Supply Chains: When disaster strikes – Cargo ship caught in a hurricane
In August, it was the explosion in Tianjin. This month it’s Hurricane Joaquin in the Atlantic. It seems we are constantly being reminded of the risks associated with global supply chain operations through these tragic events, be it natural disasters, political unrest or the uncovering of labor scandals. The American cargo ship, El Faro, was last heard from on Thursday, October 1, and is believed to have sunk after crossing paths with Hurricane Joaquin. If this is the case, it would be one of the worst tragedies involving an American cargo ship since the 1980’s. Focus has recently shifted from finding the vessel to locating potential survivors from the 33-member crew.
The ship was bound for Puerto Rico after leaving a harbor in Jacksonville Florida. At the time of departure, a tropical storm was on the radar in the Atlantic. As we now know, this storm turned into a category 3 hurricane. Cargo ships are not made to withstand these forces. This event is a reminder of the dangers associated with going out to sea and the risks that come along with an international supply chain.
For more on the search for El Faro, click here.
Let’s Make a (Trans-Pacific) Deal!
It was announced on Monday that Japan, along with 10 other economies in the Pacific region, reached a trade agreement with the United States. The 12 countries have formed what is being called the Trans-Pacific Partnership (TPP), which is designed to reduce trade barriers, create common standards, and offset China’s global economic prowess. Together, the 12 countries account for one-third of global trade, and a significant amount of potential is seen in the new ties between the United States, Japan and Vietnam in the spectrum of this agreement.
The TPP must first be approved by Congress before the deal can move forward. If it were to pass, it would represent the largest trade deal for the U.S. since the North American Free Trade Agreement in 1994, which liberalized trade amongst the U.S., Canada and Mexico. The debate regarding the TPP is fierce, with claims that an additional trade pact will negatively impact jobs and wages in the United States. On the other side of the debate, exporters see great potential for increased business amongst the 12 nations involved in the agreement.
For more on the TPP, click here.
Time to pack up and leave China?
China has experienced an increase in the amount of factories packing up and leaving the country over the past couple of years. As labor rates continue to rise, resulting in higher costs per unit, manufacturers are feeling the pressure to find a more cost-friendly production environment. One example of a company moving on is Panasonic Corp, which announced the closing of its battery factory back in August. This resulted in the cutting of 1,300 jobs. But where are the manufacturers headed?
One location that has been on the rise over the past 24 months is Vietnam. Samsung Electronics recently invested $3 billion in their existing operations, and China has lost a significant amount of business from the garment industry to Vietnam as well. Another country on the rise in terms of manufacturing facilities is India, with recent strong investments coming from Taiwan’s Foxconn, a company that has served as a top exporter from China over the past several years.
Click here to read more on the exodus of manufacturers from China
Have a nice weekend!
