 14% rise in Russia’s rate of inflation.
Apart from this, many companies are completely pulling out their businesses from the country—McDonald’s, Coca-Cola, and Starbucks to name a few.
The forced port closures in Ukraine have led to a sharp decline in its exports of rare gases, automobiles, semi-conductors, and food grains like wheat. According to the World Bank, the Russian invasion will shrink Ukraine economy by a mammoth 45% this year! Add to that the spillovers to neighbouring countries, where refugees are facing food shortages and are deprived of basic living necessities.
It is amply clear that today, multi-national companies can no longer separate business from geopolitics. Especially, the manufacturing industry, where demand and supply dynamics have reached unprecedented levels of uncertainty and scarcity. From automotive and agriculture, to electronic and FMCG—global supply chains are broken, disrupted, and dysfunctional.
Centralised But Disconnected
Threat 3: Globalisation of Supply Chains
For decades, we considered the centralised supply chain model with a sole source entity, head-quarter, and warehouse as a cost-efficient, easily manageable, stable, and viable solution in the manufacturing industry. So, when businesses started expanding, we used technology to consolidate processes back into that traditional, centralised control, the difference being that everything was now digitally optimised, but with little resilience. Who cared about resilience when the global supply chain was ticking along nicely with not a ripple in sight? But once the tsunami hit, organisations had no choice but to face the harsh truth that their current supply chains wouldn’t survive unless they adopt new configurations and adapt to the changing reality.
Today, supply chain disruptions go far beyond natural disasters. The recent historical events such as the pandemic, Russia-Ukraine War, and the Shanghai port lockdown exposed the grave inadequacies of this approach to tackle unpredictable events. Not knowing the right extent of technology integration, over-reliance, and hyper-connectivity mean that a disruption seven seas away can have instantaneous catastrophic repercussions to the entire infrastructural framework and planning of a centralised supply chain, on the other side of the globe.
The need of the hour is to avoid this domino effect and mitigate risks by leveraging a mix of the two types of supply chains: A global one to take care of expansion and a regional one that is responsive, resilient, and flexible. Basically, do not put all your eggs in one basket!
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We at InspireXT, offer Value Assessment and Capability Enhancement to our clients—a fast and pragmatic approach to examine selected domain areas of their business and identify the best ways to achieve radically enhanced performance via a portfolio of improvement initiatives. It is a sharp-shot health-check of your supply chain that determines what you can do tactically and strategically for the inherent challenges your organisation faces and overcome them to maximise your business outcomes.
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